The student loans system could be replaced with an "efficient and fair" alternative under which pension managers would take a risk and invest in young students.
The case is made in a report that argues that the main problem with meeting the cost of higher education is that the average student has no capital but can expect a healthy future income. Pensioners, meanwhile, have capital but no income stream.
The solution proposed by report author Peter Ainsworth, managing director of risk management company EM Applications, is for pension investors to provide students with funding in exchange for a percentage of their future income.
Mr Ainsworth argues that the best response to the funding gap, which is currently being considered by Lord Browne of Madingley's independent review, is to create "government-sponsored private market mechanisms that could transfer funds between investors, students and universities in an efficient and fair manner".
The report, An Equitable Approach to the Private Sector Funding of University Tuition Fees, proposes what it terms the "Fair" scheme - Funding with Affordable Income-based Repayments. Under Fair, universities would be allowed to increase top-up fees. Students could then either pay the full tuition fee by their own means or agree to pay a fixed percentage of their income to their backers once they are earning.
"The financial commitments made by students could be transferred to pension investors, who would pay in proportion to the amount they expect them to earn," the report says.
Under the proposals, students would sign a "private contract" with a special investment company, and banks would act as "financial intermediaries, processing the contracts and, in due course, collecting repayments from graduates".
Banks would be able to sell the contracts as equity or debt to investment companies.
Mr Ainsworth claims the idea is based on principles forwarded by economist Milton Friedman, who argued that asking students to take out a loan to study was inappropriate because many would never earn enough to justify the debt. Friedman likened the decision about whether to go to university to a risky business investment.
Mr Ainsworth writes: "Fair would raise income for the sector while reducing the burden on the state's finances."
The introduction of risk would also encourage universities to improve as their future interests would be linked to the career success of their graduates, he said.
Aaron Porter, president of the National Union of Students, said that the proposal was "interesting", but it could have unintended consequences.
"Relying on banks risks bringing greater unfairness and instability to the funding system," he said. "It would be unacceptable for money otherwise destined for the higher education sector to be creamed off as profit."
Lord Browne is expected to report the findings from his review early next month.
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