CptBaller - he put money ahead of the friendship when he chose not to pay you back, so in that sense I see vibby's comments making sense. However, more of what you said indicates he may not see himself as solely responsible, seeing as how 'a deal went bad' could happen to anyone anytime. Have you talked to him about it and he is in agreement that he even owes it to you? [Edited - I reread your post and see he intends to pay a third by end of summer, therefore he accepts owing you the money. If you intend to hang out and still pursue the friendship, then you may best be served with the carrot trick L2R described. Get him to save up for certain occassions and collect some of your funds that way whilst still having fun together at times. Just don't try and collect everytime you see him or he'll feel the friendship is dead and start avoiding you.]
LuGoJ - clear your conscience and get it done, quit pussyfooting around between the two of you. Obviously, you both agree the money goes to him, and you have it, so get it over with. Just go to his place, or meet him at the train, or whatever - just be somewhere where he will be and hand it to him. He can deal with what to do with it from then on and you're out of it. It's not like he's a bank and you have to wait for open hours, nor are you an atm he can hit up at any hour of the day. Put the money in an envelope, walk up to him, and hand it over - done.