"Instead, institutions should evaluate their contribution in terms of the progress that their learners make, through their learning experience, in developing their skills, understandings and attributes.
"This means adopting softer forms of evaluation and using this as the basis for improving quality - using evidence like improvements in confidence and motivation, indicators relating to retention, attainment and achievement, and feedback from learners and former learners."
College leaders have long argued that the quality of the FE experience should be taken into account in its grant support. At present, colleges suffer a financial penalty if students drop out during the first quarter of a course.
September's Executive spending review reinforced that policy by setting colleges and universities a priority for increasing the numbers who complete their studies.