Plater College in Oxford needs to upgrade its 30-year-old buildings before it can fulfil the requirements of the Disability Discrimination Act.
Under the Act it becomes unlawful for education and training providers to discriminate against disabled people. Further education colleges have to make changes to accommodate disabled students by September 1, 2005.
Plater College is a registered charity, founded by a Jesuit priest in 1921 to replicate the ideals of Ruskin College, Oxford, by offering the working class a route into education. Former students include writer William Woodruff and Labour peer Lord Pendry.
More recently it has focused on helping socially-excluded or career-changing adults with few or no qualifications. The college is funded by the Learning and Skills Council and offers most of its courses free.
It has launched a pound;2.5 million fundraising campaign to improve its buildings, but it needs to spend pound;1.5m just to meet the criteria of the new Act.
The LSC will fund up to three-quarters of the cost of improvements, but the college says it cannot find the remainder.
It has around 100 students taking its access to HE programme and some 1,000 students annually on shorter courses.
Principal Robert Beckinsale said there is a real threat of closure. "What we want to do is to welcome disabled people. We are not trying to do a begrudging legal compliance.
"Our buildings were built in the Seventies and on a fairly tight budget, and they are basically unacceptable.
"Social exclusion and getting people trained and into the workforce seems to be government policy and we are right there. We happen to have been doing it for 80 years and it is our mission still.
"It would be nice to think we could expand and grow rather than just struggle along hand-to-mouth."
The LSC says it has made more than pound;133m available over the next three years for improvements in colleges to comply with the Act. A spokesman said it may fund more than 75 per cent of improvements under "very exceptional circumstances".