College Lenders Faulted in Clinton Fight : Education: Students and lawmakers say the lenders, who stand to lose billions, have created a sham to show students oppose aid reform.

WASHINGTON —  In a frantic effort to kill President Clinton’s plan to reform college aid, lenders have set up sham student groups and flown college kids to Washington to lobby against the bill, students and lawmakers said Tuesday.

At stake are billions of dollars in profit that banks and other financial institutions make under the current college aid program.

Clinton’s plan to move to a direct government loan program will eliminate the need for many of the lenders.

University of Wisconsin graduate student Robert Kraig told a news conference that the Student Loan Marketing Assn. paid his way to Washington, where top officials tutored him on how to lobby against the plan.

Kraig also said that Sallie Mae, a quasi-governmental agency that sells student loans in the secondary market, implied that it would fund a new student group if he agreed to work against the proposal.

“What they’re really trying to do is . . . create a false sense of how students feel about this program,” he said.

The student, who supports Clinton’s direct loan plan, said he was unaware that Sallie Mae was paying for his trip to Washington until shortly before he left Wisconsin.

“What looks like a student grass-roots effort is really an orchestrated plan to create a false sense of student sentiment. Sallie Mae’s effort is an example of what might be called surrogate lobbying,” he said in a statement.

A Sallie Mae spokeswoman denied the charges, saying the organization had planned to send an official to Wisconsin to talk to students there about Clinton’s plan. At the students’ request, Sallie Mae instead brought them to Washington.

“We did not ask them to lobby or to form any organization or to undertake any activities of any kind, nor did we offer or imply any funding support. That’s the whole story,” said Gisela Vallandigham at Sallie Mae.

But another financial organization did not deny its role in setting up a student group in an effort to defeat the plan.

A lobbyist for the Student Loan Funding Corp. of Ohio, a private-sector secondary market, told Sen. Paul Simon (D-Ill.) that it spent $25,000 on activities of the Ohio Students for Loan Reform, including flyers warning that the direct lending plan “could mean increased tuition (and) reduced student programs.”

The problem is that Ohio Students for Loan Reform is not a formal association and has no legal structure or bank account.