This statement of the Director of Education and Employment Issues of the General Accounting Office's Human Resources Division discusses how the Stafford Student Loan program works, the growth in loans guaranteed and defaulted, and the concerns surrounding the financial problems being experienced by the Higher Education Assistance Foundation (HEAF). The Stafford program consists of Stafford loans, Parent Loans for Undergraduate Students, and Supplemental Loans for Students, which together represent 61% of federal student aid for postsecondary education made available in fiscal year 1990. The program involves five parties: students; schools; lenders; guaranty agencies; and the Department of Education. The amount of new loans guaranteed increased 83% from 1983 to 1989, while defaults increased 352% from $444 million to $2 billion. Default costs (payments to guaranty agencies) have risen from about 10% of total program costs in fiscal year 1980 to 36% in 1989. HEAF is the largest guarantor in the Stafford program and the biggest payer of default claims to lenders. Risks faced by lenders, the Student Loan Marketing Association, and the federal government if HEAF becomes insolvent are noted. A flow chart depicts the life of a Stafford loan. (JDD)