Enlarge imageBy Tim Castle
BOURNEMOUTH (Reuters) - University students should pay higher interest rates on their government-backed support loans and expect higher tuition fees in future in order to plug a gap in higher education funding, employers said on Monday.
The Confederation of British Industry (CBI) said the government should save 1.4 billion pounds a year by removing its interest rate subsidy from student loans and reinvest the money in university teaching and research.
Maintenance grants should be restricted to the poorest students while a rise in the 3,200-pound-a-year cap on tuition fees looked "inevitable."
It noted that universities believed an increase to 5,000 pounds a year would not lead to a decline in student demand while raising an extra 1.25 billion pounds in annual income.
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"The economic downturn makes cuts to public funding for higher education inevitable, so new sources of funding have to be found," said CBI director general Richard Lambert.
The CBI report comes as the government is about to launch its own review of tuition fees, to be completed next year.
The CBI findings will add pressure on Liberal Democrat leader Nick Clegg at his party's annual conference in Bournemouth this week.
Party activists have been angered by Clegg's threat to raise the axe over a long-standing pledge to scrap tuition fees because of the uncertain state of public finances.
Tuition fees are not paid in Scotland and some Liberal Democrat MPs fear dropping the promise to extend their abolition to the rest of Britain could cost the party vital votes in an election expected next May.
Two leading university groups welcomed the CBI report, but the National Union of Students (NUS) said the recommendations were "offensive."
"Students are already leaving university with record levels of debt, while graduate job prospects are at an all time low," said NUS President Wes Streeting.
"Instead of recommending that students are fleeced even more than they already are, the CBI should start looking at how they might put something back into the system themselves."
All students can obtain low-interest, government-backed loans to cover their tuition fees and maintenance costs, and do not have to repay them until after graduating and finding work.
