The poorest students could be frightened off going to university under proposals for a system of loans and fees which could leave them graduating #163;10,000 in debt.
Thousands of able school-leavers could also lose out in a summer of chaos as students dash to take advantage of Britain's last year of free university teaching.
The Government says that from September 1998 all but the poorest students must pay up to #163;1,000 in annual tuition fees, with maintenance grants for new students to be phased out by the following autumn.
This runs counter to proposals from Sir Ron Dearing's inquiry into the future of higher education, which recommended keeping the grant but making everyone to pay the #163;1,000 annual fee.
Tony Higgins, chief executive of the Universities and Colleges Admissions Service, said: "There is going to be an insane scramble for university places like there has never been before. Bright students who had intended to put off university entrance for a year will join a mad dash to save themselves #163;3,000 in fees. " He said as many as 60,000 students could be affected.
Education and Employment Secretary David Blunkett rejected key parts of Sir Ron Dearing's 1,700-page report on the future of higher education within hours of its publication on Wednesday.
Senior members of the Dearing inquiry joined student leaders and Labour MPs in expressing concern about the Government's proposals, warning they would create new barriers for youngsters from the poorest backgrounds.
An analysis of Government plans showed that the poorest students would graduate with debts 25 per cent higher than their well-heeled counterparts.
Under Labour's scheme children from low-income families would have to take out a loan to cover the full cost of their living expenses. Teenagers from privileged homes would only have to repay #163;8,000 - taking parental contributions into account - compared with #163;10, 000 in loans for the worst off. Details of the income levels at which the different loans and fees would apply are still being discussed.
Stephen Dorrell, the Conservative education spokesman, accused ministers of "picking the pockets" of the most deprived. He said the proposals amounted to "extra state loans for well-off young people from Islington and a kick in the teeth for low-income people from Sheffield".
The National Union of Students also condemned the proposals. Its president Douglas Trainer said: "From tomorrow morning a lot of young people will be making a judgment as to whether they can afford this level of financial commitment. Fees will be a deterrent to potential students from low-income backgrounds."
A sliding scale of fees would apply to the offspring of middle-income parents. The current top parental contribution of #163;2,000 a year for living expenses would stay, but half of it would be expected to cover tuition fees.
The Dearing report rejected means-tested loans, arguing: "We are particularly concerned that it would have a significant impact on the participation rate."
But David Blunkett told the Commons his proposals were "the best way of encouraging access and free education for the least well off". He promised that fees and maintenance would not impose an extra burden on middle-income households.
Sir Ron refused to be drawn into the row, saying the committee had provided options to give the Government the chance to decide its policy quickly
Many questions, however, remain unanswered about Labour's scheme which will start from October next year. Officials said it would be phased in over two years, but would not say what grants would be available in 1998. Students currently on courses will not be affected.