Colleges will be able to compete for an extra 20,000 low-cost higher education places as the Government tries to slow the rush towards #163;9,000-a-year degrees.
Announced in the HE white paper on Tuesday, the places will be open to institutions charging an average fee of less than #163;7,500, which includes most of the 262 colleges that teach HE courses.
The white paper, Students at the Heart of the System, said the 20,000 places will be deducted from other universities' and colleges' allocations, along with 65,000 places that will be reserved for institutions wanting to expand the places for high-achieving students with AAB grades at A-level.
More than 480,000 students were admitted to HE courses in total last year.
HE minister David Willetts said: "We must move away from a world in which the number of students allocated to each university is determined in Whitehall. Student choice will be more real if we liberalise quotas and transform information, and if there is a greater diversity of institutions to choose from."
He said the proposals would remove barriers to more HE provision in colleges, private providers and the Open University; simplify the process for obtaining degree-awarding powers; and review barriers to small providers earning the title "university".
At the moment, institutions can only take the name "university" if they have at least 4,000 full-time students, 3,000 of whom are studying for degrees, as well as having earned their own degree-awarding powers. Only Newcastle College has a large enough student body to qualify.
The process for gaining degree-awarding powers, which involves monitoring the institution's standards for four years, is to be simplified. "We are confident we can accelerate the process while maintaining standards," the white paper said.
In return, colleges and universities will have to provide detailed information about their courses, ranging from student satisfaction to progression, employment and future salaries. Mr Willetts said he wanted that data to be made available to consumer organisations such as Which?
The white paper also proposed legislation to allow bodies that do not teach to award degrees, paving the way for Edexcel's BTEC degree.
Shadow minister for universities Gareth Thomas said the changes put the quality of HE at risk.
He said: "Is not the real substance of the white paper a desperate drive to cut fees, no matter what the effect on quality?"
Martin Doel, chief executive of the Association of Colleges, said colleges wanted to see more places reserved for affordable courses and a lower threshold than #163;7,500, but he added that this was a "welcome first step".
HE WHITE PAPER
FE KEY POINTS
Allocate 20,000 places to institutions charging less than #163;7,500 on average, to encourage lower-cost degrees.
Reduce the requirement for a four-year track record for institutions seeking degree-awarding powers.
Allow smaller institutions to take the title "university" even if they have fewer than 3,000 students on degree programmes.
Force colleges and universities to publish key information sets, including details of student satisfaction and outcomes, so students can make informed choices.