Bursaries are failing to attract students from less privileged backgrounds to England's leading universities, research shows.
A report by the Office for Fair Access says outreach work would be a more effective use of funds.
It found that a higher proportion of students from poorer backgrounds were attending universities with lower levels of bursary.
Student union leaders attacked the "chaotic patchwork" of bursaries.
National Union of Students president Aaron Porter said the report showed a national bursary scheme was necessary - and that the current bursary system and the access regulator had failed.
The Office for Fair Access (Offa) had been set up to safeguard access to university, particularly for less well off students, when tuition fees had been raised in 2006.
But the NUS president attacked Offa as a "toothless and complacent regulator" which had confused students rather than widened access.
Bursaries had been part of the ambition to encourage more poorer students to apply to elite universities, with these institutions offering higher bursaries as an incentive.
But the Offa research - Have bursaries influenced choices between universities? - showed little sign of such an impact.
Instead the most prestigious universities, with generous bursaries, were more likely to be getting applications from wealthy students - while poorer students were applying to universities with lower bursaries.
Advantaged youngsters were five times more likely to go to a high-bursary institution than disadvantaged youngsters in 2009-10, said researchers.
The report says: "Since the introduction of bursaries, disadvantaged young people - who would be more likely to qualify for bursaries - have increased their participation most rapidly in the third of institutions that offer lower bursaries.
"There have been only small increases for disadvantaged participation in the higher bursary third of institutions and overall young people from disadvantaged backgrounds are no more likely to enter these institutions today than in the mid-1990s.
"The participation trends do not suggest that the higher bursaries on offer at some institutions have had a material effect on the participation rate of disadvantaged young people in those institutions."
Sir Martin Harris, director of the Office of Fair Access, said: "Clearly, these are highly significant findings which show that issues surrounding widening access to the most selective universities go much deeper than purely financial obstacles."
Sir Martin called for universities offering the largest bursaries to consider diverting some of these funds to outreach work in schools and colleges to encourage poorer pupils to apply.
Universities UK said universities needed greater autonomy over financial aid.
"The current bursary system should be replaced with an approach whereby universities are free to develop their own financial aid policies, within the context of an overall strategy to widen participation," a spokesman said.
"This would ensure institutions are able to target resources more effectively in both access and outreach activities and financial aid initiatives to support fee waivers or higher bursaries."
General secretary of the University and College Union, Sally Hunt, said the bursary system as it stood was "confusing and unfair".
She said: "We need a simplified national system so that the universities doing the most to attract students from low-income backgrounds can offer them strong financial support.
"It is clearly over-simplistic to suggest that it is the size of bursaries alone that determine students' choices and we accept there are complex other social factors that come into play, but those universities currently not attracting low-income students must step up their efforts to increase awareness of what they offer."
Paul Marshall, executive director of the 1994 Group of universities, said awareness of bursary schemes among students remains an issue.
"Universities must work in close partnership with schools and colleges to raise attainment and aspirations and provide appropriate support through better targeted information, advice and guidance to ensure that students from all backgrounds are able to attend leading universities."
Universities Minister David Willetts said: "Improving access to highly selective universities is an important part of the government's agenda to improve social mobility. OFFA's research suggests that spending on high levels of bursaries by universities is not necessarily any more effective than outreach programmes."
He said the independent review of university finance by former BP chief Lord Browne, which is due to report in October, would "be a useful contribution to the government as we develop our response".