Principals this week blew the whistle on an illicit trade in black market students which could cost the taxpayer millions.
They claimed under-performing colleges were touting for trade by annexing threatened courses from cash-strapped neighbours to help meet recruitment targets.
And they condemned college funding chiefs for sparking a wave of clandestine deals by imposing deep cuts on fast-growing colleges.
Four colleges have admitted being approached by principals appealing for help recruiting students, although none was prepared to name the suitors.
Keith Wymer, principal of Bilston Community College in Wolverhampton, claims that he will have to turn away 84,000 students from September because of the cuts. He said five colleges had already approached him offering to take over threatened courses, for which they would be paid as much as 50 per cent more.
He said: "The FEFC is having to pay one-and-a-half times as much in other colleges because we cannot recruit. They are very embarrassed about this because they say it is an improper use of public money."
Mr Wymer is one of several principals who argue they have been unfairly targeted for cuts and are considering pressing for a judicial review of the funding round.
Joanna Tait, principal of Bishop Auckland College in Durham, said she had been approached by two colleges. "I'm aware of a number of colleges who have not yet reached their targets who have taken work off colleges which have been hit by cuts in funding. Clearly this is potentially costing the taxpayer more than is needed," she said.
Courses paid for at #163;6.50 a unit of work under the complex college funding formula could be taken over by a college claiming as much as #163;15 to #163;20 for the same units. "To my mind it's not a good use of taxpayers' money," she said.
Privately, other colleges also admit to being approached by colleagues seeking extra students.
Steve Broomhead, president of the Association of College Management, said he had heard of the practice, although had not encountered it himself.He said: "In my view it breaches quite significantly the financial regulations of the FEFC as I would understand it."
The FEFC moved to outlaw colleges trading courses as recently as January, when it refused to fund programmes franchised by one college to another.
A council circular said: "This could result in provision being funded at a higher rate than necessary and possibly lead to a trading of students by colleges that had not achieved their targets."
But is is unclear whether the ban on formal deals would prevent informal arrangements when colleges simply pick up work abandoned by others.
* Education Minister Kim Howells has given a stinging rebuke to managers at a London college over the sacking of a senior manager.
He spoke out during a Commons debate on further education when Romford MP Eileen Gordon claimed a senior manager at Waltham Forest College had been sacked on the spot.
Dr Howells said: "Managements who behave in the way described by my honourable friend had better understand that this Government will not put up with such arrogance or with high-handed insensitive attitudes that do nothing to improve morale or to provide high-quality training and education for our young people."