INCREASED student debt could help fund a new university for Ipswich.Plans announced by the government yesterday created new fees which could see graduates leaving university with debts in excess of £20,000.

INCREASED student debt could help fund a new university for Ipswich.

Plans announced by the government yesterday created new fees which could see graduates leaving university with debts in excess of £20,000.

But Ipswich MP Chris Mole believes government cash freed-up by the controversial top-up fees could be channelled into the long-awaited university for the town.

He said: "Importantly for Ipswich, the way is now open in the next comprehensive spending review for the chancellor to invest in additional student places.

"If additional tax revenue were to be diverted to subsidising student loans I do not believe we would get the investment we need in a new university based in Ipswich."

Yesterday's announcement on student fees held few surprises. As expected, universities will be able to charge up to £3,000 a year for courses from 2006.

Grants are also set to be reintroduced to help out poorer families.

Mr Mole said: "I welcome the proposals for a graduate contribution scheme that is about as close to a graduate tax system as can be achieved.

"This approach reduces the dependence on assessment of parental income and only requires loans to be repaid once an individual is earning more than £15,000 per year."

Up front tuition fees – currently just over £1,000 - are set to be scrapped in favour of variable fees of up to £3,000 a year. Maximum student loans will be set at £4,000 a year.

They will be repaid at nine per cent of income once graduates are earning £15,000. Any debts still held after 25 years will be scrapped.

Means-tested grants will be reintroduced from 2004, reaching a maximum of £3,000 a year by 2006.

Universities have given a cool reception to the plans while student groups and opposition parties have savaged them.