Sir William Stubbs, chief executive of the Further Education Funding Council, was expecting Government agreement this week to fund those 16 to 19-year-olds who are not getting enough money through the new training credits scheme for their part-time studies.
But the principals argue that any agreement will not help them unless it means new cash not tied to growth targets and the Government's efficiency drive.
Training credits will be used to fund Youth Training this year, and all 16 to 19-year-olds not in full-time education are entitled to them.
The change involves a switch of Pounds 23 million from the FEFC to training and enterprise councils plus an Pounds 18 million top-up from the Employment Department. At the moment the money goes from the FEFC to the colleges. Under training credits the money will go from the TECs to the colleges.
But a shortfall has created cash crises, particularly in colleges which are YT sponsors. They currently get 60 per cent of the cash from TECs and 40 per cent from the FEFC. But under training credits, the TECs say they have not received enough to cover the extra 40 per cent of costs which they have inherited from the colleges.
In addition, private YT sponsors who buy college courses for trainees already have three-year agreements with the TECs on what should be funded. But thousands of trainees do more than the minimum agreed, often through evening classes, to improve their prospects.
Colleges will no longer get extra FEFC cash for them. Principals from 100 colleges at the Association of Principals' conference this week said they would lose out substantially. One commented: "There is a significant loss of income and I do not feel we had sufficient reassurance from Sir William."
Keith Gardener, principal of Oaklands College, Hertfordshire, said: "We have 700 students in the same category and it amounts to Pounds 1 million in funding." Barnsley College stands to lose Pounds 800,000 for 1,300 part-time students.
Cleveland Tertiary College has 120 students with funding difficulties. Michael Clark, principal of Cleveland, said: "Three students in my college are typical of the problem. John is on a retail YT scheme and wants to do two further GCSEs in order to follow a GNVQ construction. He will not be able to.
"Sarah, on a retail placement, wants to make a sideways move but cannot get a YT placement with a provider of a scheme with clerical skills. Duane is doing an NVQ in construction and is taking extra units to move out of the craft stream into the technician stream, hoping to go to university. His employers do not want him to go."
Another principal said colleges would not turn away students but this would only lead to other cash being spread too thinly. "It is not that they are being disenfranchised but that people will not pay for them. We need extra money to ensure that there is free education for all 16-year-olds."