The issue was highlighted after it was revealed that 91 students at Telford College in Edinburgh who made late applications for courses have been left without a bursary because the college's allocation ran out in the middle of last month. Telford's intake has risen by 9 per cent over last year.
Keith Robson, president of the National Union of Students Scotland, said: "It is the students who once again suffer for the Government's cavalier policy. With such a swift handover to colleges, little thought was given to maintaining the local authority system."
The NUS says the problem will be exacerbated by a new intake of students in January.
Tom Kelly, chief executive of the Scottish Association of Colleges, said: "Bursaries are essential to everything we do in further eduction, including the achievement of the Government's targets for education and training. What the Telford case shows is that the Government is underestimating the level of student demand for FE. This problem will be repeated in other colleges unless action is taken on bursary funding."
Mr Kelly last week reminded an ASC conference in Stirling that spending in FE was cut this year in real terms by 4.5 per cent, from Pounds 248 million to Pounds 243 million. A further fall of 4.2 per cent next year will cut the figure to Pounds 236 million.
The 91 Telford students have had their Pounds 740 fees waived by the college, which will also pay up to Pounds 450 in travelling costs in a bid to ease their difficulties. Joe Mooney, the college's deputy principal, said: "We have got far more people following the courses and there is not enough money from the Scottish Office to cover it."
The Scottish Office has allocated Telford Pounds 1.97 million for bursaries based on previous intakes but the college says it needs another Pounds 200,000. It has already put up Pounds 100,000 of its own money to help students. "We are talking to individual students and we have set up a bursary helpline with counselling. Some students have converted to distance learning methods or opted for part-time study," Mr Mooney said.
At John Wheatley College in Glasgow, enrolments rose by more than 14 per cent last year, taking the number of students above 4,700. Ian Graham, the college's principal, said this would mean another significant increase in grant in 1997-98 but added: "We continue to be underfunded compared with others in the sector. This situation will only very slowly readjust itself as funding begins to be more closely related with college activity."