Universities will be anxious to see extra funding maintained

But the main students' union has called the plans "abhorrent" and academics also had reservations.

The Conservative Party has said it would scrap all tuition fees and give students bigger loans - but charge them a real rate of interest, with universities getting the money this raises.

Professor Ivor Crewe, the president of Universities UK, representing vice-chancellors, said the detailed financial implications for students and institutions would have to be studied.

HIGHER EDUCATION FUNDING Labour Variable tuition fees of up to �3,000 a year, covered by loans. Grants for poorer students of up to �2,700. Student loans at inflation-only interest rate. Loans repayable from graduate earnings. Conservatives Scrap all tuition fees. Retain grants for poorer students. Bigger student loans at commercial interest rate. Repayable from graduate earnings. Liberal Democrats Scrap all tuition fees. Grants of up to �2,000 a year for poorer students. Treat full-time and part-time students equally. Student loans at inflation-only interest rate. New 50% income tax for earnings over �100,000. Have your say: Tuition fees

"It's also vital that the package benefits the whole sector - Universities UK will be paying particular attention to any potential differential impact these proposals might have on institutions."

Universities UK has called for additional investment of �8.79bn in higher education in England and Northern Ireland.

'Grave concerns'

One of its priorities in talks with the Tories would be to ensure a commitment to maintaining the "unit of funding" per student.

The provost of University College, London, Malcolm Grant, said better-off students who did not need public loans would be able simply to bypass the funding system - so they would get a free university education and universities would get no financial benefit from their participation.

Nicholas Barr, professor of public economics at the LSE, said: "The Conservative proposals unambiguously help students from better off backgrounds (who no longer have to pay fees) and harm students from poorer backgrounds, who will be hurt by the higher interest rate."

The policy benefited merchant bankers at the expense of nurses and teachers and risked losing bright people from poorer backgrounds - good policy if the aim was "to curry favour with the middle classes", but with no other redeeming features.

The National Union of Students expressed "grave concerns" over the funding proposals.

Its president, Kat Fletcher, said the Tories had stood by the NUS in its battle with the government over the introduction of variable tuition fees - but their promises for fairer funding were now seen to be "merely rhetoric".

"It is na�ve for the Tories to believe that this will win the student vote in the run-up to the General Election."

The NUS supported any plans to abolish fees but did not believe in putting a commercial interest rate onto loans.

'Free-for-all'

"Such proposals will only serve to burden those already severely in debt with more debt over a period of time," she said.

The union representing mainly academic staff at the older universities, the AUT, expressed about "the emergence of a free market in higher education".

Its general secretary, Sally Hunt, said: "Our initial analysis suggests that while overall student numbers will be capped, individual universities will be free to recruit as many as they want. Without some degree of control, this free-for-all could prove a disaster.

"We believe the proposals could lead to a decline in both postgraduate student numbers and new academic staff.

"Watching your student debt earn 8% interest a year for five years while you study for a Masters and a PhD is hardly going to attract the brightest and the best to be the academics of the future."

College concerns

The Association of Colleges noted that the Conservatives had said nothing about further education funding levels.

Its chief executive, John Brennan, said it hoped the Conservative Party would confirm its commitment to "this vitally important area".

Logically, he said, the party should also abolish the fees charged to adults taking qualifications at lower levels - who typically came from poorer backgrounds and would go on to earn less than graduates.