Birmingham University has promised to foot a £175,000 bill for visa costs to keep its foreign students.
Visa extensions for international students are to rise in April to £250 from £155.
The university has agreed to make up the £95 difference because it fears the added expense could deter applicants from overseas, who make up 18 per cent of its students and provide much of its income.
David Hall, Birmingham University's academic registrar, said: "We are concerned that this increase in the cost of visa extensions will put off international students from coming to study and the extra cost will be a further financial burden that our current students were not expecting.
"The university is committed to supporting the interests of its international students and was vocal in its opposition to these increases.
"We are therefore introducing a scheme to reimburse those students who are having to pay the increased cost for a visa extension."
The university has also employed immigration experts to advise students on applying for their visa extensions.
Non-EU students pay £155 to extend their visas by post, or £250 for a fast service if they need to stay to finish a course.
From April they will pay £250 for the postal service, with an option to pay £500 for a "premium" service.
In a written statement to the Commons, Immigration Minister Des Browne told Government that overseas students brought "economic and social benefits to the UK".
He wrote: "In recognition of this, students seeking to vary or extend their conditions of stay in the UK will be charged a reduced fee for postal applications.
"Increased visa fees are unlikely to have a significant impact on the UK's ability to attract and retain international students.
" However, in order to ensure that remaining to study in the UK remains a competitive option, we have decided that charges should be at a lower rate of £250 for the standard postal service."
The British Council estimates the number of international students applying to UK universities will triple to more than 870,000 by 2020.
It predicts this would generate at least £13 billion a year to the economy, but has warned of competition from abroad, in particular the United States.