The financing of guarantee agencies under the U.S. Department of Education's Guaranteed Student Loan Program was reviewed to determine whether, in the aggregate, the agencies are accumulating, retaining, and using reserve funds in accordance with legislative requirements and federal regulations. It was found that reserves exceed the risks guarantee agencies are asked to assume, at the expense of the federal government and student borrowers. Recommendations are offered to the Congress and the Secretary of Education concerning: (1) the establishment of limits on the guarantee agencies' buildup of cash reserves, (2) a reduction in agencies' sources of revenues to stay within these limits, and (3) the prevention of using nonfederal funds generated by the program for other than program purposes. Appendices include: a list of guarantee agencies, descriptions of the sources and uses of guarantee agency funds, cumulative sources and uses of guarantee agency funds, cumulative sources and uses of funds for each guarantee agency as of September 30, 1985, consolidated schedule of sources and uses of funds for all guarantee agencies for federal fiscal year 1985, comparison of federal advances outstanding with reserves for each guarantee agency as of April 1986, and advance comments from the Department of Education. (SW)