Students Dylan Harvey and Courtney Bowden with Guy Neaves (left) who is empolyed at Thornbury High School under a program for kids at risk of dropping out, which has been successful but is threatened due to federal budget cuts.

Guy Neaves (left) helps prevent Thornbury High School students from dropping out. Photo: Michael Clayton-Jones

A program that saved thousands of Victorian students from dropping out will be axed, with the federal government to end its funding. Now the state government is being urged to rescue the scheme.

Principals have lamented the looming closure of the Schools Business Community Partnership Brokers program in which schools, community groups and businesses worked together to keep vulnerable students in education.

An email from the federal Education Department confirmed the program, run by 31 Local Learning Employment Networks across Victoria, would cease at the end of the year.

''The department understands that with a program closing there are often issues for providers around the retention of staff, the end of property leases and other matters. We expect these issues to be managed without reducing the level of service,'' the email said.

The closure comes despite the federal government's tough approach to unemployment with plans for people under 30 to wait six months before receiving the Newstart allowance.

Earlier this month, The Age revealed 10,000 vulnerable children were dropping out of school, training and apprenticeships every year, raising concerns about a generation facing unemployment.

The federal government said the program was intended to end in 2013 before the previous Labor government extended its funding for a year.

But WynBay Local Learning and Employment Network chief executive Dallian D'Cruz said at least 20,000 young Victorians received support through the program last year.

He estimated more than 100 workers could lose their jobs and countless volunteer hours would be lost.

''We're calling on the state government to step in and fill the breach left by these Commonwealth cuts,'' he said.

Mr D'Cruz said businesses offered apprenticeships and traineeships to school students through the program. Community groups worked with students to ensure they completed school.

Thornbury High School principal Peter Egeberg said the networks provided crucial assistance that schools would struggle to maintain alone.

Mr Egeberg said he was perplexed by the decision to stop the funding. ''None of it makes any sense to me,'' he said.

The school employed a worker to support Koori students through the program, but that position will end soon.

Victorian opposition minister for higher education Steve Herbert said the state and federal governments had allowed the program to ''wither and die''.

''Thousands of young people rely on the program and the Liberals have cut millions of dollars in funding and around 40 initiatives aimed at the most vulnerable youth in the state,'' he said.

A spokeswoman for Victorian Education Minister Martin Dixon said state and federal funding for the networks was $13.3 million in 2014. The Commonwealth contributed most of that money.

''In the context of the 2014-15 federal budget we are working with stakeholders to develop transition arrangements to ensure we can continue to support young people,'' she said.

The Victorian government funded the networks from 2001 to 2009. Victoria later reduced its share as the Commonwealth took over the majority of funding responsibility by 2014.

Federal Parliamentary Secretary for Education Scott Ryan said the program was ''always intended to finish'' with relationships to become self-sustaining. He said the Commonwealth was investing ''record funding'' in schools over the next four years.

''It is expected that states and territories, as well as school communities, will make choices about what programs they wish to run to best serve their community's needs,'' he said.

b.preiss@theage.com.au