Grants to university students from poorer homes should be increased fivefold to £5,000 a year, according to an influential group of MPs.
The Commons education select committee says the cost should be met by ending the interest rate subsidy on student loans - and says loans could be bigger, to avoid people running up credit card debts.
The cross-party committee also argues that the logic of the government's approach to top-up fees is that they should be £5,000 a year not £3,000.
Among a number of criticisms, it says there is no need for a separate university access regulator.
The committee brought out its own report on student funding exactly a year ago, and is now publishing the results of its investigation into the government's strategy for higher education in England, announced in January.
Means-tested £1,000 grants from 2004
Upfront tuition fees end 2006
Fees then vary - up to £3,000 a year
First £1,125 subsidised for poor
Payable from graduate salary of £15,000+
Zero-rated student loan up to £4,000 a year
New access regulator
Research funding for the elite
50% participation through foundation degrees
That strategy will see the return of grants of up to £1,000 a year for the poorest from 2004, and "top-up" tuition fees - totalling up to £3,000 a year - from 2006, repayable from graduate earnings.
The select committee says the proposed grant should be up to £5,000 a year.
"We think the £5,000 will be a real incentive to bring students in and keep them there," committee chairman Barry Sheerman told BBC Radio 4's Today programme.
£5,000 means-tested grants
Fees of probably £5,000 a year
Whole amount subsidised for poor
Bigger loans but with real rate of interest
No separate access regulator
"University" title needs thorough debate
Broad research base
Drop foundation degrees participation link
The government could put the money it currently uses to pay the first £1,100 of fees for poorer students towards higher maintenance grants.
But if it was going to continue subsidising poorer students' fees, it ought to pay the whole lot.
The Higher Education Minister, Alan Johnson, said the government would examine the committee's report carefully, but believed the proposed arrangements were right.
"Our system where we do away with up-front fees, reintroduce the maintenance grant and no student actually pays and no parent pays, only a graduate pays when they are earning over £15,000 a year, and on the basis of no real rate of interest - we think that is an attractive system."
The MPs argue that the interest rate on student loans should not be subsidised. At present graduates pay a zero real terms rate of interest, a subsidy estimated at about £800m a year.
The MPs question the planned expansion through foundation degrees
Instead the MPs say loans should incur the government interest rate, which in turn would allow larger loans to be offered "and so make it less likely that students would have to borrow, or incur credit card debts, at commercial rates".
The committee says any move to impose market forces on universities would be a "very grave error of judgement".
It says the logic of the government's position would be a cap of £5,000 a year on tuition fees, not the £3,000 proposed.
"If it does not wish to take that step, it may have to resign itself to the fact that many if not most higher education institutions will set their fees at the maximum."
But the committee makes no actual recommendation on this subject.
To be able to charge higher fees, universities will have to satisfy the new Office for Fair Access that they are making efforts to attract students from poorer backgrounds.
The select committee says this role should be left to the higher education funding council.
It says improving state school exam results was a better way of widening access to higher education.
The National Union of Students president, Mandy Telford, said it believed "progressive taxation" was the fairest way to fund higher education.
Suggesting fees should be raised to £5,000 "will effectively price some students out of higher education and will create a two-tier higher education system".
Universities UK, representing vice-chancellors, liked the MPs' support for the principle that all those who benefit from higher education - society, individual students and employers - should contribute towards the cost.
"Substantial additional funding is still necessary", they said.
The leaders of the main lecturers' unions, Sally Hunt of the AUT and Paul Mackney of Natfhe, called the report "a desperately needed dose of common sense".
In a joint statement they said their only disappointment was that it "ducked the issue" of top-up fees.
They highlighted what the MPs had to say about a need for pay increases to make up for years of decline.
And they were pleased the committee "savages ministers' plans" to concentrate research funding on elite departments.
The union leaders accused ministers of "using smoke and mirrors" in planning to expand higher education through foundation degrees - "vitally important" qualifications, but "not full degrees".