UPDATE 2-W.House backs much of US House student loan bill

(Adds administration statement details, background)

By Kevin Drawbaugh

WASHINGTON, April 16 (Reuters) - The White House said on Wednesday it supports major provisions of a bill expected to come to a vote on Thursday in the U.S. House of Representatives that aims to stabilize the troubled student loan market.

"The administration is committed to ensuring that students and their parents have access to the federal student aid they need to pay for college this fall," said the Bush administration in a statement.

The $85 billion student loan industry is in turmoil brought on largely by the mortgage market crisis. Concern has been growing in Congress about the availability of student loans this summer as many young people firm up their finances before heading to university in the autumn.

The industry also is still reeling from cuts made last year in subsidies paid to federally guaranteed student lenders, which followed months of scandal involving conflicts of interest and kickbacks among lenders and college officials.

Sallie Mae (SLM.N), the nation's largest student lender, posted a first-quarter net loss of $132.8 million late on Wednesday compared with a profit of $107 million a year ago.

Sallie Mae Chief Executive Albert Lord said in a statement: "It has become obvious that we can only meet the enormous student credit demands we are seeing at Sallie Mae if there is a near-term, system-wide liquidity solution."

Other major student lenders include Citigroup Inc (C.N), Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N).

Citigroup's Student Loan Corp (STU.N) unit said on Wednesday that, at least for now, it will suspend lending at certain schools and withdraw from the federal consolidation loan market because of market turmoil and federal legislation.

Dozens of lenders have recently withdrawn from the federally guaranteed student loan business -- the largest source of loan money for students seeking to cover the soaring costs of getting a university education.

The House bill would let the Department of Education buy federally guaranteed student loans from lenders unable to sell them on the secondary market, where investors have retreated from securitized debt following heavy mortgage debt losses.

The Bush administration said the bill gives Education Secretary Margaret Spellings "the flexibility needed to ensure that this provision could be implemented effectively."

The House legislation would also let the department funnel capital to state guaranty agencies that could then provide the loan money to colleges in need of funding for student loans.

The administration said it supports this provision of the bill, but recommends that this authority be temporary.

The administration said it "strongly supports" giving Spellings discretion to set participation guidelines and "looks forward to working with Congress on technical changes."