I believe this is no accident. The government wants a world class education system and leading research.

They could just give money direct to universities - but then it's hard to ensure they're getting good value for money.

But by giving it to students to in turn give to universities they get better value for money.

One day someone has to pay for that - and the students paying it back via loan repayments isn't awfully different to citizens paying it back via taxes. But with the student route everyone is more invested in getting good value for money. And non-university users (who tend to be the poorest) don't end up paying. Win win.