Lenders' billings for interest subsidy payments under the Department of Education's Guaranteed Student Loan Program (GSLP) are discussed. In fiscal year 1986, the Department of Education paid lenders $2.4 billion in interest subsidies on $39 billion of outstanding Guaranteed Student Loans. The General Accounting Office (GAO) reviewed the accounts of large lenders to determine (1) the extent of errors lenders make in their billing statements, (2) the cost of these errors in federal overpayments to lenders, and (3) the adequacy of the Department's procedures and internal controls for payment to lenders. All 16 lenders studied made errors in their September 30, 1985, billings on which the Department based payments of $69.4 million. Many errors appear small when viewed individually but are significant when projected to the lenders' total portfolio of Guaranteed Student Loans. It is found that the Department's oversight of billing is inadequate, and lenders lack sufficient incentives to maintain accurate loan accounts. Recommendations are that Congress amend the Higher Education Act to authorize the Secretary of Education to assess lenders' interest on overpayment of interest subsidies due to erroneous billings from the dates of the overpayments and, also to require lenders to have their independent auditors verify loan accounts and interest billings as part of their periodic audits. Five appendices are: loans outstanding for lenders included in GAO's review; interest and special subsidy allowance billed by lenders included in GAO's review, accounts in which lenders miscalculated loan balances or interest due; comments from the Department of Education; and comments from the Consumer Banking Association. Tables and figures are included. (SM)