Brian Styles, principal of the City of Bristol College, said he has no alternative to selling the property to developers since it would cost pound;28 million to bring the buildings up to modern standards.
Numerous colleges have faced similar dilemmas since incorporation as they found themselves in charge of old, often dilapidated buildings. Barnsley College inherited a listed building which had to be bound with a ring of steel to prevent its collapse.
The Bristol buildings - former orphanages which have dominated the city's northern skyline for more than a century - were built with money raised by the Christian philanthropist, George Muller, who died 100 years ago this year. He Muller claimed to have raised pound;1.5m (equal to pound;50m today) by the power of prayer. The cash was used to house, clothe, feed and educate more than 2,000 orphans a time in five vast buildings.
Over the years, the city authorities acquired the original five buildings, now with the college. But a survey revealed the need for urgent refurbishment and a costly maintenance cycle. The Further Education Funding Council said that the buildings were too big for the 16,000 students.
"Very little was spent on these buildings in the 1970s and the 1980s and the FEFC simply does not make capital funding available on this sort of scale," said Mr Styles.
"It's easy to see this in terms of the residents' anger over losing part of the city's heritage, and it is true that there are difficult decisions that have to be taken," he said.
"But there is also a good news story here about a major FE college trying to provide the children and adults of Bristol with accommodation that is appropriate and in the right place."
three of the five Muller buildings will be demolished, the other two will be upgraded. A 250-house private estate is planned for the site.