The Scottish Education Secretary, Fiona Hyslop announced an extra £30 million of student support after being "dragged kicking and screaming", according to Labour MSP Claire Baker.
The announcement was made at Holyrood before a photoshoot and a meeting with student representatives at the University of Edinburgh's Pleasance Bar.
The £30m aims to give the poorest students an extra £622 and provide the poorest independent students with an additional £1227.
Labour's shadow minister for higher education, Claire Baker said: "Fiona Hyslop has had to be dragged kicking and screaming to this point but I am glad that she overruled her junior minister and listened to students and opposition parties on this matter."
Similarly, Liberal Democrat's education spokeswoman, Margaret Smith described the plan as a "welcome u-turn".
A grant of up to £1000 will be provided for independent students and £2 million will be spent on childcare funds.
It will also increase the maximum income-assessed loan by up to £442 next year, as well as increasing the additional student loan.
Grants to the poorest students receiving the young students' bursary will also be increased.
The plans for additional student support come as a compromise to a proposal formulated by NUS Scotland.
Liam Burns, president of the National Union of Students Scotland (NUS) said: "This is great news for students. For years we've been calling for student hardship to be prioritised over graduate debt, getting money into students' pockets when they need it most, and this announcement does this.
"We have worked closely with both the government and the opposition parties, and I believe this is a clear example of what can be achieved when people put politics to one side to work together for the best possible outcome"
Mr Burns added: "Even with this money, students will still be living below the poverty line, and we know levels of credit card borrowing and other commercial debt have increased to unprecedented levels.
"While the extra cash will help, students will be making the case over the coming months for the reform of the student support system in Scotland."
A survey by the NUS in August this year indicated that more than half of students in Scotland have had to borrow from commercial lenders.
The news was well received by EUSA student president, Thomas Graham who said: "EUSA welcomes the announcement from the government who have listened to what students have said and responded. The decision will help the poorest students get through university.
"There is still work to be done to ensure that students do not live in hardship and do not have to resort to commercial debt and we will continue to work towards a minimum income of £7000 for students."
Opposition parties are now urging Fiona Hyslop to hear Sir Andrews Cubie's call for an independent review of student support and university funding.
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