Tuition fees and student loans penalise the poor and benefit the wealthy in higher education, according to a report for vice-chancellors.
The Social Class and Participation report, launched on Tuesday by Universities UK, also reveals that some universities fear that by opening their doors to people from low-income backgrounds they risk dumbing down academic standards or damaging their reputations.
And it questions the usefulness of the government's expansion target whereby half of 18 to 30-year-olds ought to be benefiting from higher education by 2010. It says that this could be achieved with relatively little widening of participation by poorer people.
The 195-page report, which includes case studies of 23 university-run widening-participation schemes, says that the decision to introduce fees and replace grants with loans was taken too hurriedly by the government in 1997.
"There is a broad swathe of opinion that changes in the system of student support have been... a disincentive to participation," it says.
It calls for means-tested grants and loans where the means-testing regime encourages those from lower-income backgrounds. Middle-class students are more likely to view the debt from their student loans as an investment in their futures. Working-class students see it as a burden.
And better-off students profit by taking out interest-free student loans while receiving money from their parents.
Speaking at the House of Commons launch of the report, UUK president Roderick Floud, provost of London Guildhall University, said: "I believe that we can have both (expansion and widening participation) but I believe that the only way this can happen is to have a productive review of the student support system."
The report, written by the late Maggie Woodrow, of the European Access Network, and completed by Mantz Yorke, of Liverpool John Moores University, goes on to explode "myths" about widening-participation policies.
- Myth - helping students across the board helps poorer students. Fact - this widens the gap as middle-class young people are always in a better position to take the opportunities offered
- Myth - cherry-picking gifted people from low-income groups, as in the Excellence Challenge initiative, widens participation. Fact - focussing on exceptional individuals distracts from tackling underlying sources of disadvantage and does little to address structural inequalities.
- Myth - part-time study is more appropriate for young people from poorer backgrounds. Fact - the project found no evidence of this. Such students need all the learning time they can get.
The report questions whether all institutions should be engaged equally in the process of widening participation.
"This is another way of raising the issue of what a diverse national higher education system might be like - on which interested parties can be expected to differ," it says.
The report calls on the government to increase to 20 per cent or more the widening-participation premium, which pays institutions an extra 10 per cent for every student recruited from a "poor" postcode area. It also calls for a more accurate measure of deprivation than postcodes alone provide.