The final nail in the coffin for affordable higher education?

Students would be forced to pay thousands of pounds more for their degrees, with the prospect that institutions could charge as much as 12,000 a year for some courses - compared to the current 3,290 - under proposals outlined in a long-awaited review of funding.

Graduates would also pay back loans at a much higher rate of interest, equal to the Government's cost of borrowing, which could leave them facing many years of debt.

The proposals represent the most radical shake-up of the student funding system for years.

But the National Union of Students (NUS) warned that if adopted, the proposals would hand universities a "blank cheque" and lead to a market in higher education.

NUS president Aaron Porter said: "The only thing students and their families would stand to gain from higher fees would be higher debts.

"A market in course prices between universities would increasingly put pressure on students to make decisions based on cost rather than academic ability or ambition.

"Those already feeling the pinch will clearly be unwilling to take such a gamble and face being priced out of the universities that would opt to charge sky-high fees."

Sally Hunt, general secretary of the University and College Union, warned: "Lord Browne's recommendations, if enacted, represent the final nail in the coffin for affordable higher education.

"His proposals will make our public degrees the most expensive in the world and price the next generation out of education."

The review calls for universities to be left to set their own fees, with the Government fully underwriting fees up to 6,000 a year.

Universities charging over that will be hit with a tapered levy to cover the cost to Government of providing the students with finance, and will keep progressively less of the extra funding.

For example, an institution charging 7,000 for a course will keep 94% of the fee.

The review sets out figures up to 12,000 per year - universities charging this will still keep nearly three-quarters (73%) of the fee.

But it does not specify any cap, saying there should be "no single fixed price for higher education" because all universities are different and provide different courses".

The recommendation is likely to be seen as a highly controversial option for the Government and politically explosive for the Liberal Democrats, who campaigned against tuition fees during the general election.

Their favoured option of a graduate tax, ruled out by ministers over the weekend, was dismissed by the Browne review as "unworkable".

Liberal Youth, the youth wing of the Lib Dems, said removing the cap would "cripple students with unprecedented levels of debt".

The review, led by former BP boss Lord Browne, calls for the introduction of a new streamlined funding scheme.

Under the Student Funding Plan, similar to the current system, no student would pay back their loans until they were in work. But the repayment threshold would be raised from 15,000 to 21,000, with outstanding loans written off after 30 years.

It emerged at the weekend that ministers appear to have agreed to introduce variable interest rates on student loans, with higher earners charged more on the money they borrowed while at university.

Higher-earning graduates would pay back their loans at an interest rate equal to the Government's cost of borrowing.

In addition, the review proposes to simplify the living costs system, so every student is entitled to a flat-rate maintenance loan of 3,750.

It suggests that a student taking out tuition fee loans of 6,000 per year for three years and 3,750 in maintenance loans in the same period will owe 30,000 by the time they graduate.

Lord Browne said: "Under these plans, universities can start to vary what they charge but it will be up to students whether they choose the university. The money will follow the student, who will follow the quality. The student is no longer taken for granted, the student is in charge."

He added that, under the proposals, the bottom 20% of earners will pay less than under the current system and only the top 40% of earners would pay back close to the full amount.

Asked how many institutions he expected to charge more than 6,000-7,000 annually for tuition, Lord Browne told BBC Radio 4's Today programme: "I think few will go very high.

"Above 7,000, they have to demonstrate that they really are not damaging for access and some rigorous proposals are put in place for that. They have to satisfy students through the student charter. And they have to attract students."

The 60-page document also calls for a 10% increase in student numbers over the next three years, with "no restrictions" on how many students institutions can admit.

Shadow business secretary John Denham said he was concerned that the proposals would leave many graduates "shackled by debt for the majority of their working lives, that those on middle incomes in typical graduate jobs may pay more than their fair share, and the highest earners will pay less and be free of debt much earlier".

Claire Laker-Mansfield, national organiser of Socialist Students, said: "If implemented, this spells the end of access to university as we know it for future generations of young people. This will not lead to an improvement in education."

Dave Prentis, general secretary of Unison, said: "Removing the cap, and putting the cost of tuition fees up, will price many young people from disadvantaged backgrounds out of going to university. Others will be put off by the prospect of being saddled with thousands of pounds-worth of debt. What matters to students is total debt - whether it is a fee, loan or graduate tax is irrelevant.

"Many students already struggle to make ends meet during their course. The knock-on effects could be disastrous - for example, in 2013 the nursing profession turns all-graduate. The recommendations in this report will do nothing to help keep people from all walks of life becoming a nurse.

"We are calling on the Government to reject these proposals, and for the Liberals in the coalition to remember their pre-election promises."

Professor Steve Smith, president of the vice-chancellors' umbrella group Universities UK, said they were pleased with the recommendations.

"The review addresses directly the need for a properly funded higher education system. Any Government proposals arising from the review must deal immediately with the anticipated gap in public funding for universities.

"We know these are difficult decisions but, in an era of public funding cuts, we have to look fairly and squarely at who pays for the cost of higher education.

"The alternatives would mean universities having to reduce the number of student places or returning to a period of underfunding. Both of these would be hugely damaging to students, universities and the economy.

"I urge politicians not to leave us with an insurmountable funding gap and, instead, work together to find a workable solution.

"If they don't then they will starve our universities of the resources they need to teach the students of tomorrow and the chance to remain a leading player on the higher education world stage."

Lord Browne's review covered England only.