The government has said it wants universities to raise cash to promote bursaries.
"Institutions should not look to public funding alone and I ask the funding council to encourage institutions to look to other resources available to them to support the effective and efficient delivery of these measures (to promote the existence of bursaries and hardship funds)," wrote David Blunkett, secretary of state for education, to Sir Michael Checkland, chairman of the Higher Education Funding Council for England, in his annual letter.
The £1,000 bursaries are targeted at the poorest students.
Mr Blunkett restated the government's commitment to widen access to higher education for under-represented groups. He said: "I expect to see a step change in participation rates for these students in the near future." All institutions should seek to widen access, he added.
Retention rates - usually lower in institutions that recruit students from under-represented groups - will also come under scrutiny.
Plans to punish higher-than-expected drop-out rates were revealed. Mr Blunkett wants "much more substantial work to be done in identifying best practice and bringing pressure to bear on those institutions whose performance falls significantly below their benchmark".
On academic pay, Mr Blunkett said: "I want to re-emphasise that it is important for the continuing world-class reputation of our higher education system that institutions can continue to recruit and retain high-quality staff over a range of disciplines.
"In today's knowledge economy, higher education is one of the main drivers of national prosperity." He went on to say that he expected universities and colleges to take account of "affordability within the limits set by this letter".
Funding per student will increase next year - for the first time since the expansion of higher education in the late 1980s - and no cuts in the unit of funding are expected for the following two years, once the private contribution to tuition fees has been included.
Mr Blunkett also ruled out top-up fees for another year.