Ministers may waive top-up fees altogether for the poor as a concession to students, universities and Labour backbenchers threatening to sink the forthcoming higher education bill.
A source close to government said that the idea was being looked at after higher education minister Alan Johnson admitted a lack of support for the proposal for the poorest students having to pay fees of up to £3,000 from 2006.
Waivers would also mean that universities, worried that they might not generate sufficient income from top-up fees to provide their own bursaries, would not be left out of pocket, which Mr Johnson also admitted was an issue.
Finally, the source said that a concession on fees would appease many of the Labour MPs who are threatening to vote against the top-up fees bill later this year because they believe the fees will deter poor students.
The source said: "The government is likely to go down the road of paying the full fee for poor students rather than increasing any kind of grant.
"Politically it would be a good move, and it also has the benefit of simplicity whereby if you qualify for exemption to the flat-rate element of the fee, you qualify for exemption from the top-up element."
The higher education white paper, which proposed top-up fees, opted for maintenance grants of up to £1,000, to be introduced in 2004, as the vehicle for supporting the poorest.
But, at the time, education secretary Charles Clarke said that the government would look, at a later date, at whether the grant might be better configured as a fee waiver.
The source said: "It is possible that they are looking at this sooner than they might have."
Mr Johnson is worried that the poorest students could be left hundreds of pounds short if faced with a fee bill for £3,000 even if the means-tested flat-rate element were waived and the student got the full £1,000 grant.
A spokesman for the Department of Education and Skills said that the department was looking at a range of matters in relation to the poorest students. But he added that, unless there was additional money, the money for a fee waiver would have to come from grants.
The government expects universities to play their part in supporting the poorest students by funding bursaries and community outreach work from the additional income they will raise from top-up fees.
To be allowed to charge top-up fees in the first place, universities will have to specify how they will secure access for the poorest students and how they will fund this recruitment and retention. Details must be spelt out in the access agreements submitted to the Office for Fair Access.
Mr Johnson admits that institutions could be disadvantaged if they recruit large numbers of poor students whom they must support but, for fear of deterring students, could not raise money for this work by charging high fees.
Michael Driscoll, vice-chancellor of Middlesex University and chairman of the Coalition of Modern Universities, which specialise in widening participation, said: "It is important that the government comes up with a clear solution quickly. If not, those institutions that think they may be at the wrong end of this issue will find themselves unable to support the government's higher education bill."
The government has ruled out any pooling and redistribution of fee income between universities.