The cap on tuition fees will rise to £9,535 a year from 2025, education secretary Bridget Phillipson has announced.
It is the first time the charges have gone up in more than seven years and comes amid warnings the university sector is facing a funding crisis.
The move, which kicks in next April, will be welcomed by higher education bosses, but is likely to spark anger among students and their families.
It is also embarrassing for Keir Starmer, who pledged to scrap tuition fees when he ran to be Labour leader in 2020.
Phillipson told MPs “this is not a decision I take any pleasure in”, but insisted she had no choice given the state of university finances left by the last Tory government.
She said: “We will fix the foundations, we will secure the future of higher education so that students can benefit from a world-class education for generations to come.
“That is why I am announcing today that in line with the forecast set out in the Budget last week, from April 2025 we will be increasing the maximum cap for tuition fees, in line with inflation, to £9,535, an increase of £285 per academic year.”
She added: “Increasing the fee cap has not been an easy decision, but I want to be crystal clear that this will not cost graduates more each month as they start to repay their loans.
“Universities are responsible for managing their own finances and must act to remain sustainable. But members across this house will agree that it is no use keeping tuition fees down for future students if the universities are not there for them to attend.”
The secretary of state also announced that maintenance loans for students will rise by around 3%, which is worth an extra £414 a year.
Shadow education secretary Laura Trott, who was only appointed to her role this morning by new Tory leader Kemi Badenoch, said: “Last week we had a Budget that declared war on business, on private sector workers and farmers.
“It seems today that the secretary of state wants to add students to that list. Not content with putting up the cost of living for everyone with an inflationary Budget, and pushing down wages with a National Insurance increase, we are now in a situation where students will suffer from the first inflationary increase in a number of years at a time when students can least afford it.”
Green Party MP Ellie Chowns said: “Tuition fees have forced universities to prioritise profit over education and put many at risk of bankruptcy, while students face extortionate interest rates - except for those wealthy enough not to need a loan.
“They have been a disaster and should be scrapped, not increased.”