THE leader of Liverpool students union last night warned a rise in university tuition fees could prove disastrous for the city’s economy.

Josh Wright said students are worth an annual £250m to Liverpool’s economy but a possible fees rise to £9,000 a year could see many under-graduates deciding to live closer to home to save money.

Experts warned last night that most Merseyside students will now have to pay £27,000 in fees for a three-year course – and pay interest on their debts for the first time.

University leaders suggested the new annual £9,000 cap – proposed by the government yesterday – would quickly become the "going rate" at almost all institutions.

The prediction came despite universities minister David Willetts insisting the "basic threshold" would be £6,000, with universities able to charge up to £9,000 only in "exceptional circumstances".

Furthermore, a sting in the tail in yesterday's package was an announcement that students will pay interest as high as inflation plus 3% on their loans.

At present, loans – to cover fees capped at £3,290 per year, little more than one-third of the proposed new level – are interest-free. Last night, the University of Liverpool declined to say whether it would charge £9,000 for most courses, stating it was "looking at various scenarios".