A study was conducted to determine: (1) whether federal savings could be expected by replacing Stafford student loans with direct loans under a direct loan program proposed by the National Association of State universities and Land Grant Colleges; and (2) what consequent administrative responsibilities would accrue to educational institution and the Department of Education under the proposed program. The analysis was done using a comparison of the federal costs of a 1-year cohort of loans under guaranteed and direct loan programs exclusive of transition costs and based on the proposed direct loan model. Results indicated that a direct loan program could save over 1 billion dollars. The Department of Education would acquire additional oversight roles under a direct loan program. In other ways the direct program would reduce some of the Department's administrative burden and improve accountability. Educational institutions would also engage in different activities in a direct program mostly involving loan forecasting and fund transfers. In addition, institutional paper work would be reduced and reporting requirements simplified. Schools would work with one or several servicers rather than hundreds of agencies. Deferment forms would become standardized. The findings are illustrated in 1 table and 26 figures which make up the bulk of the publication. (JB)