NEW YORK -- The Student Loan Marketing Association will survive possible changes in the guaranteed student loan program, its president and chief executive said last week.

"Our franchise is on track and up to whatever challenges and changes" that occur, said the executive, Lawrence Hough, at Sallie Mae's annual meeting.

The stock price of Sallie Mae, which finances and services student loans, has been under severe stress because of concerns that direct lending by the government will drive it out of business.

The Clinton administration has proposed phasing in a program of direct lending by the government. The plan is projected to save $4.3 billion over five years, mainly by eliminating subsidies to loan-originating banks.

Behind the Pilot Program

Mr. Hough reiterated Sallie Mae's support of a four-year pilot of direct lending, saying the company is "absolutely confident" the results will show that the current program should be kept.

Asked about Wall Street speculation that Sallie Mae's very existence is in doubt if direct lending passes, Mr. Hough said, "We'll be around."

He added that he is not selling his stock.

He said Sallie Mae has a triple-A-rated balance sheet and would have no problem attracting capital if it shed its status as a government-sponsored entity.

Asked about allegations that Sallie Mae offered to fund a dummy student organization that would lobby against direct lending, Mr. Hough said, "It didn't happen."

The allegations were publicized by Sen. Paul Simon, D-Ill., a proponent of direct lending.

A University of Wisconsin graduate student said Sallie Mae paid his way to Washington, where top officials tutored him on how to lobby against the plan.

Sallie Mae provided a copy of testimony from another student, Brian Williams, who disputed the allegations.

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