Minister warned over tuition fees proposal

Former universities minister David Willetts had commissioned research at the Department for Business, Innovation and Skills into allowing universities to get involved in loans to students.

University think-tank million+said any such policy could bring major changes to England's student loan system and could lead to higher tuition fee charges by some institutions as long as they accepted the financial risk.

Willetts told BBC Newsnight: "Why not give universities that wish it the opportunity of holding the loans belonging to their own graduates? So suddenly there's a direct connection between the university and the graduate."

Pam Tatlow, Chief Executive of million+ , said:

"This would create a two-tier university system and would be opposed by the majority of university Boards and Vice-Chancellors. It would deliver preferential funding to some universities and their students and is a recipe for inequality."

A spokesperson for BIS said: "The department regularly conducts research in order to explore the viability of policy suggestions and these play an important role in informing ministers and shaping policy."