Potential negative effects that cuts in the Guaranteed Student Loan (GSL) program might have on the financial stability of colleges and universities are addressed. The recent rapid growth of the GSL program results from the fact that it is included in that part of the credit control system excluded from appropriation limitation. Media reports suggest that the Reagan Administration proposed reducing guaranteed loans by $20 billion to help reduce off-budget borrowing. In comparing the growth of the federal student aid programs from funding years 1970-1981, it was found that the largest increase was in the GSL program. A comparison of federal student aid dollars to total tuition and fees collected shows the convergence of total fees collected and federal student aid funds. Since 1970, there has been an increasing amount of federal dollars going to students, which has helped to pay tuition, particularly at independent colleges and universities. Expansion of the Auxiliary Loan program (formerly the Parent Loan program) probably will guarantee funds for what may be a transition period and allow students to complete their studies at institutions they currently attend. Reductions in the GSL program would increase the need for higher family contributions, and to some extent students will choose lower-cost institutions. Institutions in states with declining enrollments whose students are dependent on large amounts of financial aid are likely to face extreme financial problems and a real threat to survival in the next few years. (SW)