WASHINGTON (Reuters) - The Student Loan Corp (STU.N: Quote, Profile, Research) said on Wednesday it will suspend lending at certain schools and withdraw from the Federal Consolidation Loan market because of market turmoil and federal legislation.

"These changes reflect the decisive action that is needed to manage our business through this difficult time in the overall economy," Michael Reardon, chief executive of SLC, said in a statement.

Shares of SLC, majority-owned by Citigroup Inc's (C.N: Quote, Profile, Research) Citibank N.A., were up 3.2 percent to $107.68 in late morning trading on the New York Stock Exchange.

SLC's announcement came amid growing concern about student loan availability this autumn.

Last year, Congress slashed federal subsidies paid to lenders involved in the federally guaranteed student loan program.

New legislation proposed by Democrats would let the U.S. Department of Education buy student loans that lenders are unable to securitize and sell on the secondary market. That market has been paralyzed by general credit anxieties linked to the subprime mortgage crisis.

A vote on the bill is expected as early as Thursday in the U.S. House of Representatives.

SLC said that beginning May 1, it will withdraw from the Federal Consolidation Loan market and will stop lending at schools where loans with lower balances and shorter interest-earning periods are less profitable.

The changes will not affect existing loans, the company said.