A college for HS2 engineers that failed to attract enough students has been branded "financially unsustainable".
The National College for Advanced Transport and Infrastructure has been placed under supervision due to its "very poor financial position".
It recently agreed to "significant legal costs" to challenge an Ofsted report describing it as inadequate.
The college said its training was "needed more than ever" after the Prime Minister gave HS2 the go-ahead.
Michelle Donelan MP, minister of state for universities, said: "It is clear that the college faces significant financial challenges and is unsustainable unless structural solutions are sought out as soon as possible."
The college, which has campuses in Doncaster and Birmingham, was established by the government to train people to work on HS2, the high-speed rail link, connecting London to Birmingham, Manchester and Leeds.
It was predicted that HS2 would create 2,000 apprenticeships .
The college opened in 2017 and was originally called The National College for High Speed Rail. It changed its name last year amid "ongoing delays" to the infrastructure project, currently the largest in Europe, which has faced mounting concerns over the exact route and spiralling costs.
In November, Ofsted inspected the college, and found that managers and staff did not act quickly enough to protect apprentices from harassment and that safeguarding arrangements were ineffective.
The college said the Ofsted inspection process and overall grade was "flawed" and challenged the rating by seeking a Judicial Review.
The Further Education Commissioner (FEC), part of the Department for Education, which works with colleges to improve their quality and financial resilience, visited last month.
In a report, it said: "Whilst the scope of this visit did not include curriculum and quality, the FEC team did question the board members on their decision to agree to significant legal costs to challenge the Ofsted outcome.
"Given that the college is in receipt of ongoing emergency funding from Department for Education, this is clearly a very difficult and sensitive issue."
The FEC found that the college had an "ongoing shortfall" in its finances because of the difficulties in bringing in apprentices and other full-time students.
In the current academic year, the college budgeted for 1,024 students but only had 310 students.
In the report, it said: "Due largely to the uncertainty around the future of HS2, which has arisen since the budget was set, employers in the industry are reluctant to take on and train new staff, especially apprentices."
The FEC also found that the college's 12 senior management roles had a gross cost of about 72% of income, "an exceptionally high overhead cost to carry".
The college was given supervised status with Education and Skills Funding Agency observers set to attend college board meetings and other meetings with immediate effect.
In a statement, the college said its legal action, taken against Ofstead as a "last resort," had now been dropped.
It said: "We are working with the FEC and others to ensure a long-term sustainable future for our provision, without disruption to our current learners. This has allowed us to drop the legal action."
The college said it had faced "financial challenges from factors outside of our control" including delays to HS2.
However, a spokesperson said: "The recent announcement on HS2 and the government's plans for further infrastructure investment means that the skills delivered by the college are needed more than ever."