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86 FY 2016 Agency Financial Report—U.S. Department of Education 

Required Supplementary Stewardship Information 

OMB requires each federal agency to report on its stewardship over various resources 

entrusted to it and certain responsibilities assumed by it that cannot be measured and 

conveyed through traditional financial reports. These elements do not meet the criteria for 

assets and liabilities required in the preparation of the Department’s financial statements 

and accompanying footnotes, but are nonetheless important to understanding the agency’s 

financial condition, strategic goals, and related program outcomes. 

Stewardship Expenses 

Stewardship expenses are substantial investments made by the federal government for the 

long-term benefit of the nation. Because costs of stewardship resources are treated as 

expenses in the financial statements in the year the costs are incurred, they are reported as 

Required Supplementary Stewardship Information to highlight their benefit and to 

demonstrate accountability for their use. 

In the United States, the structure of education finance is such that state and local 

governments play a much greater overall role than the federal government. Of the 

estimated more than $1 trillion spent nationally on all levels of education, the majority of 

funding comes from state, local, and private sources. In the area of elementary and 

secondary education, nearly 90 percent of resources come from nonfederal sources. These 

funds serve over 50 million students enrolled in public, private, and charter schools in the 

United States and its territories, according to the National Center for Education Statistics. 

See the National Center for Education Statistics Condition of Education for more 

information. 

With its relatively small role in total education funding, the Department strives to create the 

greatest number of favorable program outcomes with a limited amount of taxpayer-provided 

resources. This is accomplished by targeting areas in which funds will go the furthest in 

doing the most good. Namely, federal funding is used to provide grant, loan, loanforgiveness, work-study, and other assistance to more than 20 million postsecondary 

students. The majority of the Department’s $285 billion in gross outlays during FY 2016 

were attributable to Direct Loan disbursements administered by FSA. Grant-based activity 

under discretionary, formula, and need-based formats primarily accounted for the 

remainder of the outlays. 

Discretionary grants, such as the Federal TRIO Programs and the Teacher Incentive Fund, 

are awarded on a competitive basis. When funds for these grants are exhausted, they 

cease to be funded. The Department reviews discretionary grant applications using: 

 a formal review process for selection,

 both legislative and regulatory requirements, and

 published selection criteria established for individual programs.

Formula grants, such as Title I and Title III of the Elementary and Secondary Education Act, 

are not competitive. The majority go to school districts, as often as annually, on a formula 

basis, and they: 

 provide funds as dictated by a law and

 allocate funds to districts on a per-student basis.
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Need-based grants, including the Federal Pell grant, Federal Work Study, and the Federal 

Supplemental Educational Opportunity Grant, are based on family income and economic 

eligibility. While there are many state, institution (college or school), and privately sourced 

need-based grants, most need-based grants are funded by the federal government where 

the financial aid formula is determined by a combination of factors, including: 

 family income and discretionary assets, 

 expected family contribution, and 

 dependency status of the student and other members of their family.

Further details on financial figures and program-level goals can be viewed in the 

Department’s 2016 Budget Summary. 

Investment in Human Capital 

Human capital investments are defined similarly by OMB, in Circular A-136, and the 

Statement of Federal Financial Accounting Standards No. 8, Supplementary Stewardship 

Reporting. These investments are expenses included in net cost for education and training 

programs intended to increase or maintain national economic productive capacity and 

produce outputs and outcomes that provide evidence of maintaining or increasing national 

productive capacity. 

Departmentwide strategic goals are formed around the agency mission of promoting 

student achievement and preparation for global competitiveness by fostering educational 

excellence and ensuring equal access. The Department drives toward accomplishing this 

mission by establishing priority areas. For 2016, the following six elements of focus were 

enumerated in the Department’s Budget Request: 

 increasing equity and opportunity for all students, 

 strengthening support for teachers and school leaders, 

 expanding high-quality preschool programs, 

 augmenting affordability and quality in postsecondary education, 

 promoting educational innovation and improvement, and 

 improving school safety and climate. 

Supplementing state and local government funding, the Department utilizes its annual 

appropriations and outlay authority to foster human capital improvements across the nation 

by supporting programs along the entire spectrum of “cradle to career” education. Direct 

Loans, guaranteed loans, grants, and technical program assistance are administered and 

monitored by FSA and numerous other program-aimed components of the Department. The 

Institute of Education Sciences is the independent nonpartisan research arm of the 

Department that aims to present scientific evidence on which to ground education practice 

and policy while providing useful information to all stakeholders in the arena of American 

education. Further details of each office and their work can be viewed on the Department’s 

Coordinating Structure website. 

The following table illustrates the Department’s expenses paid for bolstering the nation’s 

human capital, broken out by the nature of the expense, for the last five years. 
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88 FY 2016 Agency Financial Report—U.S. Department of Education 

Summary of Human Capital Expenses 

(Dollars in Millions)

 2016 2015 2014 2013 2012 

Federal Student Aid Expense 

Direct Loan Subsidy $ 

 16,119 $ (892) $ 8,126 $ (39,557) $ (10,720) 

Federal Family Education Loan 

Program Subsidy 

10,234 (3,856) (6,585) (8,753) (14,381) 

Perkins Loans, Pell and Other Grants 30,671 31,400 33,098 33,542 34,310 

Program Operational Costs 308 242 206 222 192

 Subtotal 57,332 26,894 34,845 (14,546) 9,401 

Departmental Programs 

Elementary and Secondary Education 22,155 22,146 22,832 22,221 22,137 

Special Education and Rehabilitative 

Services 15,944 15,751 15,948 15,919 16,139 

American Recovery and Reinvestment 

Act and Education Jobs Fund 

- - - 2,623 7,651 

Other Departmental Programs 6,349 6,494 6,938 6,175 6,211 

Program Operational Costs 625 511 667 703 481

 Subtotal 45,0 73 44,902 46,385 47,641 52,619 

 Grand Total $ 102,405 $ 71,796 $ 81,230 $ 33,095 $ 62,020 

 

Further detail regarding the nature of expenses and the recipient(s) of payments can be 

seen in the Department’s financial statement footnotes (starting on page 50) and at the 

Department’s USA Spending Agency Profile Page. 

