Ruskin College - the workers' university - faced a difficult future this week after a crucial property deal fell through.
Principal Jim Durcan had drawn up plans to move the 100-year-old Oxford college from three sites to a single site in north Oxford owned by Berkeley Homes. But the deal collapsed because of a disagreement between the college and Berkeley Homes over the price of the site.
Mr Durcan said that despite expansion in recent years, the college, which is famous for its trade union links and educating working-class mature students faced "significant financial pressures in the next five years".
Alumni include deputy prime minister John Prescott, Baroness Lockwood, founding chair of the Equal Opportunities Commission, and MP Dennis Skinner.
Part of the problem is the cumulative effect on college income caused by a switch, in 1994, from the Higher Education Funding Council for England to the Further Education Funding Council, which has since been subsumed by the Learning and Skills Council.
Lord McCarthy, an academic adviser to the college, said: "This has had a mounting impact on our income. It means we get less for students and that our academic staff posts are underfunded."
In a briefing note on the property deal circulated last week, Lord McCarthy says: "The nature of the Ruskin crisis is that we cannot hope to survive unless we can persuade the Learning and Skills Council that we have done our level best to turn these cumulative deficits of some £1.3 million into a surplus over the next three years."
The move to the former Unipart site had been strongly opposed by members of the Association of University Teachers in the college.
Teresa Munby, law lecturer at the college and chair of Ruskin College's AUT group, said: "We are delighted that the deal is off. We now want to work collaboratively with the college management and other unions to resolve the property strategy."
The group had said that the new site was on contaminated land, was too small and that expansion of the existing Headington site had not been fully explored.
But Lord McCarthy says in his note: "If we followed the AUT group lead, and abandoned the present business plan, we would be incapable of preventing the end of Ruskin as we know it."
The note says that the move to a single site would cut running costs by some £500,000 a year.
Mr Durcan said the college would continue its search for a single site.