Students could be paying more than double the present fees for university courses after a review of the funding of higher education to be started today.

The cost to graduates of repaying student loans is also likely to rise sharply as the current subsidised rate proves unsustainable. Higher fees will mean bigger debts, costing the Exchequer more unless the interest rate rises.

Lord Browne of Madingley, the former chief executive of BP, will chair the independent review of higher education and student finance.

The choice of a business figure, rather than an academic, to lead the review reflects the Government’s belief that universities should become better attuned to the needs of industry.

The review, lasting up to a year, will be announced by Lord Mandelson, the Business Secretary, with minimum fuss, in line with the wishes of Labour and the Conservatives not to generate controversy over higher fees before the general election. In a written statement, rather than an announcement in person, Lord Mandelson is expected to say that students from poorer families have not been put off from applying to university by higher tuition fees since 2006.

Some vice-chancellors are pressing for fees to rise to £7,000 a year, from the current £3,225. Others believe that £5,000 a year is a more realistic level.

The review will look at levels of student debt and weigh these against how students themselves value higher education and the rate of return from gaining a degree. It will also consider how higher fees affect different groups, such as women, ethnic minorities or those with disabilities.

Lord Browne will examine how universities have spent the £1.3 billion in additional income that they have received from higher tuition fees, and the effectiveness of bursaries for students from the poorest families.

Although his recommendations on lifting the cap on variable tuition fees will receive the greatest attention, his stance on student support will also have huge implications for those considering university.

The CBI called several weeks ago for interest on student loans to be charged at the Government’s own borrowing cost, rather than the subsidised rate effectively pegged to inflation. The CBI also said that the threshold for student maintenance grants should be cut from a parental income of about £50,000 to £38,000.

Higher tuition fees, which would be introduced from autumn 2012, are likely to accelerate the dominance of a group of elite universities able to compete globally for students and research funding. Top universities would be most likely to charge the full fee, with other institutions levying slightly less, creating the variable-fee structure originally envisaged.

Only Leeds Metropolitan University tried to undercut the £3,000-a-year maximum fee when it was introduced three years ago. Its discounted rate of £2,000 was initially popular with students but was abandoned this year.

Stephen Williams, the Liberal Democrats’ universities spokesman, said: “The Government and the Conservative Party have deliberately connived to make sure that the review does not take place until after the general election so they can avoid having a debate in the election itself.”

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