Part-time students will only have access to loans to cover their fees if they are taking first degrees under proposals for England that would rule out hundreds of thousands of people.

An impact assessment published by the Department for Business, Innovation and Skills shows that only a third of part-time students would be eligible for loans, leaving about 300,000 students to meet increased fees themselves, based on 2007-08 figures.

The mismatch can be partly attributed to the government's decision to offer fee loans only to students studying to at least a third of the intensity of full-time courses.

However, an analysis by two academics - and confirmed by the government - shows that loans will be denied to those seeking an equivalent or lower-level qualification (ELQ) to one they already hold, continuing the controversial funding restriction brought in by Labour.

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The assessment was carried out by Claire Callender, professor of ÖйúAƬ policy at the Institute of Education and Birkbeck, University of London, and her colleague David Wilkinson, head of the National Institute of Economic and Social Research's Employment Group.

Professor Callender said that if the government was planning to allow students with existing higher-level qualifications to take out fee loans, 61 per cent of part-timers would benefit.

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She pointed out that under current rules, only 10 per cent of part-time students were eligible for state support.

However, she warned that part-time students ineligible for loans under the new system could see their fees increase at a faster rate than their full-time counterparts because many universities currently do not charge a "pro rata" price.

In addition, thousands of part-time places are currently subsidised by teaching-grant money that is going to be cut.

According to the BIS impact assessment, the teaching grant for part-time students will drop from ?410 million to ?85 million by 2014-15.

The document says that this is being reduced "as for full-time students" - confirmation that teaching funding is being slashed by almost 80 per cent across the board.

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Labour said that figures obtained from the House of Commons Library suggest that The Open University would be hardest hit, with cuts of ?84 million to its current teaching grant.

In a joint statement, The Open University and Birkbeck say that they are working with the coalition to ensure that the Browne Review's commitment to part-time study "survives".

The BIS impact assessment also reveals that the government is estimating that its policy will cost the country as a whole more than ?2 billion over the next three years because of the increased burden on graduates.

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According to the analysis, there will be total savings to the government of ?2.5 billion owing to cuts in the teaching grant, whereas graduates face an extra ?4.5 billion in loan repayments.

Elsewhere, the document confirms that the government's loan package would be more costly to taxpayers than Lord Browne's proposals, although even this is based on assumptions - criticised by analysts - about future earnings and an average fee level of ?7,200. Many predict that most institutions will charge ?9,000 if they can.

Meanwhile, a survey of university marketing and communications directors shows that most think that higher fees will lead to a decrease in demand from students.

Of the 42 responses to the study by The Knowledge Partnership, more than half also agree that pure academic subjects such as English and history could become the preserve of the "very well off".

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Almost all thought some universities would be forced to close or merge in the next 10 years, while about two-thirds predict a shift in demand from full- to part-time postgraduate study.

simon.baker@tsleducation.com.