WASHINGTON - In a victory for shareholderw who oppose the student Loan Marketing Corp.'s privatization strategy, the government-sponsored agency said it would withdraw its lawsuit against former chief operating officer Albert Lord.

It also said it would validate the election of Mr. Lord's eight board nominees.

Mr. Lord's nominees will now outnumber management directors by 8 to 6 among elected board members. Seven are appointed by the President.

Responding to the Clinton administration's plan for direct government lending to students, Sallie Mae management had proposed privatizing the company and diversifying its operations.

But dissidents led by Mr. Lord staged a proxy fight arguing that direct lending is by no means assured now that Republicans control Congress. They favor maintaining the corporation's current status and reducing its balance sheet to $10 billion, from $50 billion, through asset sales and securitization.

After the board election in May, the corporation sued Mr. Lord, saying votes had been incorrectly tabulated because he expanded his slate of directors to eight from four.

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