Millions of students face paying more interest on their student loans to create more money for universities, elite university group suggests.

The Russell Group has said that students could end up paying higher rates of interest on their student loans because several universities were “severely at risk” from budget cuts that are being introduced to try and solve the UK’s debt problems.

The Russell Group, which represents 20 of the most research focused universities in Britain, said that universities were facing a deficit of more than £1billion in the next three years unless signigicant investment was made in the higher education sector.

An independent review of the student financial systems is currently underway, led by Lord Browne, and pressure has already been put upon the review to increase tuition fees to more than double their current amounts.

The Russell Group have suggested that the loan repayment system as it stands currently is too generous and includes too many subsidies that benefit those from wealthier families. The group suggested introducing an interest rate in line with actual loans, rather than the subsidised one that is currently offered. Another suggestion is to lower the threshold of earnings that must be reached before the loan starts to be repaid.

The group’s proposals were criticised by the National Union of Students however and their president Aaron Porter said: "The Russell Group have casually advocated cutting the repayment threshold and increasing monthly repayments, plunging graduates into greater hardship at a time we already know will be tough.

"There are more progressive ways to address inefficiencies in the student loan system, which Lord Browne needs to consider. But he should rule out this highly regressive approach to student finance."