Dozens face the sack in Hackney
Funding chiefs want to recover the cash because some of Hackney college's courses have attracted and retained fewer students than expected.
Natfhe, the lecturers' union, claims the college will axe between 50 and 60 posts as it tries to trim pound;1.6m from its budget to refund the Learning and Skills Council.
The college says the number of compulsory redundancies has yet to be finalised - but could be fewer than 43. It hopes to limit sackings by redeploying staff, encouraging voluntary redundancies and "new business".
It also says the business plan produced in response to the funding crisis could save some of the undersubscribed courses from closure. The plan has yet to be approved by governors, a college spokesman told FE Focus this week.
Richard Payne, spokesman for the college's Natfhe branch, said lecturers felt they were paying for college mismanagment.
"Members feel shocked and angry," he said. "We believe they are closing whole area such as special needs provision and dismembering adult literacy and numeracy.
"It is not understood how the college will be more "efficient" if staff pay with their jobs for failures not of their making. Lecturers will not accept that the way out of the college's current financial position is to sack people."
The union claimed it had not been consulted about the decision to make redundancies, which it said was made on the last day of spring term, shortly after the college was announced as a centre for vocational excellence in business and information technology.
A spokesman for the college denied this, and said that the union had been consulted about the plans, which are still under discussion.
He said: "Consultation with the unions on how to reshape the course offer and balance the budget next year started in September 2004. "Meetings with the unions on how best to proceed have taken place twice a term since that date, and will continue."
Elsewhere, Natfhe continues to be in dispute at several colleges that have failed to implement fully the nationally-agreed pay deal for lecturers.
But a truce has been called in another dispute, over pensions. Natfhe has halted its strike ballot over the Government's plans to raise the retirement age from 60 to 65, as have other public-sector unions, including the National Union of Teachers.
The unions have accepted an offer of further talks over the proposed pension changes with Alan Johnson, the work and pensions minister.