RATIONALE: Drugs used in chemotherapy use different ways to stop tumor cells from dividing so they stop growing or die. Combining chemotherapy with peripheral stem cell transplantation may allow the doctor to give higher doses of chemotherapy and kill more tumor cells. Interferon alfa may interfere with the growth of the cancer cells.

PURPOSE: Phase II trial to study the effectiveness of high-dose melphalan plus peripheral stem cell transplantation followed by interferon alfa in treating patients with Waldenstrom's macroglobulinemia.

OBJECTIVES: I. Assess remission rates and overall and progression-free survival in patients with Waldenstrom's macroglobulinemia treated with tandem high dose melphalan supported by peripheral blood stem cell support. II. Assess the associated hematologic and nonhematologic toxicities of this regimen in these patients.

OUTLINE: Regimen A (dexamethasone induction): All patients receive high dose dexamethasone orally on days 1-4, 9-12, and 17-20; courses repeat every 35 days for a total of 3 courses. Regimen B (stem cell mobilization and collection): Following a 4-6 week break after dexamethasone induction and regardless of response or progression, patients have stem cells collected following administration of filgrastim (G-CSF) by injection; G-CSF continues until completion of stem cell collection (maximum of 6 aphereses). Regimen C (first peripheral blood stem cell transplant (PBSCT)): Regardless of disease progression, patients recovered from toxicities from dexamethasone induction and stem cell mobilization and collection, and who have adequate number of CD34 cells collected for at least 1 transplant, receive 1 dose of melphalan daily for 2 days followed by peripheral stem cell reinfusion. G-CSF is given by injection beginning on the day after peripheral stem cell reinfusion and continues until the absolute granulocyte count is greater than 1,000/mm3 on 3 consecutive days. Regimen D (second PBSCT): Patients who had adequate stem cell collection for 2 transplants during regimen B, have no evidence of disease progression after the first transplant, and have recovered from effects of previous treatment undergo a second treatment with high dose melphalan with PBSCT and G-CSF support, given 3-12 months following the first transplant. Patients who had enough cells collected for only one transplant go directly to regimen E. Regimen E (maintenance interferon alfa): Beginning 5-12 weeks after transplant and upon hematologic recovery of blood counts and other toxicities, patients with at least a partial response after high dose melphalan and PBSCT receive subcutaneous interferon alfa injections 3 times a week for 5 years or until disease progression, relapse, or toxicity. Patients are followed every month for 6 months, then every 3 months for 5 years, then annually thereafter.

PROJECTED ACCRUAL: A total of 60 patients will be accrued for this study over 4 years.

DISEASE CHARACTERISTICS: Immunologically diagnosed Waldenstrom's macroglobulinemia (WM) Evaluable quantifiable IgM One of the following criteria must be met: 1) Patient demonstrates clinical symptoms such as fatigue, dizziness, visual inacuity, or hemorrhagic manifestations of WM with anemia, hyperviscosity, thrombocytopenia, or coagulopathies 2) Advanced tumor mass present involving ONE of the following: Extensive lymphadenopathy (greater than 2 cm) Hepato or splenomegaly palpable on clinical examination Marked bone marrow infiltration greater than 50% 3) Progressive disease; i.e., increase in IgM concentration by at least 50%, and/or a drop of greater than 2 g/dL in hemoglobin (in the absence of gastrointestinal bleeding), and/or a greater than 50,000/mm3 decrease in platelets

PATIENT CHARACTERISTICS: Age: Under 70 Performance status: SWOG 0-2 Life expectancy: Not specified Hematopoietic: See Disease Characteristics Hepatic: Not specified Renal: Not specified Cardiovascular: At least 6 months since myocardial infarction No congestive heart failure No arrhythmia refractory to therapy Ejection fraction within normal range by MUGA or ECHO Pulmonary: FEV1 at least 50% of predicted DLCO at least 50% of predicted Other: Not pregnant or nursing Effective contraception required of fertile patients No significant comorbid condition No uncontrolled life-threatening infection No uncontrolled diabetes No other malignancy within past 5 years except adequately treated basal or squamous cell skin cancer, carcinoma in situ of the cervix or adequately treated stage I or II cancer currently in remission HIV negative Hepatitis B surface antigen negative

PRIOR CONCURRENT THERAPY: Biologic therapy: Not specified Chemotherapy: At least 4 weeks since chemotherapy and recovered Endocrine therapy: Not specified Radiotherapy: At least 4 weeks since radiotherapy and recovered Surgery: Not specified