Universities united this week in calling for graduates to contribute more towards the cost of their education, as they published their proposals for a new system of funding.

All of the sector's mission groups contend that there is a case for introducing a "real" rate of interest on student loans or a higher repayment rate, but they are divided on the issue of the tuition fee cap, as submissions to the review of university fees and funding show.

According to the Russell Group of large research-intensive universities, the best way to protect the quality of higher education is to allow universities to set their own fees.

The group advocates an "incremental approach" to removing the fee cap altogether.

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But as a new study shows that efforts to widen access to elite universities has stalled (see page 11), the Million+ group of new universities says that opening up a market in fees would simply transfer more resources to the universities that are the most socially exclusive.

Million+ makes the case for introducing a maximum 2 per cent rate of interest on loans provided by the state, and for extending the graduate contribution period from 25 to 35 years.

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Doing this would deliver savings of up to ?1 billion a year, which should be used to stop the ?600 million cuts set out in the 2009 pre-Budget report, the group says.

It also wants to see the end of statutory bursaries, arguing that this would allow universities to reduce their fees, which would in turn reduce the size of the loans students require.

The resulting savings to the Exchequer would also fund more than 800 additional student places.

Meanwhile, the Russell Group calls for an "urgent" increase in funds, and argues that higher fees need not mean an increase in lending from the public purse.

Instead, its submission says, the cost of student support could be lowered by introducing a "real" rate of interest on student loans and by looking to private investment.

Under one option, the Student Loans Company would continue to provide income-contingent loans to students, but would finance them by selling bonds linked to graduate repayments to private investors.

Another model would see individual universities, or groups of universities, raise funds by selling bonds linked directly to graduate repayments, or annuities funded by future graduate repayments.

The Russell Group says that higher education should remain "free at the point of use".

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"Government could achieve an overall cost reduction in comparison to the current system, whilst still providing loans to cover the full tuition fee, even up to a fee of ?9,000 per year, if necessary," the document claims.

But Aaron Porter, president-elect of the National Union of Students, said this could lead to students accruing debts of more than ?40,000.

Removing the cap on fees would expose students and their families to "the huge risks and potential calamities of the market, abandoning them to sink or swim", he said.

The University Alliance also suggests that student loan bonds could be sold to private buyers, which it says would free up money to expand student numbers.

It joins Universities UK in calling for a rebranding of top-up fees as graduate contributions.

This would dispel "myths" about there being an upfront cost to university study and the language of debt, the University Alliance claims.

In its submission to the review, which is being led by Lord Browne of Madingley, the University of Cambridge says it faces a "funding gap" of ?9,000 per undergraduate. It proposes a secondary university fee that would not rely on state guarantees or subsidies.

Only universities making commitments to widening participation and providing better information to would-be students would be allowed to charge it.

Meanwhile, a submission from the University and College Union and the left-wing think-tank Compass says the solution is more funding from business, rather than from graduates.

Calling for tuition fees to be abolished, the submission says that increasing corporation tax to the G7 average would generate almost ?3.9 billion for higher education.

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rebecca.attwood@tsleducation.com

MORE FEES, PLEASE: Higher Education's Wish List

Group/University: Position

• Russell Group: Fee cap should be removed incrementally
• University of Cambridge: Fee cap should be increased or removed
• 1994 Group: Fee cap should be raised in stages
• University Alliance: Universities to decide graduate contributions for different courses, with a ceiling set by government
• Universities UK: Graduate contribution should increase over time up to a maximum level
• GuildHE: Against an entirely uncapped system for fees, but in favour of higher fees
• Million+: Bursaries removed and replaced with lower fees
• University and College Union: Abolish tuition fees and charge a business education tax.