This report on the Guaranteed Student Loan (GSL) Program in the California community colleges discusses the repayment of student loans and recommends strategies for reducing default rates. Introductory material highlights the following trends: (1) financial aid programs for low-income students have failed to keep pace with demand; (2) by 1983, loans represented 41% of total financial aid dollars; and (3) default rates on GSL loans in California increased from 12.4% in 1983 to 33.1% in 1988. Chapter 1 examines the reasons students borrow money to pay direct college costs; the structural factors that influence who borrows and the amount borrowed; and the role of borrowing in financing students' education. Brief discussions are also presented of the roles of lenders and financial aid administrators in the borrowing process. Chapter 2 reveals that the majority of those who default on loans are students from very low income homes, who have no alternative to borrowing to finance their education, who fail to achieve academic success, and who find themselves in worse economic circumstances after attending college and accumulating a sizeable debt to pay. Chapter 3 looks at the institutional, state and federal actions taken in recent years to curb default rates, and countervailing actions that undermine the effectiveness of such efforts. Chapter 4 shows that while community colleges have reduced the number and volume of loans, the default rate continues to increase. Finally, recommendations for reducing default rates are presented, focusing on loan administration, counseling, access, and federal and state funding. (AJL)