This report proposes reform recommendations in the Federal Student Loan Program that are intended to reduce government (and taxpayer) costs, allow for the incorporation of the National Service Initiative, and provide more flexible repayment terms for borrowers. The proposal provides for an evaluation period for direct government lending, the adoption of broad student loan program simplification, and the reform of student loan delivery and financing systems providing a budget savings to the government of more than $4.7 billion over 5 years. Other aspects of the proposal include: (1) immediate implementation of the National Service Initiative at the local, state, and regional levels using the existing student loan administrative structure; (2) immediate access to a variety of student loan repayment options to all student borrowers, including income contingent repayment and traditional repayment and community service forgiveness; (3) the creation of a single, national federal student loan program and a federal parent loan program to replace existing, overlapping loan programs; and (4) the simplification of federal education loan programs designed to reduce defaults and the sharing of default costs by private participants. (GLR)