Colleges are being short-changed under the government's New Deal scheme for the unemployed.
Further education colleges receive about Pounds 2,300 for educating a New Deal student from the Employment Service compared with about Pounds 3,000 per student from the Further Education Funding Council.
Added to this is the extra cost of educating the New Deal students, a greater proportion of whom have motivational and behavioural problems, say college chiefs.
John Brennan, director of further education for the Association of Colleges, said: "The Employment Service argues that colleges are merely infilling courses with New Deal students and that it should therefore provide only the marginal cost of their education.
"But colleges are keen (to ensure) that young people on the New Deal are on programmes that are relevant to local employment needs. So colleges are offering these places and are not always infilling on existing courses."
Mr Brennan said New Deal students can cost colleges more in terms of personal support and supervision. Problems can arise because the students lack motivation which, in turn, may be related to the coercive nature of the New Deal.
Under the scheme, unemployed people aged 18 to 24 must choose one of four options, including full-time education or training, or risk benefit cuts. "We have individuals who have personal problems or perhaps criminal records. This is true of other students, but there tends to be a higher preponderance in the New Deal cohort. Colleges tend to spend more on sorting out these peripherals, but they are not getting the extra money to do so," said Mr Brennan.
The latest New Deal figures from the government show that since its launch in January 1998, 68,800 young people have started full-time education and training courses. More than half went into work within four months of completing their courses. A total of 436,900 young people have started on the New Deal since January 1998.