Last year the Department for Innovation, Universities and Skills announced that two-thirds of all students would receive grants to supplement their loans.
This promise has now been withdrawn after it was discovered that the new grants would leave the government with a £200million hole in its pocket.
Up to 40,000 students will now no longer receive the grant money that they were expecting when they started university.
The Government had raised the qualifying household income threshold for a grant to £60,000, meaning that students from middle income families could receive a grant of between £50 and £524. However, the threshold has now been cut down to £50,020.
Union President Dave Hurst called the funding situation "another aggressive move in terms of higher education".
He said: "These cuts are not in students’ best interests. It means that students will have to put more of their own money into going to university and will increase the amount of people who will be priced out of education, so that university will end up being only for the elite," he said.
He added that this was another example of the Government saying one thing and doing another, in terms of widening support for students.
"The current student finance system is unsustainable and has lost sight of its original purpose," Hurst added.
Only one third of students were expected to qualify for the new grant levels, but in fact 40 per cent were eligible. The government has also had to cut its number of new student places from 15,000 to 10,000.
The government’s Secretary of State for Innovation, Universities and Skills, John Denham, stressed that the changes to the financial support system will not affect students from lower income families.
Students with a household income of up to £25,000 will be eligible for the full grant amount of £2,835.
Denham also said that the new support arrangements will only affect students entering university in England in the next academic year.
The President of the National Union of Students, Wes Streeting, said that this cut will hit students from middle-income families just as they are suffering the effects of the credit crunch.
Stephen Williams, the Lib Dem Universities spokesman said: "This kind of incompetence is not going to persuade young people that the Government is committed to supporting them with their studies."
Hurst added that students at Sheffield who are suffering financial difficulties should not wait for the worst case scenario to arise.
He said: "There are two finance advisors available at Student Services Information Desk (SSiD) who will help with everything from budget plans to bankruptcies.
"Students should also be aware of all the bursaries and hardship schemes that are available to them from the university."
Kirsty McEwan
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