Student leaders have said "market forces" are creating inequalities between universities.
The National Union of Students says that rich and prestigious institutions have an "unfair advantage" over other universities in that they can hand out more generous bursaries to students.
This inequality will only worsen if the cap on top-up fees is either lifted or increased, the union claims, with NUS president Wes Streeting saying that the amount of debt for some students would be "staggering".
Streeting said: "Market forces have already crept into our higher education system. More prestigious universities in the Russell Group are able to offer poorer students an average annual bursary of £1,791, but less prestigious universities in the Million+ group are only able to offer £680.
"There is clearly a market of prestige at work, with financial support being based not on how much you need it but on where you study."
And Streeting also said that the NUS is no longer pursuing the argument that top-up fees should be abolished as he believes that "we won't win by dredging up the old arguments."
In response, higher education minister Bill Rammell said: "The new system is working, as is demonstrated by record levels of applications and acceptances, up by six per cent this year.
"Record numbers of students from all social classes are choosing to go into higher education and reap the benefits this brings. This is at a time when the government has abolished upfront fees and this year two-thirds of students will benefit from a full or partial grant of up to £2,835.
"We have always stated that we will meet our commitment to have an independent review of the first three years of variable fees. I would not like to pre-empt the findings of this review as this report has done."
Stakeholder Response: GuildHE
NUS has today published a detailed critique of the interaction of students with the way higher education is funded. GuildHE institutions take student opinions very seriously and we can recognise that this report 'Broke and Broken' highlights real difficulties that students are now facing.
Alice Hynes, CEO of GuildHE said: "The NUS report is a perceptive and debate-provoking document - it's also a timely commentary as we look forward to 2009 and the re-examination of the fee-charging and bursary structures of the current model. The NUS rightly asks for the debate to be opened widely and to accommodate a range of issues.
"How can a market really work for an activity like higher education that is not in essence about products and trading but actually about personal transformation and building an economic future for our society?
"However, we would dispute that the current system is broken and needs wholesale reconstruction. Change should be gradual and not risk the stability of institutions with whom student make long working relationships. It is certainly worth reviewing what are the benefits, who receives them, who already contributes to make the funding system work.
"Like all these complex processes, change needs to be thoughtful and steady and we look forward to future discussions with our NUS colleagues and the DIUS review".
