Finance chiefs at the London School of Economics are reviewing corporate plans after a projected Pounds 3 million slide into the red.
Governors attending an informal court meeting on Monday heard the projected budget deficit could stand at around Pounds 2.5 million by the 1997/98 academic year Q some Pounds 3 million behind the hoped-for Pounds 500,000 surplus.
One governor said the LSE was "very worried" by the latest projection, having realised that, in the absence of funding solutions from the Dearing inquiry, the deficit could have serious long-term ramifications for the institution's international competitiveness and standing.
Public relations head Iain Crawford said the LSE was expecting a Pounds 500,000 deficit this year and that this could increase steeply over the next year.
Director John Ashworth said that cost-cutting could have a detrimental effect on overseas recruitment.
A full report is due to be presented to the Court of Governors at their full meeting next month.
Student union president Kate Hampton said she feared the projected deficit would lend weight to the argument for top-up fees, due to be considered by the academic board next month.
Meanwhile, the LSE is to re-advertise the post of director after Sir John Bourn's surprise decision to turn down the job in February. Pro-director Leslie Hannah will act as caretaker director from August 31.