Ministers are threatening to step in after an official report has criticised the management of Teesside Tertiary College.
The Middlesbrough-based college has been told by Ofsted and the newly-set up Learning and Skills Council to draw up an urgent action plan of improvements.
Their inspection reports on provision for 16 to 18-year-olds said that the college provided "generally satisfactory education but unsatisfactory leadership and management".
Higher Education Minister Margaret Hodge has asked the Learning and Skills Council to work closely with Teesside in addressing the problems.
"Standards simply aren't good enough," she said.
"Nothing is more important than raising standards and ensuring high quality learning for students. People have a right to expect those standards, regardless of whether they attend a school, college or university, or are trained with an employer."
She said that the college had "got to improve, and improve rapidly".
While she believed the college could be turned around, she warned of a range of measures if things did not get better.
"We will not hesitate to take firm action and look at other options - including bringing in expertise from other institutions, withdrawing funding from certain courses and departments, establishing new governing bodies, or mergers with other institutions," she said.
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