UK universities risk falling behind international competitors because nervousness about tuition fee reforms has made them focus on savings instead of investments, according to a senior figure at one of the sector's major bank lenders.
Chris Hearn, head of education at Barclays Corporate, also said in an interview with Times Higher Education that the rumoured sale of the student loan book could make the new undergraduate finance system "a lot more sustainable".
About 40 to 45 per cent of UK universities' bank borrowing comes from Barclays, with two-thirds of universities being clients of the bank.
Barclays' exposure to universities amounts to £3.7 billion, making the sector a "fairly significant client group", Mr Hearn said.
He described universities' financial performance over the past three years as "outstanding".
"When we as a bank think about universities and the uncertainty that exists in other, similar client groups, it's clear that the business model of the sector is strong: you have demand for places, global brands, the longevity of its client base - all of that makes it a very sound business model," Mr Hearn said.
The sector's "inherently prudent and conservative" approach is a strength, he added, with its short-term cash deposits currently amounting to £7 billion.
But Mr Hearn also noted "the weakness of [the sector's] prudence. Seven billion pounds is clearly a very nice cushion to absorb any shocks that might come from the changes in student finance. But on the other hand, it's money that's not actually invested into the sector. Maintaining high-level investment is key, to my mind, in the sector keeping its competitiveness...not just in the UK but globally."
Investment in student facilities is seen by many as increasingly important, with students likely to demand more in return for their higher fees.
At current interest rates, "a pound invested" is worth more than "a pound in the bank", said Mr Hearn.
With regard to the new loans system for undergraduates, some critics in the sector argue that the government has underestimated the costs.
Mr Hearn, who described the scheme as "generous", said: "You can imagine a time when it may have to be reviewed again, just because of the volume of taxpayers' money that is caught up in the scheme."
The government is also planning to sell the student loan book to private-sector buyers.
Mr Hearn observed that because the new undergraduate finance scheme "is attracting interest, and proper interest, this time - rather than the old scheme which was just effectively [keeping pace with] inflation - it may be that there are elements of it that could be sold".
Of the potential sale of the undergraduate loan book, he said: "If it was possible, it would probably make the whole thing a lot more sustainable over time."