Fine Gael and Labour backbenchers have warned of trouble within the Coalition over plans to include farm and business assets in the means test for third-level grants.

Government sources have said discussions are continuing over proposals to include assets worth over €750,000 in the means test.

The Department of Education spent €336m last year on third-level student grants and income is currently the only thing taken into account when awarding grants.

Minister for Education Ruairi Quinn has proposed including assets, such as property and stocks and shares worth over €750,000, in the assessment.

However, there is already significant opposition within Fine Gael, with particular worries about the effect on farmers whose land may be worth significant sums without generating much income.

Waterford TD John Deasy told RTÉ News he does not understand how income can be imputed from assets, adding there will be trouble in the Coalition if Labour pursues this.

But Labour backbenchers have hit back and Dublin North Central TD Aodhán Ó Ríordáin said it appeared Fine Gael backbenchers have no interest in equality or a fair distribution of the grant.

Mr Ó Ríordáin said Labour feels strongly about the issue.

Speaking on RTÉ's Morning Ireland, he said too many people were currently eligible for the scheme that should not be, because it failed to take the issue of cumulative wealth into account.

He said the De Buitleir Report in 1997 found the current means test "defective" for this reason.

Mr Ó Ríordáin said he believed the scheme should specifically target students who come from families with very little resources, who: "should not be fishing out of the same pond as those who have quite an amount in their savings accounts or quite a number of assets".

Meanwhile, the Irish Farmers' Association has reiterated its opposition to means testing assets.

IFA President John Bryan described the calculations used by Teagasc as "deeply flawed".

He said: "The proposed threshold of €750,000 would buy a 75-acre farm. Depending on location, soil type and enterprise, it is ludicrous to suggest that every farm makes an income of over €40,000."

He said including productive assets in the maintenance grant assessment would discriminate against the self-employed, including farmers.

Fine Gael TD for Cork East Tom Barry said those calling for farm and business assets to be included in the means test are displaying a lack of knowledge about how farming and business works.

He said the issue was not a person's assets, but their ability to pay, and he was critical of those who he said were playing politics with the issue.

Mr Barry said the average farm income was below the average industrial wage of less than €20,000, with 12,000 farmers on the Farm Assist Programme, and children of wealthy farmers do not get a grant.