The Summer Training and Education Program (STEP) was developed in 1984 as a strategy for reducing the number of young people who leave school without the skills and motivation necessary for productive employment. The STEP intervention involves collaboration between the public schools and the federal Summer Youth Employment and Training Program (SYETP), which provides more than 650,000 low-income teenagers throughout the country with eight weeks of employment every summer under the auspices of the Job Training Partnership Act. With summer income as an incentive, 14- and 15-year-olds who are doing poorly in school and are eligible for SYETP enroll in STEP for 15 months--two summers of half-time work and half-time basic skills remediation and life skills instruction, and one school year of supportive services. The goal is to reduce the learning losses typically experienced by disadvantaged youth during the summer vacation, improve reading and math skills, increase graduation rates, and reduce the incidence of early parenthood. STEP has been operating at the following sites: (1) Boston, Massachusetts; (2) Fresno, California; (3) San Diego, California; (4) Portland, Oregon; and (5) Seattle, Washington. This, the third annual research report on the 4-year demonstration of STEP, records its progress through fall 1987 and describes its impact on three cohorts of 320 enrollees at each of the five sites (4,800 total), at the various points of their participation they had reached at that time. Numerous tables and figures illustrate the data. Appendices provide the following: (1) program participation analysis; (2) tables referenced in text; (3) control group losses; and (4) technical data. (BJV)