By Mike Baker BBC education correspondent

It was miserable and wet in London on Wednesday but that didn't deter thousands of students from taking to the streets to demonstrate their opposition to "top-up" fees.

But was this an altruistic protest in support of the principle of free education or was it the middle classes marching to defend the big subsidies they receive to get a degree which, in all probability, will earn them a higher salary than non-graduates?

It is not easy to answer that question - the issue of student finance is more complex than most and glib slogans don't really get to the heart of it.

But we do need to recognise some uncomfortable facts if we are to understand why the issue of students fees and grants is causing so much difficulty.

Demand for graduates

For a start, there are some conflicting aims. Much of the current debate is driven by the government's target of getting 50% of those under 30 into higher education by 2010.

Not all agree with this target. They say we're already producing too many graduates when what we really need is more plumbers and electricians.

They also argue that if we have too many graduates they'll no longer receive a big earnings premium.

But the government is firmly set on expansion. Margaret Hodge told a universities' conference this week that research suggests most jobs growth will be in areas demanding graduate-level education. Indeed she predicts a 50% increase in the demand for graduates.

But getting more students into university is not, in itself, so difficult. The middle classes show little sign, so far, of abandoning the university route.

Little has changed

Universities could meet the 50% target simply by taking more middle class students.

The more difficult challenge is combining expansion with the government's other aim - broadening the range of people going to university.

The socio-economic composition of Britain's student body has hardly changed over the past 40 years.

In other words, not only do the middle classes predominate now, they also did so when there were still full grants and no fees.

Vocational degrees

We have a better chance of understanding where the government is heading with its higher education review if we are clearer about its aims.

First, the expansion it wants is not more of the same: in other words, not more middle class students studying the arts and humanities at Russell Group universities.

No, it wants more students from homes with no tradition of going to university and it wants them to take foundation degrees, HNCs, and HNDs in vocational subjects at the newer universities.

While it wants to achieve this sort of expansion it also wants to do so at no extra cost to the taxpayer.

At the same time, ministers have accepted that Britain's elite universities need a lot more money if they are to compete with the world's best.

This is not just keeping up with the wealthy institutions in the USA but also in places like Singapore and Hong Kong.

More money

It is these aims which explain why Downing Street has been so keen on the top-up fees approach - it gives the elite universities the freedom to raise more money from students.

Vocational courses at the newer universities would be unlikely to attract top-up fees.

The extra income from higher fees could both boost income at top universities and provide money for a limited restoration of non-repayable grants to students from poorer homes.

This would be a shift from subsidising middle class students towards a system where the subsidies are more sharply focused on broadening participation.

Wide opposition

But an unusual combination of political forces have combined to oppose top-up fees.

On the one hand there are those who quite simply think it is wrong to charge fees of any sort.

On the other there are those who realise they - as parents or graduates - will have to pay a lot more in order to subsidise those who can't afford to pay.

So with top-up fees Tony Blair risks alienating both his own left-wing backbenchers and middle class voters. Hence this week's apparent signal that parents won't be charged thousands of pounds "up front".

This, of course, does not rule out top-up fees altogether, as it is perfectly possible to charge them through a graduate tax or deferred payment scheme.

Mixed answer

It now looks increasingly likely the government will go for a combination of both up-front payments and deferred payments (in other words, paid after the student has graduated either through a graduate tax or an income-contingent loan scheme).

The most articulate advocate of income-contingent loan schemes is Professor Nicholas Barr from the London School of Economics. He was also speaking at this week's universities' conference.

He argues that tuition fees should rise to �3,000, but some universities could choose to charge less. At the same time, there should be much larger loans than at present.

These should be big enough for the poorest student to be able to cover both fees and living costs.

Indeed, part of this loan would go directly to the university to pay tuition fees, thus - in effect - making university free at point of use. This would also remove the need for parental contributions.

Debt aversion

This might seem a very expensive idea. But according to Professor Barr it could be done at neutral cost if the interest rate on these loans were based on standard bank rates, rather than being heavily subsidised as now.

However, as this week's student survey showed, young people do not always behave as economists wish them to.

Fear of debt is a big factor in deterring the very students the government most wants to attract.

Professor Barr's response is to suggest non-repayable scholarships targeted at students from the poorest homes.

He suggests that if these were concentrated on first-year students that might be enough.

After that they may be convinced of the value of a degree and be ready to take out a loan.

Higher fees, bigger loans, and targeted scholarships: it's an intriguing option.

Has Professor Barr been called in to Downing Street to explain it?