Ministers are set to gamble on a £500 increase in grants for students from poor homes, easing the passage of the higher education bill published this week.
Maintenance grants, to be introduced later this year, are likely to be increased to £1,500 when top-up fees arrive in 2006. At the same time, student loans will rise to meet the cost of living identified in the government's student income and expenditure survey, which put non-housing costs outside London at £4,485 and in the capital at £4,685.
Outstanding debts from the fees proposed in Thursday's bill will be forgiven after 25 years. Repayments will be made only when graduates' salaries exceed £15,000. Demands to raise this threshold are expected to be rejected.
The government is hoping that the concessions will be sufficient to persuade Labour rebels to vote for the higher education bill during its second reading, scheduled for January . Almost 160 have signed an early-day motion demanding that alternatives to variable fees be examined before further legislation is debated.
The concessions represent a partial victory for universities across the board. The government is not expected to insist on a certain proportion of fee income being set aside for bursaries. There will also be no national bursary scheme.
Post-92 universities with large numbers of students from poor homes had expressed concern that they would be able to charge only modest fees while simultaneously having to find the most money for bursaries. But the government expects the extra money for student support to prevent these institutions being disadvantaged.
Taken together, the student-support package will be worth £2,700.
Post-92 universities will be expected to find £300 per student per year in bursaries for the least well-off from their tuition-fee income.
Meanwhile, the research-dominated Russell Group institutions will not see their tuition-fee income confiscated by the government to pay for student bursaries at other institutions.
But the elite will come under the scrutiny of the Office for Fair Access, which will be created by the passing of the bill. It will concentrate its efforts on institutions where students from poor homes are under-represented, and the government is expected to take reserve powers to direct universities to increase the share of fee income dedicated to bursaries if compulsion is deemed necessary to boost access.
The student-support package may be modified during the passage of the bill so that the £1,200 fee waiver for students from underrepresented groups is transformed into an up-front loan.
This week, Labour rebels Peter Bradley and Alan Whitehead published a five-point plan for higher education that called for precisely this measure. Insiders said that progress could be made on this very quickly.
The government is expected to publish a document outlining its thinking for members of the parliamentary Labour Party, in a further attempt to appease the rebels.
It is also expected to agree to Mr Bradley and Mr Whitehead's demand for a comprehensive, independent review of the impact of variable fees after the first three years, in 2009.
Ultimately, the government wants to abolish the means-testing of student loans. Education secretary Charles Clarke is known to be unhappy that 18-year-old students are not treated as independent adults when the income of their parents is used to assess the level of support available. Mr Clarke will appear before the Commons education select committee next week to be quizzed on the bill.
The government is also expected to reannounce that universities will receive a 10 per cent premium for taking part-time students. The extra cash is a nod to those institutions that are concerned that they will be disadvantaged by the abolition of up-front fees for full-time students.
The Conservatives attacked the government proposals. Shadow education secretary Tim Yeo said that, if the maintenance grant were increased to £1,500 as proposed, it would cost an extra £150 million on top of calculations. He said that this showed that Labour's plans did not add up.
He added: "Further, possible concessions that the government may make to appease their backbenchers will increase the cost of the policy to taxpayers with no benefit to universities.
"Labour's plans mean taxpayers pay more than £1 billion to give universities just £690 million because of a complicated and inefficient system that leaves students saddled with debt.
The government's plans for higher education will mean massive extra debt for students, at massive cost to taxpayers, for little or no benefit to universities."
Cash boost welcomed but Blair comes under attack
Thom Bussey, 20, a second-year applied arts student at Middlesex University, says fees are a good idea if the funds are channelled back into cash-strapped institutions like his to ensure studios and labs are better maintained, writes Chris Johnston.
But he feared they could result in a two-tier system and said they must be accompanied by a bursary scheme that was fair and equitable.
Monica Hughes, 39, who is studying applied arts at Middlesex, accused Tony Blair of championing Britain's creative talents on one hand while on the other taking action that would damage them. She said: "He got his education for free like many other ministers, so it is a bit unfair they are now trying to introduce fees.