University top-up fees would be rebranded as graduate contributions under proposals published today by a group of 23 universities.

The University Alliance ¨C which represents institutions including The Open University, the University of Hertfordshire and Sheffield Hallam University ¨C argues that its system would dispel ¡°myths¡± about an upfront cost to university study and the language of debt.

Its plans would see the troubled Student Loans Company replaced with a ¡°Graduate Contribution Agency¡±.

Universities would be free to set a maximum graduate contribution for different courses, which could result in a market, but this would not be described as a ¡°fee¡± and the government could still establish a contribution ceiling.

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Higher education institutions would receive the contribution sum ¡°upfront¡± from the reformed SLC, students would have access to grants and loans to meet living costs, and graduates would make contributions on an income-contingent basis.

But, in a key departure from the current model, the proposed system would be funded via private investment through the sale of bonds, rather than by the government, and rates of interest would cover the full cost of borrowing.

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This would free up money to expand student numbers by reducing the costs to the public purse, the alliance argues, calling for the new government to re-establish progression towards the 50 per cent target for university participation.

Meanwhile, targeted subsidies would protect low earners, and the need for contributions would stop after 25 years to help those on low incomes.

¡°With real interest rates to cover the full cost of borrowing, including the cost of any subsidies, the reformed SLC could sell student loan bonds to private buyers raising upfront private finance,¡± says the UA¡¯s report, which is being submitted to the review of higher education funding and student finance led by Lord Browne of Madingley.

The group says a similar model has been operating successfully in Hungary for nearly ten years.

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Libby Aston, director of the University Alliance, said that, given the Liberal Democrats¡¯ objection to any increase in tuition fees, the proposals might prove to be a useful basis on which to make progress on conversations about university funding.

¡°Our proposals are affordable to government in any economic climate. By reducing the cost to government, more qualified students would be able to go to university,¡± she said.

Aaron Porter, president-elect of the National Union of Students, said the proposals were an ¡°important contribution¡± to the debate.

¡°While we can¡¯t agree with every aspect of their suggestions, it is encouraging that more and more experts are promoting alternatives to a damaging market in higher education,¡± he said.

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rebecca.attwood@tsleducation.com