Washington — Sallie Mae announced today that it would not bid in a forthcoming auction to make PLUS Loans, saying it would not be profitable to participate.

In a letter to colleges, the lender said it had reached its decision with the “firm belief that the best interests of parents and schools would be served by maintaining the current PLUS Loan program.”

The lender’s decision could spell trouble for the auction, in which lenders are expected to “bid” the lowest federal subsidy rate they will accept to make loans in a given state. Sallie Mae makes 40 percent of PLUS Loans in the guaranteed-loan program; if a lender with that economy of scale decides it can’t make money, other lenders may decide to sit out the auction as well.

Congress created the auction pilot in 2007 as part of an effort to remove the politics and guesswork from the setting of subsidies. Since then, the loan-securitization market has collapsed, and President Obama has called for the complete elimination of the guaranteed-loan program.

Student-aid offices have asked the Education Department to postpone the auction to prevent disruptions to the PLUS program, which provides low-interest loans to graduate students and to parents. They worry that the department will not complete the auction in time for colleges to award the loans for the coming academic year, and that Mr. Obama’s plan could render the auction moot.

But the department appears to be forging ahead with the plan. Last week, it asked the Office of Management and Budget to approve its auction bidding forms promptly, so the agency can meet a Congressionally imposed deadline of choosing winners by July 1. —Kelly Field