The Department for Business, Innovation and Skills has carried out market research into the effect of introducing loans for 19- to 24-year-olds as it faces sharp cuts to its budget in the next spending review.

Protection of health, schools and overseas spending means that BIS could face an estimated #163;1 billion of cuts - 7 per cent of its budget - in the review, which is expected by the end of summer. It has already taken some of the biggest cuts in government since the coalition came to power.

BIS said its research, which suggests that younger learners are more likely to say they would take out a loan than over-24s, does not indicate specific plans for extending the programme. Colleges say they will be urging the government to pursue other options.

The research found that interest in loans among learners who currently contributed to the cost of their courses was higher among 19-24s than among older students. Nearly two-thirds of this age group studying a level 3 course told researchers that they would be interested in an income-contingent loan, compared with 59 per cent of over-24s. In general, the survey found that the 25-40 age group was the least likely to pay fees.

Colleges would be urging BIS to look at alternatives to more loans, said Julian Gravatt, assistant chief executive of the Association of Colleges. He said it was “good that BIS is researching options but ‘willingness to pay’ in a market research survey is not the same as actually paying”.

Students in the survey indicated that they were willing to pay about 10 per cent more for their courses. But Mr Gravatt said the real fee increases would be closer to 100 per cent if BIS introduced fees and loans in the same way as happened for over-24s - which could put off more students even if loan support were available.

Loans for 19-24s posed problems that did not apply with older learners, Mr Gravatt said: at 19 some children were still in school, for instance.

Apprenticeship growth may also be at risk. A recent study by BIS examining the response of a range of groups to loans for over-24s admitted that “it was difficult to establish what apprentices - younger and older - are likely to do from 2013” and whether employers would pay their fees for them.

Shadow skills minister Gordon Marsden said it was a “deeply alarming” admission about a policy to be introduced in April.

And Mr Gravatt said: “Given the big push on 18-24 apprenticeships and the proposals on 16-24 traineeships, it might be better to see how 24-plus loans hit 24-plus apprenticeships before extending them downwards.”

Any expansion of fees and loans in apprenticeships would face opposition. Lecturers’ unions and the National Union of Students last week lobbied MPs over loans for over-24 apprenticeships, which they said were effectively a charge to work.

“It is outrageous and deeply counter-productive to charge apprentices to work,” said Toni Pearce, NUS vice-president for FE. “Apprentices already accept lower wages below minimum wage pay in order to get the skills that their employers value and now older apprentices are being asked to take on thousands of pounds of debt in order to have a job that has career prospects.”

A BIS spokeswoman said the survey questions addressed to under-24s about loans were an unintended consequence of a broad survey encompassing many aspects of FE and aimed at all ages of adults. But she declined to say whether loans for 19-24s had been ruled out.

“This is the first time that loans of this sort have been introduced in FE and we are keen to understand attitudes. Therefore, in addition to dedicated research and focus groups that BIS has commissioned on 24-plus Advanced Learning Loans, we have also looked to other opportunities to expand our evidence base,” she said.