Universities will be able to offer two-year degrees with higher tuition fees under Government plans.
Students taking the shorter courses would pay more per year than they would for a three- or four-year degree, but would save a year's worth of money for housing and living costs.
They would pay around the same tuition fees in total as their peers taking longer courses.
The proposals were met with caution and some concerns, with leading universities saying that while they welcomed the Government's commitment to ensuring that fast-track degrees are properly financed, careful consideration is needed so that the courses do not affect student learning or their undergraduate experience.
Universities Minister Jo Johnson told university chiefs that while for many students, the classic three-year degree will remain their preferred option, "clearly it must not be the only option".
"We know that accelerated courses appeal especially to students who may not otherwise choose to pursue a degree," he said.
"This includes mature students who want to retrain and enter the workplace faster than a traditional full-time three-year degree would permit, those from non-traditional or disadvantaged backgrounds, or those who want to get into the workplace faster."
Mr Johnson said an amendment to the Higher Education Bill, allowing the Secretary of State to set higher fees for accelerated courses "will mark a step change in how students in this country can learn, increasing choice in our system, and opening up opportunities to more people than ever before."
He added: "Let me be absolutely clear. The higher annual fee limit will be only - let me reinforce - only for accelerated courses, which will be tightly defined on the face of the Bill.
"And make no mistake, this will not mean an increase in degree costs for students. I can confirm today, that the cost for a student of taking an accelerated course which is subject to the new fee caps will never be more, overall, than that of the same course over a longer time period. And in most cases it is likely to be less."
Shorter degree courses have been mooted in the past, but universities have had little incentive to do so if they are going to receive less in fees than they do for standard programmes.
Under the latest proposals, fees for these degrees, which have yet to be confirmed and would need Parliament's approval, could be as much as £13,500 a year.
Students would have to work more intensely, while their holidays would be significantly shorter than their peers paying up to £9,000 a year on three- or four-year degrees.
The amendment on shorter degrees is one of 107 made to the Bill today.
Dr Tim Bradshaw, acting director of the Russell Group, which represents 24 of the UK's top universities, said: "We support diversity and innovation in higher education and welcome the Government's commitment to ensure appropriate financing for accelerated degree courses.
"There are a number of reasons why full-time, three-year degree programmes are generally the most appropriate at research-intensive institutions.
"Careful consideration will be needed for how these accelerated courses are delivered so that they don't negatively affect student learning or compromise the overall undergraduate experience."
Dame Julia Goodfellow, president of Universities UK, said: "Several universities have been offering two-year, fast-track degrees for a number of years, but demand has been limited under the current system.
"As the minister acknowledges, the three-year undergraduate degree will remain the preferred option for many students. But if changes can be made to the funding and fees system in England, that help increase the flexibility of provision and are in the interest of students, this is a good thing."
Sally Hunt, general secretary of the University and College Union (UCU), said: "The debate around two-year degrees comes up regularly and at least there is a new twist this time as the Government is not even considering the cut-price element, which some saw as their one saving grace.
"Allowing universities to charge more money for an accelerated programme looks like another misguided attempt to allow for-profit colleges access to UK higher education."