An end to the ban on the practice, due to be agreed this week, has been hailed by some as a step towards the creation of the two-plus-two degree courses. These courses, which are split between colleges and universities, are already common in America. They are being examined by the Dearing Committee's review of higher education.
However, other colleges claim the change will simply permit universities to cream off cash from FE while sending funding on a needlessly circuitous route.
Funding chiefs revealed they were poised to lift the ban on higher education institutions franchising FE courses to colleges at the Further Education Funding Council's annual meeting in London this week.
The move was welcomed by the University of Central England in Birmingham which withdrew from such a deal with Handsworth College two years ago after learning it was illegal.
The university now proposes to franchise art and design and law FE courses to a number of Birmingham colleges as a means of attracting students who will then progress to its degree programmes. It already offers those courses, with FEFC funding, as foundation programmes on its campus, but hopes running them in colleges will attract students who might be wary of universities.
Dr Diana Green, UCE pro-vice chancellor and a board member at Walsall College, said: "We feel this matches the American two-plus-two system which could be the way forward for Dearing."
But one principal of a northern college with substantial HE provision claimed the lifting of the ban would clear the way for universities to claim cash and sub-contract courses relatively cheaply to colleges granted little growth funding, while creaming off a profit.
Geoff Hall, FEFC director of education programmes, said the council would insist the use of the procedure was justified.
John Brennan of the Association of Colleges said the change would be positive if it created more FE-HE links and helped student progression.