This publication discusses areas of concern in the Department of Education's management and oversight of postsecondary student financial aid programs, especially the Federal Family Education Loan Program (FFELP), the Federal Direct Student Loan Program (FDSLP), and the Federal Pell Grant Programs. The General Accounting Office determined that, in 1992, the federal government paid out over $2.6 billion on defaulted student loans. To address underlying problems with federally guaranteed student loans, the Congress and the Department of Education required schools to develop plans to reduce defaults, implemented stronger enforcement tools, simplified borrower deferments, added repayment options, required lenders and guaranty agencies to share more of the risks and financial costs, provided for the 5-year phase-in of the FDSLP, reorganized the Office of Postsecondary Education, and began development of the National Student Loan Data System. However, assessment of the current situation suggests that these measures may not be adequate. Many of the Department's weak management practices caused by a complicated process, flawed structure, and mismanagement continue. The Department has not developed a strategic business or transition plan for phase-in of FDSLP, although implementation has begun. In addition, a significant growth in student loan demand from 1993 to 1994 may hamper implementation of the FDSLP. (Contains 12 references.) (JB)