More than 6,000 full-time student places may be at risk across Scotland, college leaders have warned.
They blame a combination of cuts and uncertainty over elements of their funding.
The indicative grant letter from the Scottish Funding Council last week confirmed that teaching grants to colleges will be cut to pound;387.5 million, a reduction of almost 10 per cent to the actual grants received by the sector last year.
It confirmed funding for only 93 per cent of last year's target number of student places. This will be increased by a further 3 per cent by using pound;8 million earmarked for use in subsequent years and through "targeted efficiencies", it said.
The remaining 4 per cent to maintain student numbers is to be financed by Skills Development Scotland (SDS) in a new pilot scheme.
However, no details have yet been released, and principals say they are concerned the funding could be tied to specific courses for people out of work, modern apprenticeship courses, or even existing contracts with SDS.
Many say they have no choice but to plan on the basis of the funding already allocated by the SFC and reduce activity significantly. A 4 per cent cut in weighted student funding could translate into over 6,000 full- time equivalent places being lost.
Robin Parker, president of NUS Scotland, said: "We are concerned by the lack of clarity from the Scottish government over funding for colleges. The government is asking colleges to plan provision with very little notice of what funding the SFC will provide and no idea how funding from SDS will work."
John Burt, principal of Angus College, said his college had started interviewing student applicants, but would offer no confirmed places until the budget and SDS's scheme had been clarified.
He said: "Staff were magnificent last year in helping us to deliver a similar number of student places with a nearly 10 per cent teaching grant cut. I do not think that is a repeat option for 2012-13."
The levels of cuts in college and student funding would "impact on what we can provide for the north-east", said a spokesman for Aberdeen College.
The average amount allocated to colleges per student has also been reduced, SFC figures show. On average, each college will now receive pound;188 per weighted student unit of measurement, compared with pound;207.80 two years ago. Principals told TESS this may result in more redundancies, larger class sizes and fewer contact hours as colleges balance the books.
The grant letter published last week contained detail on the funding for only 93 per cent of student places. But the funding council said it would allocate money for a further 3 per cent.
Two per cent is to be given to colleges in those regions identified by the SFC as having the greatest gap between need and current provision - Ayrshire, the Borders, Central, Dumfries and Galloway, Highlands and Islands, and Lanarkshire. This means colleges outside these regions could miss out on that funding tranche. A further 1 per cent will be given to colleges where "additional productivity can be expected" or early efficiencies achieved.