The Guaranteed Student Loan Program (GSL) is made up of two components: a State or private nonprofit agency loan insurance program and a Federal loan insurance program. Students in post-secondary institutions can obtain long-term loans on which the government generally pays the interest while the student is in school. The government bears all losses for defaulted federally insured loans and a large portion of the losses for defaulted State or privately insured loans. This review by the General Accounting Office examines lending institutions' loan disbursement policies and practices under the GSL program and their effect on the cost to the Government for interest payments made on behalf of qualified student borrowers. An effort also was made to determine whether certain students who had received loans under the program continued to be eligible for such funds throughout the academic periods for which the funds were intended. This report discusses the authorizing legislation, the program operation, and loans disbursed since 1966. It also examines opportunities to reduce federal interest costs on student loans: the major one being to arrange for lending institutions to disburse student loans on an installment basis when the funds are for use in more than one academic period, rather than in a lump sum. (AF)