SCOTTISH National Party ministers are set to scrap the £2,000 graduate tax this week and meet the £20m annual cost from government coffers.
Education Secretary Fiona Hyslop is expected to announce to Parliament on Wednesday that the Graduate Endowment Scheme will be dumped, honouring a key election pledge.
But more costly Nationalist plans to replace student loans with grants are not
expected to be rolled out immediately, in a move which looks set to trigger a fresh row with opposition parties who claim the SNP's "populist" election pledges are too expensive to implement.
The Graduate Endowment Scheme, introduced by the previous Lib-Lab coalition saw students pay funds into a central pot which was then used to pay bursaries to poorer students.
The scheme is easily affordable, but the pledge to replace student loans with grants is far more expensive, costed by the SNP at £100m a year.
Ministers are now expected to wait until after the UK Treasury sets the Scottish Executive's budgets later this autumn, before launching the plan.
The new education secretary met university funding chiefs last week to set out her plans.
She has insisted that the vast sums she intends to invest in helping students will not have an impact on the funding of Scotland's universities, which say they need an extra £168m a year in order to keep pace with universities in England.
However, there are growing fears there will not be enough cash to ditch the endowment, scrap loans and boost funds all at the same time.
The concerns come with English universities now drawing in extra income from the yearly £3,000 tuition fee, a figure likely to increase soon once the cap on the fee is lifted.
Labour's former higher education minister, Allan Wilson, claimed the SNP would not be able to afford to scrap student loans. "It was an election bribe that they will not be able to deliver on," he said.
Labour's education spokesman, Hugh Henry, added: "They haven't costed this properly and it may take money from direct investment in the university sector. But they must be held accountable for the decisions that got them into power."
Dr Brian Lang, principal of the University of St Andrews, said: "We need to ensure that we are encouraging students to come to universities that are first-class. We should not be asking them to come to universities that are less than excellent. We need to have a complete review, not just of student funding, but we need to take a more complete view of what universities are for.
"The minister has sketched out the plans on cancelling student debt. She knows what she is talking about but I don't want her just to focus on that, but also on how we can continue to have good research carried out at our universities," he added.
While the universities say they will be content with an extra £168m, there are other claims that more cash will be needed if a funding gap between England and Scotland is not to open up.
Wilson also claimed that, while still in office, Scottish Executive officials had calculated that universities would need an extra £550m over the next three years - around £200m more than previously claimed.
A spokeswoman for the Scottish Executive said that all details for the government's plans on student finance would have to wait until the minister's statement on Wednesday.
