It was the second time peers had voted against the so-called Scottish anomaly, which means students in England, Wales and Northern Ireland will pay tuition fees for the four years of a Scottish degree while students from north of the border and elsewhere in the European Union will pay only for three.
An amendment to exempt all UK students from paying fees for the final year was passed by 212 votes to 89. This reinstated an earlier vote in the Lords which was overturned in the House of Commons. It is the first time in this Parliament that peers have insisted on retaining a Lords amendment rejected by the other House.
The Teaching and Higher Education Bill will now return to the House of Commons so the vote can be reversed, delaying the legislative timetable.
A spokeswoman from the Department for Education and Employment said: ``These amendments would cost universities and the Government millions of pounds. English and Welsh students have not been significantly deterred from applying to Scottish universities by the proposed fees arrangement.'' The Government had hoped the amendment would take place after the start of the Scotland Morocco game, thus emptying the Chamber of those with loyalties north of the border, but peers dealt briskly with other business.