Dennis Canavan: Wanted threshold raised

The Tories and the Scottish National Party also had attempts to raise the threshold defeated.

The endowment scheme is intended to reflect the fact that graduates earn more than non-graduates and can therefore afford to fund a bursary scheme for poorer students.

Up-front university tuition fees have been abolished in Scotland. Instead, graduates will either pay off a �2,000 contribution or take out a student loan.

If they take out a loan, their payments would be collected through the Inland Revenue's machinery for collecting student loan payments, which are currently based on a salary level of �10,000.

The Bill also brings in grants for students from low-income families, reforms the loan system and scraps the obligation on students to pay council tax if they share a flat with non-students.

Andrew Cubie investigated student funding

Ministers believe it is a good deal, which is more generous than the one on offer in England.

But critics say it still does not go far enough.

The proposed salary threshold falls short of the �25,000 recommended by Andrew Cubie, whose inquiry into tuition fees led to the setting up of the graduate loan scheme.

Mr Cubie has previously criticised the low threshold saying it came close to a graduate tax.

Mr Canavan warned the proposed system would discourage students from entering higher education and accused the Executive of "stubbornly" refusing to implement the full recommendations of the Cubie inquiry.

"The �10,000 threshold is so ludicrously low," he said.

"One of the objectives of the Bill is to encourage more people to enter higher education but my fear is that many people, particularly from low income families, will be discouraged from entering higher education."

Brian Monteith: Iniquitous tuition tax

He added: "We need to ensure a fair deal for students and this is unjust, especially for those on low incomes.

"It is not good enough to say that the scheme is better than the status quo and we should just accept it."

Mr Canavan tabled an amendment for the salary threshold to be raised to �25,000 and adjusted annually according to inflation or an increase in earnings.

He said the collection of payments should be made through a progressive system of income tax.

The Tories branded the Executive's scheme as an "iniquitous tuition tax".

The party's education spokesman Brian Monteith said: "We believe that the collection of this tax at such a low threshold is unjust.

"What students are looking forward to is justice and there is no social justice in this Endowment Bill on such a low threshold."