The University of Buckingham will give students the chance to pay for courses via a share of their post-graduation earnings in a ¡°risk-sharing¡± system built with a finance firm, with the institution¡¯s vice-chancellor describing the Westminster government as being ¡°very interested¡± in the scheme.

As the private university has opted to remain outside regulations in place at traditional English universities, its undergraduates are only able to access fee loans to a maximum of ?7,400 a year from the public Student Loans Company on the two-year degrees it specialises in. But those courses have fees of ?12,600 a year, leaving a gap of ?5,200.

Where students currently have to fund the gap through bank loans, cash or parents¡¯ money, Buckingham will offer future earnings agreements, also known as risk-sharing agreements, so students do not have to pay up front. The university hopes this will help it attract a more diverse range of students.

StepEx, a firm ¡°providing infrastructure for universities to accept payment with a share of future earnings¡±, already works with the London Business School, Insead and Cranfield University, but the Buckingham deal will offer its first future earnings agreements at undergraduate level.

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James Tooley, the Buckingham vice-chancellor, put the scheme in the context of growing government dissatisfaction with the costs of the student loans system, in which the vast majority of students are not expected to repay their loans in full.

¡°I¡¯ve spoken to people in Number 11 [Downing Street] and the Department for Education about this possibility. There are a lot of people saying, ¡®The Student Loans Company cannot carry on in the way it is at the moment and what can we do?¡¯¡± he said.

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¡°One suggestion I had is, why don¡¯t you watch closely what Buckingham is doing and actually give the student loan [at universities] not for the full amount of the fees, the ?9,000¡­but give it for a lower amount, ?6,000. And then allow the student to top up ¨C either through cash, through parents, or a scheme like we¡¯re discussing now.

¡°I think it¡¯s going to have wider applicability if the government bite, and they are very interested. They are watching us carefully.¡±

Others would argue it is highly unlikely such a funding scheme for the wider sector could ever get off the ground politically, and that finance firms would not be willing to offer financing at some universities.

Daniel George, StepEx¡¯s founder, said the firm has had conversations with some in government about ¡°using this structure that Buckingham¡¯s adopting for universities, especially those courses that are not covered by the SLC, like, for example, technology bootcamps [and] software developers¡±.

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In the Buckingham system, students will sign an agreement with StepEx to waive a given amount of course fees in exchange for a share of their future earnings.?Buckingham will only get paid by StepEx when?a graduate gets a sufficiently well-paid job, with the amount dependent on earnings.

Peter Ainsworth, an honorary senior research fellow at Buckingham, said payments for graduates would be at ¡°6 per cent of gross earnings, but only if you¡¯re earning ?21,000¡± and above, with ¡°effectively no rate of interest¡±. Payments will be in place for 10 years where income is at the monthly equivalent of a ?21,000 annual income, with a ¡°drop dead date after 15 years ¨C so [after] 15 years, even if you¡¯ve not paid a penny, then you don¡¯t pay any more¡±, he added.

Mr George said on a ¡°fee waiver¡± of ?10,000, graduates would pay ¡°somewhere between ?0 and ?20,000. We anticipate you would pay about ?10,000. But if you become the CTO of Goldman Sachs, you¡¯re going to pay ?20,000.¡±

john.morgan@timeshighereducation.com