East Durham Community College has committed up to Pounds 500,000 to pay out in bursaries to 16 to 19-year-old students in return for regular attendance.
But the step will be questioned by funding chiefs because, unlike previous inducements offered by colleges, the cash is on offer to all new full-time teenage students. Last year, Teesside Tertiary College offered Pounds 1, 200 and Pounds 900 bursaries, but the "golden hellos" were only for a select number of high-flyers with top GCSE grades.
The Further Education Funding Council gave the all-clear to the selective Teesside scheme, but has raised doubts over the legality of East Durham's. Geoff Hall, FEFC director of education programmes, said: "If it is universal, it may go beyond the area we understand to be a proper use of funds. It could fall within the category of a grant, and we don't have the power to give grants."
The college would be advised to consult its internal auditors if the council ruled it had exceeded its powers, he said.
Managers at East Durham say they are introducing the bursaries, payable in three instalments throughout the year, to boost flagging retention rates in the depressed former mining area.
Though the initiative by the college, known for its aggressive marketing, has angered some of its neighbours, it highlights a sector-wide problem facing colleges over lack of support for FE students.
Mr Hall said: "One has considerable sympathy with them. The system is not one that the council is happy with."
Ruth Gee, chief executive of the Association for Colleges, said that though the AFC would not aim to encourage such schemes, it understood their necessity in poverty-hit areas while FE students were still denied financial support.
But the move will be seen by some as a precedent encouraging cash-strapped local authorities to continue the trend of cutting discretionary support and cash for transport, leaving responsibility for maintenance at the discretion of individual colleges.
East Durham - formerly Peterlee College - is drawing on public cash from the Further Education Funding Council to finance its bursaries. With one of the highest funding increases in the country for 1996-7 - up 13.4 per cent as a result of rapid expansion this year - it has the resources for the scheme, where many other institutions have no cash to spare.
Managers deny suggestions that the initiative is intended to boost recruitment by "poaching" students away from neighbouring colleges. Malcolm Fallow, customer services manager, insisted widening participation was the key motive. He said: "We have done a lot of research into drop-out and found that in many cases a relatively small amount of cash for books or travel expenses would have swung it." The college hoped to attract some of the school-leavers who went on to unsuitable youth training courses with the promise of Pounds 29.50 a week payment, but ended up dropping out.
The bursaries fund would not mean cash being taken out of existing crisis funds, nor a reduction in quality of teaching, he claimed. "We have a remit to increase student numbers anyway. We know that the only real way we can achieve sustained growth is actually to provide quality education and training. Inducements alone would be a very superficial way of attracting students. "