Universities should invest some of their extra income from tuition fees in measures to ensure that fewer students drop out of degree courses, vice-chancellors will be advised next week.
A senior funding official will also suggest that universities consider "deploying their best teachers early on" rather than relying on less-experienced lecturers to take first-year courses, which is when most students drop out.
John Rushforth, director for widening participation at the Higher Education Funding Council for England, will use a keynote conference speech next week to call for investment in better advice for candidates before they enter university and more support and counselling for undergraduates in their first six weeks.
UK universities boast some of the world's lowest dropout rates, but nearly one in five students still fails to complete their degree.
The conference at the Commonwealth Institute in London on May 13 will weigh up how institutions can reduce the student dropout rate, including how to retain part-time students.
Mr Rushforth said that there was an "understandable risk" that universities would "take their eye off the ball" with regard to retention as they attempted to settle on their wider marketing strategies about tuition fees in the run-up to 2006.
He stressed that student retention was not only a financial issue and said that "everyone can come out of this ahead: institutions can be better off, students can feel more successful and academics can feel more fulfilled".
Mr Rushforth said: "Looking forwards, the great unknown is what fees will do to the whole higher education environment. Fee income will give institutions an opportunity to invest in retention. It will not only improve retention but generate more money coming through from Hefce, which they could reinvest further in retention."
Mr Rushforth said that there was a significant challenge in engaging people before they came to university, through advice and support.
"There are also issues to do with monitoring, counselling and engagement with people in their early stages, the first three to six weeks of their attendance at an institution," he said.
"There's an interesting discussion to be had about whether institutions should be deploying their best teachers very early, rather than as sometimes happens in some institutions where first-year courses are taught by relatively new and untried lecturers and the third-year students get the more experienced people."
- The number of universities could drop by half in future because of a widening gulf between prosperous and poor institutions and the trend of students to study locally, it was predicted last week.
Roger Brown, principal of the Southampton Institute, predicted that disparities between institutions would increase once the top-up fee regime was introduced in 2006 and that the number of universities could drop eventually from 115 to "50 to 60".
In his lecture "English higher education: past, present and future", Dr Brown said the lines between further and higher education would be increasingly blurred through mergers and collaboration, and new private universities and colleges would be established.