Britain's universities need an extra £900 million a year but the perceived burden of student debt may be deterring students, the head of Universities UK has said.

In an exclusive interview with ePolitix.com, Baroness Warwick, the chief executive of the body which represents the nation's universities, also said students may have to pay more for their higher education.

Britain's higher education sector had made it clear that "to deliver the very diverse range of demands the government's now put on universities, we need an extra £900 million a year," said Warwick.

"How the government finds that money, it seems to me, is a matter for them. But I don't think we can rule our the possibility of students paying more," she added.

It is important that any changes to student contributions and worries over debt do not deter people from entering the higher education sector, said Warwick.

"These debts are not primarily a result of tuition fees, 97 per cent of which were repaid last year. They are being incurred to pay the living costs associated with three years of study. Vice-chancellors are becoming increasingly concerned. They are especially worried when its leads to students dropping out or, in a few cases, excluding students," Warwick said.

She also warned that Labour's aims of expanding the number of students in higher education and reducing social exclusion may be hit by the cost of university study. People from poorer backgrounds may be put off by an aversion to debt, argued Warwick.

Universities UK also announced that it had commissioned a group of leading researchers to talk to students and young people with the aim of gathering hard evidence and assisting the search for new solutions.

The government passed the Teaching and Higher Education Bill in 1998, which replaced the previous system of maintenance grants with loans and introduced £1000-a-year tuition fees.

Ministers argued that the charges were essential for funding the growth in the numbers of those studying, and that those who gain a university education benefit from higher salaries during their working life.

The private sector will also have an expanding role in higher education in the coming years, Warwick told ePolitix.

"The whole role of universities in innovation has been a very positive development. And I think there's much greater partnership now, much greater awareness of the importance of partnership, between companies and higher education, so I see a growing role there," she said.