SOUNDWELL College, near Bristol, whose financial crisis was revealed by FE Focus in January, may be rescued by merger.
Governors have voted to approach City of Bristol College, and Bristol's governing body will meet next week to discuss the plan.
A major cause of Soundwell's turmoil has been the Further Education Funding Council's decision to claw back money from previous years. Bill Bevan, installed as temporary principal in February, said that the level of debt was still unresolved - there has been speculation it could be as high as pound;4 million. "I could not comment on that - we are waiting to know what the final clawback will be," he said.
Brian Styles, principal of City of Bristol College, said: "We have to get the current level of debt resolved, and some assistance from the Learning and Skills Council. This will be of more than interest to us - it will be an early indication of how the LSC will operate.
"The appeal of merger for City of Bristol is that it is in keeping with our strategy of devolving FE through neighbourhood centres. We would want to maintain Soundwell's national prominence i motor vehicle training."
Soundwell has around 7,000 full and part-time students and 500 staff. David Ekinsmyth, its former principal, went on leave in January. When inspected by the FEFC in March 2000, governance and management at Soundwell were graded four - generally unsatisfactory.
The college, which serves north-East Bristol and South Gloucestershire, was criticised for over-optimistic financial forecasts that led to "underachievement of funding targets". Inspectors said an ineffective management information system meant the corporation was slow to realise how much money had to be repaid.
Mr Bevan said: "Merger would mean much needed financial stability following recent funding problems, and provide opportunities for the redeployment and career enhancement of staff. At the moment, amid the uncertainty, there are high anxiety levels among staff members."
Regional support officer at lecturers' union NATFHE, John Bryant, said: "We welcome the move towards merger but staff have a number of concerns about provision in the area.They want to see as wide a range as possible maintained".