The Leicester City man came in on loan in January as a short-term replacement for departing captain Conor Hourihane.
James has been influential in the middle of the park since his arrival and he netted his first goal for the club at Derby County just over a fortnight ago.
However, with a year left to run on his contract with the Premier League champions, the Reds just simply cannot afford to put an offer in for the player or pay his wages.
As it stands the Foxes are substantially helping pay James’ wages, and what Barnsley could offer would be a mere drop in the ocean to what he could command elsewhere.
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Heckingbottom said: “I don’t think we’d be able to keep him beyond the end of the season.
“The gulf in money is that big that it won’t be possible.
“I’d like to think by the end of the season, if money wasn’t an issue, that Matty would think ‘yeah, I’d love to stay at Barnsley’.
“But unfortunately it just isn’t going to happen.
“We’re thankful to Leicester for their help in terms of wages and that comes from the plan we had for him as a player.
“For us to afford him they had to subsidise those wages.”
Despite all of that, Heckingbottom is delighted with what James has brought to his squad.
He added: “We knew when we were getting him what type of player we were getting and the qualities he possesses.
“The reason I wanted to get him is because I though he fitted in with what we wanted and the way we play.
“He knew we wanted to build his fitness and his confidence in himself and I think he bought into that.
“He liked the fact we had a plan for him and he wasn’t just a body for us and we’re beginning to see the benefits of that in the last few games.”