The cuts, imposed by the Lib Dem-controlled authority, have outraged colleges which have warned that drop-out rates will surge. North Devon College - one of the most isolated in Britain - has more than 1,200 students living at least three miles away who depend on public transport.
The county council took the decision "reluctantly", saying that the alternative was major cuts to school budgets. But the colleges and training and enterprise councils insist it is a false economy since more money will have to be spent finding alternative training for those who fail to stay on.
Costs for transport to college have risen progressively since the 1992 Further and Higher Education Act stripped education authorities of control of FE but maintained LEA responsibility for transport.
Devon colleges are among the worst hit. The local authority imposed a Pounds 35 charge in 1993. It rose to Pounds 165 last year and Pounds 500 this year.
The decision has angered the political opposition who accuse the Lib Dems of jeopardising the futures of thousands of 16-year-olds.
Shadow education minister and Tiverton MP Angela Browning said: "We are in a position where something that has been provided or organised is not being renewed. If there is not a package of transport it could frighten a lot of people off."
Saxon Spence, Devon's Labour education chair and former education chairman of the Association of County Councils, said: "We are trying to get recognition of the costs of rural areas. But there is a problem with transport for 16-year-olds.
"I tried to get agreement that existing arrangements would not be disturbed. I don't think that arrangements for people already on courses should be changed. "
David Truman, principal of North Devon College, said: "I find it extraordinary that the Lib Dems should impose such cuts. It is against their policy of increasing the skills base of the community through education and their traffic policy of keeping car use to a minimum."
The college already spends Pounds 40,000 a year subsidising transport for the most needy. He is looking at ways of increasing support for future students but is doubtful. "We are a low-spending college and get only around Pounds 2,000 for an A-level student. I don't see how we can find the extra Pounds 300-400 they would need."