Lincoln University has proposed a major overhaul that will cut 51 jobs and reduce the certificate and diploma courses offered at its Telford campus near Balclutha.
The university wants to partner with another, bigger institution - and is not ruling out a merger.
Lincoln is New Zealand's smallest university. It has been under close government monitoring because of problems with low enrolments and financial deficits.
The plan announced today suggested job losses would save $4.9 million a year, with two-thirds of the cuts in administrative roles and 17 at the university's Telford campus.
Vice-chancellor Robin Pollard said the university was considering transferring its Telford campus, which offers certificate-level courses, to another institution.
The university said in the past, the campus profited from distance education courses that subsidised on-campus programmes.
However, enrolments in Telford courses had fallen, and the university was recently embarrassed by funding rule breaches that prompted a $1.5m repayment to the Tertiary Education Commission. The campus was previously a stand-alone polytechnic, which merged with Lincoln in 2011.
"It made very little sense for Lincoln University to pursue sub-degree students up and down the country, taught through complex arrangements with third-party operators," Professor Pollard said.
He said the university needed to make economies of scale by finding another, bigger institution to provide back-office functions.
Professor Pollard said all options, including a merger, were open.
"We're appointing a high-level transformation board and they will invite options from interested parties and then consider them."