The University of Ulster has had its student intake for next month drastically reduced after admitting too many students last year. The financial loss is put at about Pounds 500,000.

The university says it came under pressure to increase places following the IRA and Loyalist terrorist ceasefires. But it is being financially penalised by the Northern Ireland Department of Education for exceeding its official maximum aggregate student numbers. This year UU is offering 3,340 places, compared to 4,332 last year - a cut of almost 1,000.

Peter Roebuck, pro-vice chancellor for academic affairs, said there were a number of factors which had led to student numbers being capped.

"First, for financial reasons, and perhaps due to the more relaxed atmosphere in the province following the ceasefires, many of those whom we might have expected to seek places in Great Britain, applied to us and achieved our asking grades," he said. "Second, we had a much higher than average success rate in our first-sit and re-sit examinations."

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The third reason was the university's growing popularity with European Union students. And finally, between last September and December - during which the main census date for MASN figures falls - the university had significantly lower drop-out figures than normal, he added.

A Department of Education source said: "We are obliged to apply financial penalties in situations when a university exceeds its MASN figure."

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The decision has forced more Ulster A-level students to look for courses and places on the mainland. Ulster Unionist MP John Taylor, who obtained the initial figures in a parliamentary reply, said their problem was compounded by the number of students from the Irish Republic seeking places at UU.

He was highly critical that taxpayers are funding Irish students in up to 20 per cent of UU places while Ulster teenagers were "denied" entry.