Colleges could face a cut in adult skills funding of almost a third as a result of the comprehensive spending review, according to independent research by the House of Commons Library.
A typical college with the equivalent of approximately 20,000 full-time students would face a cut of pound;2.5 million on an pound;8 million budget when the impact of withdrawing funding for level 3 courses for over-25s is taken into account, the research shows.
Colleges of this size would have to obtain pound;500,000 in fees, backed by loans, from their students if they are to avoid a larger-than-expected drop in income. It is the first assessment of the impact of withdrawing funding for older students at level 3.
Gordon Marsden, the shadow skills minister who requested the figures, said: "These figures are very alarming. They already show that the sector could soon be facing some of the same issues that will be hitting teaching in higher education and the university sector as a result of the spending review.
"And there is more to worry about when we look at the Government's proposals to scrap direct grants for over-25s taking level 3 courses. The library's analysis shows that when the removal of direct public funding for this is taken into account, FE colleges would lose an average of an additional half a million pounds - taking the hit on funding up to 30 per cent."
Mr Marsden said the research also suggested it might be hard to find all the cuts needed from provision for over-25s and the Train to Gain programme, now marked for abolition, raising the possibility that budgets for younger students might also be cut.
Lynne Sedgmore, chief executive of the 157 Group of colleges, said some institutions which relied on priority courses for the coalition Government might only face 20 per cent cuts, while others which invested heavily in Train to Gain or courses for over-25s were braced for 30 per cent cuts.
"It depends on the profile and the mix of provision," she said. "You are better off never having done Train to Gain.
"I am trying to be optimistic, because we know that ministers fought hard to get this settlement. We have only had one arm amputated instead of two, and we are still here."
Ms Sedgmore said they also feared that income from 16-19 teaching, which makes up the larger proportion of most colleges' total budgets, would be vulnerable to a drop in participation sparked by the withdrawal of education maintenance allowances.
"There will be a whole tranche of students who were really hard to bring into college and need that extra support, which will not be there any more," she said. "Our biggest fear is that it will affect participation."