Colleges could end links with universities that make them vulnerable to their senior partners' whims by following the lead of three further education providers that have won degree-awarding powers, the Association of Colleges has said.
Newcastle College, West Lancashire College and New College Durham have all been granted powers to award foundation degrees after three years of scrutiny by the Quality Assurance Agency.
Joy Mercer, director of education policy at the Association of Colleges, said the new powers would give the colleges a sense of control as they would no longer have to rely on external course validation.
About a third of colleges that offer higher education rely on universities to allocate them a proportion of their set places, she said. It is feared that universities may reduce that allocation if higher tuition fees lead to a fall in applications.
"When universities start worrying about their own recruitment, they will start withdrawing numbers from colleges," Ms Mercer said.
"One of the things that colleges feel vulnerable about is a relationship with a university that has other fish to fry."
Greg Wade, policy adviser at Universities UK, welcomed the new powers. But he said he would be concerned if the decision led all colleges to feel they should review their positions, as "universities are still committed to their partnerships".
He said the move to increased competition would improve student choice, but would also heighten uncertainty across the sector.
Bradford College has applied to the QAA for full taught degree-awarding powers, while Grimsby Institute and Blackburn College have applied to offer foundation degrees.
Newcastle College and West Lancashire College, both part of the Newcastle College Corporation, said offering full degrees was an "aspiration".
Ms Mercer said she did not know how many other colleges would follow their lead, but argued that only a few would be able to afford the process. "New College Durham needed someone employed full-time for three years (to secure the powers)," she said.
The government is consulting on changes to what it called a "complicated and slow process" for approving degree-awarding powers, and also on university and university college title.
Ms Mercer said: "We don't want there to be a diminution of the rigour. But we do welcome the White Paper, which says (these processes) could be streamlined."
She also suggested that the QAA could cut its assessment workload by looking at Ofsted reports, assessments by exam boards and colleges' own internal reports.
About three-quarters of colleges plan to charge tuition fees of less than £6,000 for higher education courses in 2012-13, making study with them "much more cost-effective to the individual" than at universities, Ms Mercer said.