Attempts to reintroduce third-level fees have been rebuffed by the Department of Education during negotiations on the forthcoming Estimates.
The Department of Finance has been lobbying for a return of fees - abolished in 1995 - but the Minister for Education, Mr Dempsey, has resisted the move.
However, it is understood that the issue will be reviewed if the Exchequer position worsens dramatically. One source said yesterday: "The Minister knows he would be politically dead if he reintroduced fees; it is not going to happen at the moment."
It is understood that Mr Dempsey favours radical action to achieve greater equality in education. It is expected that he will give a new priority to educational disadvantage in primary education. This could mean that funding for third-level will be cut.
At present, student support services cost the Exchequer €330 million a year. Mr Dempsey wants the universities to take a more pro-active role in helping to improve access to colleges for all sectors of society.
Last month, he caused a furore when he raised the registration fee for third level by almost 70 per cent. With grant-supported students exempt from the charges, Mr Dempsey took the view that the increase would hit those who are in a position to pay it.
Third-level fees were abolished by former education minister Ms Niamh Bhreathnach. The rainbow government defended the move by saying it would help to increase access for all to third-level.
Despite this, the third-level sector remains dominated by the middle and upper classes. Last year, a Higher Education Authority report found that school-leavers in some middle-class areas were 10 times more likely to go to college than poorer areas.
The report indicated that while over three-quarters of students in the Foxrock got into college, only 7 per cent of students from Ballyfermot/Chapelizod did.
The report found that some 70 per cent of students in fee-paying schools got into college but only 38 per cent of vocational school students reached this level.
The analysis by Dr Patrick Clancy of University College Dublin revealed that participation rates in Dublin 11 (Finglas/ Ballymun) and Dublin 22 (Clondalkin/Neilstown) - already among the lowest in the State - had actually declined since he conducted a similar exercise in 1992.
Last week, on Today FM's The Last Word, Mr Dempsey signalled his readiness to take radical action to achieve greater equality in education.
"I'm going to look at the use we put the student supports to and find out if it's being effectively spent; if it's not helping those that are at a disadvantage from an economic point of view from getting into third-level, then we'd obviously have to change it."
The €330 million paid by the Exchequer in student services includes the cost of tuition fees. These are paid directly to the colleges in lieu of the fees which were paid by undergraduates until 1995.