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Every few weeks, Abdul Mannan picks up the telephone to call his parents in Manchester to ask for money for food or to help pay the rent. The 22-year-old final-year student at Glasgow University is already £14,000 in debt, and believes that without the lifeline his family provides he would struggle to complete his English literature degree.

"I have to phone my parents when I'm really short of money. They give me £30 or £40 at a time and it helps make ends meet," he says. "I also do odd jobs such as posting up flyers to get some extra money, but without support from my family I would have to work through the week and that would have a big impact on the amount of time I have for studying."

Mr and Mrs Mannan are not alone in subsidising their son's progress through higher education. Recent research has shown that parents across the UK are spending £4000 a year to help pay for their children to go to university. And the scale of Abdul's debts is not unusual: students at Scottish universities now owe an average of £7561 when they graduate, while a quarter owe more than £12,000.

The reason students end up in debt is because, rather than having their studies and living costs paid through grants, which happened in the past, they are now expected to contribute to the cost of their education through government loans that are repayable after they graduate. Although undergraduate students in Scotland don't pay for the cost of their tuition, they are charged the so-called graduate endowment when they finish their studies: a one-off fee of more than £2200.

Those who support the current system argue that, although a university education is expensive, it delivers significant benefits to those who take part and that therefore they should contribute to the cost. A recent report found that graduates currently earn about 50% more than those without degrees, with the average annual graduate salary in 2003 reaching £28,000, compared with £14,000 for non-graduates.

The argument is augmented by the fact that higher and further education in Scotland has seen a massive expansion in recent years that has taken participation rates from 19% in 1984 to more than 50% of young Scots at the turn of the century, although that figure has now dropped back to 46%. While the additional skills these students bring to society is welcomed, the sheer numbers coming though the system create a significant additional funding burden for the state.

However, critics of the status quo argue that saddling society's most talented individuals with thousands of pounds of debt as they begin to make their way in the world, both in terms of a career and in the housing market, is counterproductive, even though repayments begin only when their salaries top £15,000. More worryingly, there is a fear that student debt is deterring people from deprived backgrounds from going to university.

Most political parties support widening access for under-represented groups, but there has been little impact on those most in need. Although Scotland is doing better than the rest of the UK - figures for 2003-04 show that our universities attracted 18.6% of their intake from low-participation neighbourhoods, compared with a UK average of 13.7% - the proportion in Scotland has remained static since 2001. It also varies widely from institution to institution, and there has been little impact on the most deprived communities. The wealthiest 7% of Scots are five times more likely to go to university than the least-well-off 7%.

James Alexander, president of the National Union of Students in Scotland, says debt regularly tops the list of concerns of the 500,000 people currently studying in further and higher education in Scotland. "I have spoken widely with students and this is the one issue they keep coming back to," he says. "We also know that the biggest turn-off for potential students is the fear of saddling themselves with debt."

What threatens to make the situation worse for students such as Abdul is the significant change to higher education funding in England, where universities can now charge students additional money to pay for their studies: so-called top-up tuition fees.

Much has already been made of the potential impact on Scottish institutions. The top-up system allows universities in England to charge students up to £3000 in fees every year: an increase in overall income of £338m in 2006-07, rising to £1bn in 2008-09. The fear is that, with the extra money, English universities will be able to attract the best academics and develop the best facilities, leaving Scotland a poor second.

What will change the picture radically is the likely lifting of the cap on top-up fees in 2010, allowing universities to charge students as much money for their courses as the market will allow.

Once that happens, it will either require ever-increasing amounts of public money to be pumped into Scotland's universities to keep pace with the top institutions in England, or politicians will face the prospect of raising additional money from students, either through top-up tuition fees or some other mechanism, such as a graduate tax.

So far, increased funding from the public purse, now running at more than £1bn, has kept those fears at bay, although universities are now looking for a 15% increase in public funding above inflation by 2010-11 to keep the sector competitive. Despite what they might think privately, university principals have held off making a public call for tuition fees, but they fear the sector will be left behind once the cap on fees comes off.

The picture is complicated further by the current financial state of the sector, which is already showing signs of strain following the signing last summer of a pay deal for lecturers worth 13.1% over three years, which followed a boycott of exams that threatened graduations.

So far this year, Dundee University has announced 100 job losses, Strathclyde University is to lose 250 posts, Stirling University is predicting a budget shortfall of £1.8m and Glasgow University has already shed 230 staff.

Sir Muir Russell, principal of Glasgow University and convener of Universities Scotland, which represents university principals, said the last settlement in Scotland contained a sufficient increase to set against the sort of income stream expected in England, but warned: "The key issue for the future is to maintain that position."

However, for some, relying on the continued goodwill of government to treat higher education as a funding priority is not enough. Dr Andrew Cubie, a leading academic who drew up the graduate endowment scheme for the Scottish Executive, believes that if public funding fails to keep pace with increasing university income south of the border following the election, ministers should order a "rapid independent review".

He says: "We are in a very competitive market globally and we have to avoid being in a position where we are disadvantaged, and the new Scottish Executive has to address this issue. There may be a view from political parties that there will not be a funding gap, but I would challenge that. If it is not addressed through funding, there would be a need for a rapid independent review of the circumstances arising from that."

International race for private funding
UNIVERSITIES are increasingly trying to bolster their public funding with private income in the quest for international excellence. In 2001, some 54% of the income of universities in Scotland came from public funding, but that figure has fallen to 51%.

The rest of the sector's total revenue of £1.9bn comes from a variety of sources, including research contracts, commercial spin-offs, consultancy services to industry and the international market. Increasing the number of foreign students who come to university in Scotland can be lucrative.

Overseas students pay full fees at a market rate, which allows universities greater flexibility in the courses they teach and the research they pursue.

Scottish universities have increasingly courted the international market, first in other EU countries and now in India and Asia, with numbers from outside the EU more than doubling over the past six years, to 2606 this year. Money from overseas students has become fundamental to subsidise home students.

However, there are concerns about the expansion. Some critics view the trend as a form of academic colonialism, with developing countries being stripped of their brightest - and richest - students, while others have warned that tailoring university courses for overseas students will harm the interests, and take the places, of home students.

Another growth area is philanthropy, with universities trying to increase the amount of money donated from successful graduates, businesses and charities across the world.

Figures for Scottish universities in 2003-04 show that income from endowments and investments was more than £25.5m, an increase of £300,000 on the previous year.

Universities are increasingly following the example of America, which has a culture of educational donations.

In England, the trend has been encouraged by Tony Blair, who pledged that for every £2 that universities and colleges can raise from donors the government will offer £1, to a maximum of £2m, in a bid to help generate a total of more than £600m for the sector.

What the parties say
Labour
Widen access into higher education by strengthening links between schools in poorer areas and universities, and ease the financial pressure on students from the poorest families. Aspiration of at least 50% of the population to have degree-level qualifications by 2020. Rule out top-up fees in universities for a third term.

SNP
Abolition of the graduate endowment and student loans. They would be replaced by means-tested grants at a cost of £60m a year. The party would also write off the accumulated debt still owed to the Student Loans Company by Scottish domiciled and resident graduates at a cost of some £1.6bn.

Conservative
Establishment of an independent review to look at student debt and the future financing of higher education.

LibDem
Rule out tuition fees and scrap the graduate endowment. Pledge to continue to maintain high levels of public investment in higher education.

SSP
Abolition of all fees in further and higher education and unification of colleges under a co-operative network. Increase adult numeracy and literacy programmes.

Solidarity
Abolish the student graduate endowment and bring back grants.

12:01am Monday 23rd April 2007

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