As soon as the party hats have been put away and the New Year celebrations have faded, there will be one big issue bulging in the education secretary's in-tray.

The future of student fees and university funding will have to be determined.

After a review that has dragged on for over a year, this month will finally see the fruits of Labour's long hard thinking on a topic that has dogged them since taking office.

In the latest round of controversy, the government was accused of planning huge hikes in tuition fees to pump extra money into universities.

This has been denied - and it seems increasingly unlikely that students and their families will face mortgage-sized up-front fees.

Student protests and the prospect of scaring off middle class voters appear to have tilted the argument towards a payment system that begins after students have graduated.

But nothing is certain and the Education Secretary Charles Clarke has no easy options.

Cash shortfall

Mr Clarke will be the third successive Labour education secretary to wrestle with student funding - with neither of his predecessors having found a solution that pleased either students, universities or the Labour backbenches.

This reflects the complexity of the problem.

Universities, the government accepts, are short of cash, with vice-chancellors claiming a �10bn shortfall.

But the government's plan to make students contribute more to university coffers has seen them stumbling over a series of political trip-wires.

On the backbenches, Labour MPs say that charging students more will deter applications from students from poorer backgrounds.

And with tuition fees and the end of grants, this has pushed the government into an uncomfortable position of defending high levels of student debt.

The prospect of even higher fees will also antagonise middle class families, who are the biggest consumers of higher education.

As ever larger numbers of students enter university, so the electoral impact of student financing increases.

And the review was called in direct response to the general election feedback from MPs that student funding was one of the biggest issues on the doorstep.

Graduate taxes

Graduate taxes have been proposed as a more socially inclusive and politically less damaging alternative to up-front fees, removing the difficulties attached to an entrance charge for university.

Students would pay back through the tax system once they entered work - and student financing would become an opaque tax code rather than a more uncomfortably transparent system of fees and loans.

But promising higher education that is "free" at the point of entry would be a far from straightforward choice.

While the government has the aspiration to widen participation in university, it also has the perspiration of keeping a limit on public spending.

And keeping over a million full-time undergraduates for three years in accommodation, food and tuition would be a huge financial commitment.

There have been forecasts that it would take 10 or even 15 years before the incoming revenue from graduate taxes would balance the expense.

Private finance

To bridge this funding gap, it is likely that the government will have been sounding out the possibility of using the private sector.

But expanding the role of private finance in higher education will not be without its political sensitivities.

And there will be some creative thinking about how extra funds could be raised - perhaps using bonds or some kind of education-linked savings scheme.

There are already "ethical" Isas (individual savings accounts) for environmentally-friendly investors, and perhaps a "university" Isa will not be far behind.

It will not be enough for Mr Clarke to find a practical solution to this funding logjam.

He will also have to sell the deal, a problem that is made more difficult because the debate straddles so many of the fault-lines beneath the government.

Privatisation

Left-wing backbenchers have been staging revolts against student fees since 1998 - and they will need to be convinced that the funding arrangements will not deter the less well-off.

But the government will also need to steer a careful path between protecting the expectations of the middle classes - and the risk of being accused of introducing stealth taxes.

And any idealism in opening the gates of higher education will have to be balanced with the Chancellor's reputation for financial rectitude.

If short-term funding depends on private-sector partners that also runs the risk of being interpreted as a form of creeping privatisation.

Universities also will be checking the small print of any financial settlement, to make sure that they do not lose out in any political trade-offs.

It could be a busy start to the new year for Mr Clarke.