An audit discovered higher than reported drop-out rates
London Metropolitan University has said it will cut 550 jobs after Higher Education Funding Council for England (HEFCE) asked it to return funds.
A spokesperson said 330 staff will be asked to take compulsory or voluntary redundancy by July 2010, while some vacancies will not be filled.
HEFCE asked the university to repay money after an audit said drop-out rates were higher than reported.
The university has been "overfunded" by £15m a year since 2005, HEFCE said.
The university has 4,612 staff and 34,000 students on its register.
The spokesperson said: "London Metropolitan University is proposing a reduction of 550 posts from across the university by the end of July 2010, with approximately 330 of these coming from either voluntary or compulsory redundancy."
The exact amount will not be known until February 2009, but is likely to be substantial
London Metropolitan University
The university said it has been in discussions with the funding authority for the past few months after the audit which concluded that, given the rate of "completion" by students, teaching grants would be cut.
A statement from the university said: "We have now been notified by HEFCE that it is likely to seek to recover in full an overpayment of recurrent funding it gave the University between 2005 and 2008.
"The exact amount will not be known until February 2009, but is likely to be substantial and will be recovered from the university over a phased period of time."
The university said it is also looking to reduce non-staffing overhead costs.
Last month MPs warned that the university could lose up to £56m - an £18m reduction in teaching budgets and £38m retrospectively recovered from previous years.
An early day motion said: "This scale of cuts throws the future viability of the university into doubt at a time when education and training are vital to the capital's economic health."