Ed Miliband is planning to cut tuition fees from £9,000 to £6,000 if Labour wins this year's General Election.
The BBC's economics editor Robert Peston has been told that Miliband will make the policy announcement next month. A commitment from Labour on tuition fees has long been expected.
The policy may help the party keep some of the Lib Dem defectors on side as the election draws nearer and may help solidify the party's lead among younger voters. However, in times of restrained public spending Labour will come under scrutiny as to how the policy will be funded.
The cut in tuition fees could cost as much as £2.5bn a year, based on the amount that is expected to be lent this year. Peston reports that Shadow Chancellor Ed Balls has not yet found a tax or spending cut to cover the cost of the pledge.
Labour is considering a tax raid on banks or replacing the current student loans system with a graduate tax to pay for the policy, according to Peston. The Tories will no doubt take the opportunity to accuse Labour of making unfunded promises and being irresponsible with the public finances.
Labour have faced a challenge among the youth vote with the rise of the Greens. The Greens now tie with the Tories for second place among the 18-24 years olds. Labour's support fell from 44 per cent in January 2014 to last year to 32 per cent in December.