Media playback is unsupported on your device Media caption David Willetts: "This gives universities a stronger incentive to focus on graduate jobs"

Ministers and officials have been considering an idea that could bring major changes to England's student loan system, BBC Newsnight has learned.

It could lead to higher tuition fee charges, changes in loan terms and the way higher education works.

And universities could take on some of the risk that their own students repay less of their student debt than expected.

But the research was not official policy, said the government.

It was commissioned by the former universities minister, David Willetts, said the Department for Business, Innovation and Skills (BIS).

A spokesperson for BIS said: "The department regularly conducts research in order to explore the viability of policy suggestions and these play an important role in informing ministers and shaping policy."

Mr Willetts told Newsnight: "Why not give universities that wish it the opportunity of holding the loans belonging to their own graduates?

"So suddenly there's a direct connection between the university and the graduate."

At the moment, students are loaned money by the Treasury for their fees and living costs.

Lower-paid jobs

Once they have graduated - but only when their salary is more than £21,000 per year - they pay back a share of their income in repayments.

After 30 years, outstanding debt is written off, so students who take lower-paid jobs repay less of their loan.

The costs of the debt - currently assumed by officials to be between 30p and 40p in every £1 that it lends - are paid by the Treasury.

Higher education institutions could, in future, buy that debt as students graduated.

Officials said the price could vary from institution to institution - but the big idea is that institutions would profit if their students repaid more of their debt.

Image copyright Thinkstock Image caption Graduates start repaying the debt when they earn more than £21,000

Officials said they had the support of about "half a dozen" top universities.

There is also one "vast" institutional investor interested.

Mr Willetts presented this plan to leading universities but, officials said, he later became more interested in getting newer and less-renowned institutions involved.

These institutions tend to be more job-focused and their students tend to have weaker employment outcomes.

Cambridge graduates have a 4.3% unemployment rate in the first year out of study; for Staffordshire leavers, it runs at 13.9%.

Two supportive vice-chancellors from top-end institutions also pointed out that the plan could lead the way to higher fees.

One reason why the government has capped fees at £9,000 a year in England is to protect the Treasury; higher fees mean bigger loans and so more losses.

But if universities were to share some risk, the Treasury might allow them to charge more.

Grade inflation?

They might also seek to vary the terms of the loan scheme.

The idea is still in its early stages and would also require careful design to avoid unwanted consequences - for example, the easiest way to cut loan defaults would be to admit fewer women and students from poorer families, since both groups tend to have lower lifetime earnings.

Care would need to be taken to protect academic integrity; the process could spur grade inflation.

Unemployment among people with first-class degrees just out of universities was 5% in 2012/13, as opposed to 7.2% for people with upper-seconds.

If implemented crudely, the process could lead to a rush to provide lucrative subjects - more lawyers and scientists, fewer historians.

Officials said these issues could be dealt with by regulation and pricing of the loan book.

Image copyright Thinkstock Image caption After 30 years, outstanding debt is written off

Furthermore, few universities would be able to finance the stream of loans for long.

Even a strong university such as Leeds would go from having debt equivalent to about 38% of its current annual income to well over 100% within three years.

One supportive vice-chancellor suggested a partnership with pension funds might be the answer - they tend to lend to universities very cheaply.

For many institutions, other forms of risk-sharing seem more plausible.

Universities could buy a share of the loan book, not all of it. They could also be paid for their services in part in debt.

Or they could agree to pay the government the difference if loans cost more than a set amount - and receive a dividend if they came in under that cost.

The research is still emerging and unlikely to be in any manifesto - not least since there are major IT problems to be overcome to make it work. But it might be where future university reform heads.