Sallie affirms '08 outlook, House votes

By Kevin Drawbaugh

WASHINGTON (Reuters) - Sallie Mae (SLM.N: Quote, Profile, Research, Stock Buzz), the largest U.S. student loan company, on Thursday affirmed its 2008 profit forecast, but warned of a "train wreck" in the $85 billion education financing market without urgent government intervention.

The company said it still expected "core" earnings of $1.70 to $1.80 a share for the year.

But Chief Executive Al Lord told analysts on a conference call: "We've been predicting something of a train wreck" in mid-2008 without prompt changes in a market hit by fallout from the subprime mortgage crisis and cuts last year in federal subsidies to student lenders.

As a result, Lord said Sallie Mae's new loans for the most part would lose money.

He said Sallie Mae was working with Congress and the Bush administration "to make solutions for lending viable ... The effort has been very pleasantly bipartisan to this point."

His remarks came hours ahead of an expected vote on the floor of the U.S. House of Representatives on a bill meant to help stabilize the student loan market, with legislation also pending in the Senate amid general White House support.

Millions of young people will begin this month to lock in their financing before heading to college in the autumn, raising concerns among officials about loan availability.

The legislation pending in Congress 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.