The government is looking closely at bringing back student maintenance grants which it abolished four years ago.

A review led by the Education Secretary, Estelle Morris, has identified two possible models for a new system of grants, one of which would involve restoring grants for all students regardless of their family income.

However, to cover the costs of the new grants scheme, all graduates would have to make a contribution towards the costs of higher education once their incomes rise above a certain level.

In a separate development, it has emerged that some ministers involved in the review are supporting calls to scrap student tuition fees.

Change of heart

If the review does bring back grants and scrap tuition fees, it will be reversing the changes introduced by the new Labour government immediately after its victory in the 1997 General Election.

The then Education Secretary, David Blunkett, replaced student grants with a loan scheme and announced plans to charge tuition fees from autumn 1998.

Tony Blair hinted at the review at the Labour Party conference on Tuesday

It now seems that the government accepts it may have acted too hastily in ending grants and introducing fees at the same time.

Ministers have accepted the argument that fears about student debt are deterring many young people from poorer backgrounds from going to university.

They know that they cannot meet the prime minister's target of 50% of young people attending university without the participation of students from poorer homes.

Two options

Two schemes have been proposed.

The first would restore grants for all students, regardless of income, while the second would provide them only to poorer students following a means test.

However, under both schemes, once graduates are earning above a certain level they would have to pay a percentage of their income to the government as a "contribution" towards the costs of higher education.

The amount they pay would not necessarily be the same as the amount of grant they had received as students.

Under the second scheme, better-off students who received no grant would still have to pay a contribution, although it would be smaller than under the first scheme.

This is likely to prove controversial as it means students from middle-class homes would, in effect, be subsidising grants for poorer students.

Tuition fees

In a separate move, the future of tuition fees is now "in the melting pot".

A number of ministers are said to "look favourably" at scrapping altogether the up-front fee which currently costs students over �1,000 a year.

However ministers will want to retain the principle that graduates should make some contribution towards the cost of their university courses.

Some form of graduate tax is a possible option.

The review should report within six months, but it is unlikely changes could affect students before autumn 2003.