In response to the requirements of the Higher Education Amendments of 1986, this report addresses the impact of the two-year-old Student Loan Consolidation Program. Principle findings of the investigation concern the higher interst costs to the borrower that are brought about by longer payment plans and the fact that the government's subsidy costs will increase because of loan consolidation. Several options are presented for the Congress to consider for changing the program in order to reduce the government's costs. The Department of Education and four of the five lenders providing data for review also provided written comments on a draft of the report; the lenders also provided technical comments. Appendices include a description of the methodology used to eliminate consolidated loan costs as well as default statistics, a list of lenders, and information related to reducing the subsidy costs. (GLR)