A funding model for higher education that would replace tuition fees with a system of graduate contributions has been proposed by the National Union of Students.

In a report published this week, the NUS calls for the establishment of a "people's trust" for higher education, with graduates paying a monthly sum into an independent central fund for 20 years after they complete their courses.

The amount paid would vary according to a graduate's earnings. After 20 years, the total income generated each year would exceed the sum raised by lifting the cap on fees to ?5,000, the NUS says.

"Our proposals would end the very notion of a course fee or price and shut the door on a market in fees," said Wes Streeting, the NUS president.

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He argued that lifting the fees cap would result in the "wealthiest and most socially exclusive" institutions gaining resources while the rest lost out. Mr Streeting called for the Government's forthcoming review of fees to examine other options.

Under the proposals, the top 20 per cent of earners would contribute 2.5 per cent of their earnings, an estimated monthly contribution of ?125, while the bottom 20 per cent of earners would contribute 0.3 per cent - about ?5 a month. No contributions would be required from those earning less than ?15,000. Graduate payments would also be related to the number of credits studied.

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As contributions in such a system would be spread over a longer period, they would be more affordable, according to the NUS - someone earning ?30,000 would be ?37 a month better off than under the existing system, it says.

After two decades, the scheme would generate ?6.4 billion a year, ?7.9 billion after 30 years and ?8.5 billion after 40 years, compared with an estimated revenue of ?6 billion each year if the cap on fees is raised to ?5,000 and the ?4.5 billion currently raised.

As more income would be generated in the long term, the scheme should be conditional on "new measures to monitor and improve the quality of the student experience and the impact of higher expenditure in the higher education sector," says the report, Funding our Future: Blueprint for an Alternative Higher Education Funding System.

Fees for part-time students would be abolished, and employers would be encouraged to pay for employees' credits upfront or pay off credits they have already taken.

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"Our system would initiate a new era for non-traditional learning," Mr Streeting said. "No system is perfect, and we don't claim that our proposals can solve every problem. We do believe that this work should be seen as proof that a viable alternative could be found."

rebecca.attwood@tsleducation.com.