Universities should take on their students¡¯ tuition fee debt so that they have an incentive to get their graduates into well-paying jobs, the former universities and science minister has argued.

Writing today in the Financial Times, David Willetts says that the scheme would, for the first time, give universities ¡°a financial incentive to raise their game through pushing their students harder towards success in the jobs market¡±.

Under Mr Willetts¡¯ plan, graduates would pay back their tuition fees to their alma mater, rather than the Student Loans Company, meaning universities¡¯ income would be linked to how much their graduates earn.

¡°To do so would be to give the universities a direct financial interest in ensuring their graduates secure well-paid jobs that enable them to pay back more of their debt sooner,¡± he writes.

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¡°The more universities improved graduate job performance, the more their financial returns would increase,¡± he adds.

Mr Willetts does acknowledge a number of objections to the idea, including that it would mean universities only recruit ¡°the type of student who goes to a well-paid job¡±.

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But, he responds, no university would be forced to buy their graduates¡¯ debt and would only do so ¡°if they could improve the likelihood that it would be repaid¡±.

The former minister, who stepped down from his position in a government reshuffle earlier this month, also acknowledges that by taking on student debt ¨C which he says could amount to ?100 million a year ¨C universities would be saddled with liabilities that would soon ¡°dwarf all the university¡¯s other assets¡±.

But a university would have the option to buy ¡°only a portion¡± of the loan book, he said.

Mr Willetts also says that he looked at the idea while in government but concluded it was ¡°not yet deliverable¡± because government IT systems ¡°could not cope¡±.

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¡°But they should be able to in the next few years,¡± he concludes.

The idea put forward by Mr Willetts is not a new one. Economists are currently working on a project to link graduate earnings to the university a student attended, which could pave the way for a sale of individual institutions¡¯ loan books.

david.matthews@tsleducation.com