The adequacy of the Department of Education's automated information system for the Guaranteed Student Loan Program was assessed. The review conducted by the U.S. General Accounting Office focused on the department's efforts and plans to correct system deficiencies, the reasonableness and propriety of major system costs incurred, and the contractor's performance under the most recent system contract awarded in April 1979. It was found that the system continued to be deficient in four functional areas: the automatic reinsurance of state agency loans regardless of whether the student is qualified under the law and regulations; interest and special allowance payments; the collection of insurance premiums on federal loans; and the accumulation and reporting of the program's financial status in accordance with the needs of the department's financial managers. It is recommended that the needs of users of the Guaranteed Student Loan system should be identified and translated into specifications for meeting these needs. The department should follow a design approach that will assure that these management features are adequately incorporated in the program's automated information system. Additionally, it was found that existing operations were converted to a new contractor with minimal service impact, but added costs were incurred and key contract elements remain to be accepted. (SW)