Ronald Harrison, fired this week as chief executive of the Student Loans Company, has announced through his lawyers that he will fight the dismissal through the courts.

Gillian Shephard, Secretary of State for Education, said that Mr Harrison had been dismissed for conduct which had brought him and the company into disrepute, and would not be paid any compensation.

But Mr Harrison said he denied all allegations of impropriety and gross misconduct, and that his dismissal was totally unjustified and without foundation.

Mr Harrison's temporary replacement at the SLC is poised to urge the Government to reform the loans repayment system so that it is more closely linked to graduates' earnings.

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Sir Eric Ash, the SLC's acting chief executive, said the present system, whereby graduates earning Pounds 14,599 repaid nothing, but those who earned Pounds 1 more could have to pay up to Pounds 530 annually was too sharp a difference.

"I think something smoother would be very much better," he said. "That implies that some payments could begin at a lower salary level, for example Pounds 10,000, while someone on Pounds 25,000 could afford to pay more than Pounds 530 a year (the current maximum repayment)."

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The SLC will submit a number of options to the review of ÖйúAƬ launched last year by Mrs Shephard.

Sir Eric is also launching a review of the SLC's widely condemned reapplication system, which left a backlog of unpaid loans. Sir Eric is today convening a liaison group of ÖйúAƬ administrators to finalise a new system which is likely to involve the SLC contacting students at their home rather than term-time address.

Sir Eric said he would prefer reapplication forms to reach students in May, but the company's revamped computer system had to be adequately tested first.