Students from Wales will not have to pay top-up fees under a deal agreed by the parties in the Welsh assembly.
So what will this mean for students from Wales, the rest of the UK and Europe, and for the universities?
Why are Welsh universities taking a different route from their counterparts in England?
The Labour-run Welsh Assembly Government has lost its working majority, and the opposition parties united last month to force through a vote against top-up fees.
Labour has now had to strike a deal with Plaid Cymru, Conservatives and the Liberal Democrats to end what First Minister Rhodri Morgan calls the "cloud of uncertainty" over funding for higher education.
What does the deal mean for students from Wales?
Welsh universities will be able to charge top-up fees of up to £3,000 from 2007, as in England. But students living in Wales will have to pay only £1,200, and the rest will be paid by the assembly government.
What will it cost?
The cost is estimated at about £34 million in 2007-08, rising to £53 million by 2009-10.
What about students from outside Wales?
Students from England, Scotland and Northern Ireland will have to pay the full £3,000 if they go to university in Wales.
But non-UK students from the rest of the European Union will receive the same rebate as Welsh students. This is to avoid the possibility of a legal challenge under European law.
Could students from England, Scotland and Northern Ireland challenge the decision?
Brian Morgan of Cardiff Business School believes they could argue that they should receive the same rebate as Welsh students and those from the rest of the EU.
The assembly government says charging them more is legal, as has happened to non-Scottish students in Scotland. The Scottish Parliament has always had devolved power over student finance and decided to scrap up-front tuition fees for Scottish students at Scottish universities in 2000-01.
But there are test cases in Scotland where English students are challenging the charges.
What will Welsh students have to pay if they go to university in England?
Normally, they will have to pay the full £3,000 from 2006. But where courses are not available in Wales, such as veterinary science, they will be subsidised by the assembly government.
What does the bursary scheme involve?
This is designed to improve access to university for students in Wales, and was recommended by Professor Teresa Rees in her review of university finance.
Universities will have to use a share of their extra money to devise a scheme to make higher education more available to a wider range of students. There will also be incentives to study such subjects as maths and engineering, where there are shortages, and extra support for teaching through the Welsh language.
What do students make of the system?
The National Union of Students gave it a cautious welcome, but said it must be "backed up with adequate support to give students the means to live while they are studying".
But the NUS said it needed to see the fine print before judging whether it will work.
What about the reaction of universities?
Universities say they need more money, and they now have all-party support to create a strong higher education sector in Wales.
They have also been concerned that funding in Wales is slightly lower per student than in England, and that will be addressed, along with the commitment that they can charge top-up fees.