1) don't loan out your laptop... ever
2) check your manual to see if there is a recovery partition and how to access it
3) request restore discs from the original manufacturer. This may cost a little money, but still much cheaper than purchasing a brand new copy of Windows.
4) If all else fails, try a copy of linux. I know it isnt what you are use to, but if you need a free legal OS then it is the way to go. I would suggest Ubuntu, Fedora, or LinWin as those are the more user-friendly and mainstream of the bunch (thus more support if something goes wrong).