Malcolm Florey, principal of Bicton College in Budleigh Salterton, said: "In a county like Devon that is dependent on the incomes from the rural industry, it will cut off the life-blood of skills flowing in. All those young adults, many of whom live in the more remote and rural areas of Devon, will now be seriously disadvantaged and discriminated against".
He said the county council's plans to cut Pounds 1,000,000 of discretionary grants this year and up to Pounds 2m over the next two years would cut Pounds 500,000 from the college's annual budget. Of the 180 students in this year's intake, 170 received grants.
Mr Florey accused the council of walking away from its responsibility and using as an excuse the fact that colleges are now funded by the Further Education Funding Council (FEFC). "We are in danger of being batted between local and central government. If our numbers fall because of losing the grants, our FEFC funding will also suffer."
The college will now lobby hard to get the policy overturned and it has already won the backing of the National Farmers' Union. However, Ken Turner, chair of the county's education committee, warned that though the recommendation still has to go to the policy committee and the full council, it would not be rescinded.
Discretionary grants are means-tested and cover living away from home expenses of around Pounds 2,000 per student per year. Mr Florey said they made up just 0.3 per cent of the council's total education budget.
A spokeswoman for the FEFC said it was well aware of the issue and it had been clear for a long time that discretionary awards had a serious impact on agricultural colleges with a residential base.
She said: "When we ask agricultural colleges for their plans as a group they say LEA discretionary grants are a high risk for them. The council has been pressing for discretionary awards to be transferred to the FEFC."
Mr Turner said that the council had been forced to cut the grants in order to meet other funding commitments. He thought the farming community or agricultural interests might be persuaded to make bursaries available.
He said: "These are discretionary grants. We have statutory and mandatory problems as well and first we have to make sure that the front line services of schools are not hit. We have to make savings somewhere".
He said further education was outside the control of the local education authority, and the government would have been better leaving all FE with the LEAs.
He added: "We have not just walked away we have said we will have money in the funds for hardship cases. We will do our best."