First-year undergraduates from the lowest income households – those earning under £16,000 – will have their fees limited to £3,500, under the plans approved yesterday by the university’s council. For the later years of a course, the charge will be £6,000 per year.

Oxford said that in 2009-10 it had a total of 935 UK students doing a first degree who came from households with incomes below £16,190, the threshold at which children are eligible for free school meals. Of these, 295 had also attended independent schools.

Under the proposed new fee regime, Oxford students with household incomes of up to £25,000 will also receive a fee waiver, with final charges of between £6,000 and £8,000 per year.

The university also plans to expand bursaries, with students from the lowest income households receiving £4,300 in their first year, which will drop to £3,300 in subsequent years.

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An Oxford spokesman said that, in total, more than £15 million a year would be spent on financial support and access through fee waivers, bursaries and outreach work.

He added that when cuts to public funding for teaching were taken into account, the actual extra income Oxford would receive would amount to £10 million a year, of which more than £7 million would be immediately reinvested in new student support.

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Andrew Hamilton, Oxford’s vice-chancellor, said: “We have paid particular attention to concerns about debt aversion among potential students from the lowest income backgrounds.

“The changes to the financing of higher education – including the deeply regrettable cuts to teaching funding – present a real challenge to maintaining the excellence in teaching and research that distinguishes the world’s best universities.

“Investment in the long-term sustainability of our world-leading institutions should be a major national priority. It is not an issue that will go away.”

The proposals agreed by the council still have to be approved by Congregation, the university’s “parliament”.

The Oxford proposal comes as figures were highlighted which suggest that the cost to the government of every university charging fees of £9,000 could be over £750 million a year, once all students are under the higher fee regime.

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The statistics from the House of Commons library, released today by Gareth Thomas, Labour shadow universities minister, show the extra public spending required if the average fee is higher than the £7,500 originally assumed by the Treasury.

Mr Thomas said ministers would have to claw back the money – ranging from £50 million to £777 million depending on the final average fee – by further cutting public funding such as the teaching grant.

“Only this Tory-led government could end up with a policy where students get charged more and more and the government saves less and less,” he said.

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Meanwhile, it has been reported that the University of Leeds will also propose a fee of £9,000, although the decision has yet to be agreed by its governing council.

The Leeds Student said it found details of the proposal on the university’s intranet site.

It reported that the plans are to be discussed by the university’s senate, which is responsible for academic governance, tomorrow.

A Leeds spokeswoman said a final decision on fees and student support would be made at a council meeting on 31 March and no public statement would be made until then.

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simon.baker@tsleducation.com