Under the plan put forward by an academic at the London School of Economics, those studying for a master's degree could borrow ?10,000 - which would be classed as a maintenance loan to avoid a direct link to fees - to help cover tuition and living costs.

Like undergraduates, postgraduates would repay through the tax system once in work, but would settle the extra debt through contributing 9 per cent of income earned between ?15,000 and ?21,000 a year.

This would mean that those earning ?21,000 or above would pay ?540 a year towards the extra loan in addition to undergraduate repayments.

Tim Leunig, a reader in economic history at the LSE, wrote the paper for the CentreForum thinktank, where he is chief economist.

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He argues that despite the extra monthly repayments, such a loan would still be much more attractive than commercial debt.

He also claims that the system would cost the government much less to subsidise per student than undergraduate loans - with only ?700 of each ?10,000 being written off, on average, because of debts not being repaid.

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The higher wages typically earned by those with master's degrees could even mean the plan would pay for itself through increased tax revenue.

"The government will break even so long as at least one in 10 people taking out the graduate degree loan would not otherwise have undertaken a graduate degree," he concludes.

The coalition has been attacked for not addressing postgraduate funding, and ministers are said to be looking at the plan with interest.

It has already received support from Andrew Hamilton, Oxford's vice-chancellor, who, in his annual oration last week, criticised the government for giving "scant attention" to postgraduate studies in its recent White Paper.

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"I'm glad to see such a timely contribution to the vital policy issue of UK graduate funding. I hope that it will be given serious consideration," he said.

simon.baker@tsleducation.com.