Student grants and subsidised loans may bear the brunt of the £600 million cuts announced for the academy in the pre-Budget report, sources within the sector predict.
The cuts, announced last week by Alistair Darling, Chancellor of the Exchequer, will be implemented over two years from 2011 to 2013, and will come from "changes to student support within existing arrangements; efficiency savings and prioritisation across universities, science and research; some switching of modes of study in higher education; and reductions in budgets that do not support student participation".
David Lammy, the Higher Education Minister, said decisions about how the cuts will be distributed would not be made until after the review of higher education funding and student finance being conducted by Lord Browne of Madingley has reported.
But one senior sector source, speaking anonymously, said the report was a "clear steer" to Lord Browne that the cost of higher education should shift from the Treasury to students and graduates.
"The gossip is that most of the £600 million could be found from the student-support budget," he said.
A report published by the Confederation of British Industry earlier this year states that student support - including bursaries - accounts for 25 per cent of government funding for higher education,"on a par with the most generous student-support arrangements in the world".
It recommends that interest on maintenance and tuition-fee loans be charged at the Government's cost of borrowing, rather than the current negligible rate of interest.
If the rates charged stayed the same, any increase in tuition fees - a widely expected outcome of Lord Browne's review - would correspondingly increase costs to the Government.
Wes Streeting, president of the National Union of Students, said he wanted "to make clear to politicians that under no circumstances will students be prepared to pay more for less in order to foot the bill for these cuts".
The announcement that the reductions will target areas "that do not support student participation" is presumed to include funding for the numerous organisations that receive state cash but do not provide educational programmes.
However, David Willetts, Conservative Shadow Universities Secretary, said there was "a lot of important information that we need to hear to have the key lines in the pre-Budget report explained".
Liam Byrne, Chief Secretary to the Treasury, has also said that "switching of modes of study in higher education" will mean a shift towards more part-time students.
The sector has already been asked to make "efficiency savings" of £180 million across recurrent resources for teaching and research in 2010-11. Universities have been planning for further cuts of about 15 per cent over three years.
The £600 million cuts, spread over two years, will come from an annual higher education budget of about £12.9 billion.
"This is pretty much what we were expecting before the election," the source said.
In an analysis of the pre-Budget report, the Institute for Fiscal Studies (IFS) says higher education is a "significant unprotected area" likely to face swingeing cuts in the next Parliament to balance rising or frozen spending in ring-fenced areas.
Gemma Tetlow, an IFS researcher, said unprotected departments could face average cuts of 5.6 per cent a year on a total of £36 billion in 2011-14.
Meanwhile, vice-chancellors are speculating about what will happen to universities' teaching grant from the Higher Education Funding Council for England if Lord Browne's review, which will report in autumn 2010, recommends lifting the cap on tuition fees.
One possibility being discussed is that the "unit of resource" - the sum universities receive per student for teaching - would be reduced by £1,000 or more, creating an incentive to make up the difference by raising fees.
Another possibility is that the unit of resource would be reduced only for universities charging fees above a certain threshold, creating a disincentive to charge higher fees.
DARLING-PROOF RING-FENCE? UNCERTAIN FUTURE FOR SCIENCE BUDGET
Has the Government broken the hallowed science ring-fence with the announcement of £600 million in cuts from the science and higher education budgets in 2011-13?
Scientists were forced to confront the possibility, which runs counter to previous promises, following last week's pre-Budget report.
The Government argues that the ring-fence is still intact - the cuts will not hit until next year, which is after the current Comprehensive Spending Review period.
But others believe they could undermine the pledge in the ten-year Science and Innovation Investment Framework (SIIF) 2004-2014 to increase public science spending "at least in line with the trend growth rate of the economy".
Ben Martin, professor in the Science and Technology Policy Research unit at the University of Sussex, said: "It is never straightforward what the ring-fence means."
There is also concern among scientists that the announcement pits science spending against the wider higher education budget.
Nick Dusic, director of the Campaign for Science and Engineering (CaSE), said the resulting tension was "a real shame when they should be reinforcing each other".
Speaking at the CaSE annual lecture in London last week, John Beddington, the Government's Chief Scientific Adviser, said he hoped the commitment to the SIIF would be met, with any changes in the budget being in line with the UK's gross domestic product.
But he said even this "could mean a modest cut, because we have had a drop in GDP courtesy of the financial crisis".
Speaking last week in the House of Commons, David Willetts, the Conservative Shadow Universities Secretary, said: "What will happen to the Government's previous pledge on the ring-fencing of the science budget?
"We would like to know whether that statement still stands."