Conservatives: Counting the pennies

The Conservatives have detailed plans to scrap university fees but raise interest rates on student loans.

Shadow education secretary Tim Collins said on Wednesday that graduates would be "considerably better off" under the Tories' package.

However the claim was disputed by ministers who argued that the proposals would penalise poorer students, women and the higher education sector.

The Opposition has been against tuition fees since their inception but has held back from outlining its ideas in detail since the 2001 election.

Labour is committed to introducing variable fees of up to £3,000 per year from 2006, although loans for maintenance costs will remain interest free in real terms.

The Tories announced that scrapping all fees, while retaining mean tested grants, would ensure university places are awarded on merit.

Collins also claimed that revenue lost by institutions would be replaced by transferring ownership of the student loans book from the Treasury to colleges and charging a market rate of interest on the cash.

He said graduates would have smaller debts and would be able to clear them more quickly under the Conservative scheme.

Allowing students to take out larger loans would also reduce dependence on expensive credit cards and overdrafts he added.

"Because the amount of debt is reduced quite sharply the average graduate under the government's plans would leave with loan debt of the order of £19,000 - under our plans they leave with about £10,000," the shadow minister said.

'Con'

But higher education minister Alan Johnson told the BBC that the Tory plans were "convoluted, with the emphasis on con".

"They would mean that repayment of student loans would not be based in any way on the ability to pay," he said.

"Those who would be particularly badly hit would be those going into low-paid vocations such as voluntary organisations and the church.

"Women would be viciously penalised by having children and bringing up a family.

"Repayment would not be through the tax system and so would be massively unfair and expensive for the universities to administer.

"And most importantly of all, universities would simply not get the money they need for raising the quality of their courses."

Liberal Democrat education spokesman Phil Willis agreed that market rates would deter applications for degree courses.

"Michael Howard is now showing his true colours. Under his plans only the wealthy should apply to universities," he said.

"Tory policies will see poorer students being priced out of universities by huge hikes in the cost of student loans. 

"By introducing commercial interest rates poor students will end up with astronomic levels of debt and many will be put off going to university all together."