Program Outcomes 

Favorable results in the various programs administered by the Department can be 

interpreted in many ways. The “cradle to career” analogy in education culminates with the 

successful completion of academic programs and the receipt of a degree. Accordingly, the 

effectiveness of the Department’s investments in human capital can be gauged by changes 

in the number of students who fully complete the requirements for earning a bachelor’s or 

associate degree. This often final stepping stone in one’s educational career correlates 

strongly with wage and/or salary increases for a person, due to the high-level skills 

expected by employers of graduates entering the labor force. Attaining a degree has proven 

to increase an individual’s job opportunity outlook for life, making them less susceptible to 

general economic downturns and allowing them to afford living expenses more comfortably; 

make debt payments, including student loans; and avoid delinquency and credit problems. 

Increased employability makes Americans more competitive in the global labor market, 

yielding lower unemployment, higher economic well-being, and greater national security. 
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Interesting data regarding U.S. unemployment rates and average incomes published by the 

Department of Labor in September 2016 are illustrated in the graphs below. 

An inverse relationship is evident where persons who completed lower levels of education 

experienced higher rates of unemployment. For example, as of September 2016, men and 

women together had the following unemployment rates: 

 8.5 percent for those who had not completed high school, 

 5.2 percent for those who had completed high school, and 

 2.5 percent for those who had completed a bachelor’s degree or higher. 

Another relationship clearly exists for the effect on income based on whether an individual 

has a high school education or a college education. For example, as of September 2016, 

men and women had the following average incomes: 

 $40,000 annually for men with a high school diploma, 

 $69,000 annually for men with a college degree, 

 $31,000 annually for women with a high school diploma, and

 $52,000 annually for women with a college degree. 
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90 FY 2016 Agency Financial Report—U.S. Department of Education 

For further details on this data, please visit the U.S. Department of Labor’s Bureau of Labor 

Statistics, Table A-4 for employment status or Table 5 for median income. 

Nationally, progress is being made from early education, expanding through the time 

college graduates enter the workforce, as well as later in life when they are repaying 

student loan debt incurred for postsecondary education. Broad improvements to the system 

increase equitable opportunities for every child to have the privilege to learn, develop life 

skills, and succeed over the course of their adult life. These improvements certainly 

accelerate the attainment of national educational goals. 

Successful outcomes like these in early-focus areas lead to elementary school students 

who continue to outperform their predecessor classes. This is shown in the fact that 4th and 

8th grade metrics for aptitude tests in math and reading, presented by the National 

Assessment of Educational Progress, are at their highest ever. 

At the secondary level, the number of students graduating or completely fulfilling general 

education requirements continues to rise each year. Increases are also taking place for all 

levels of postsecondary degrees. Recent data shows that 91 percent of young adults aged 

25–29 have a high school diploma or equivalent, 45 percent have an associate degree, and 

34 percent have a bachelor’s degree or higher. For the same age range, expanded to 

include those up to 34 years old, earnings were higher and unemployment was generally 

lower for each increased level of education. 

With increased completion of high school diplomas, participation in some form of 

postsecondary education has also risen. In the 2013 cohort of students graduating from 

high school, for example, 66 percent enrolled in college the following fall. Participation in 

postsecondary programs is particularly higher for Black and Hispanic students, who have 

shown a combined increase of 1.1 million students since 2008. 

One important method used in the area of analyzing student loan programs, borrower 

activity, and institution participation is the monitoring of default statistics. Each year, 

substantial stewardship expenses incurred by the Department are aimed at lowering the 

number of defaulted loans, defaulted borrowers, and disbursed dollars going into default. 

This is done because every default—when a loan payment is missed for multiple months—

results in loan funds that are not replenished, missed opportunities to invest in other 
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FY 2016 Agency Financial Report—U.S. Department of Education 91

degree-seeking human capital, and additional resources used by the government in 

attempting to collect its money. Each aspect of a default costs American taxpayers, affects 

the federal budget, decreases economic well-being, and harms borrowers’ credit scores.

Although a direct and proven linkage does not exist between the two variables, the 

Department feels strongly about its ability to mitigate the risk of default through various 

efforts. Stewardship expenses for this postsecondary goal include those incurred to 

increase borrower awareness of repayment options, encouraging third-party loan servicers 

to work more effectively in helping students avoid default by devising viable repayment 

plans, and by working with financial aid offices around the country to help them improve the 

loan counseling provided to students who have yet to graduate or enter repayment. 

Default statistics for the FY 2013 cohort of borrowers entering repayment were released at 

the end of FY 2016. Of the 5.2 million borrowers entering repayment from October 1, 2012, 

to September 30, 2013, 593,000 defaulted on their loan before September 30, 2015. This 

borrower default rate of 11.3 percent across all institution types showed a decline from the 

prior year rate of 11.8 percent for the 2012 cohort. It is important to note that this metric is 

unadjusted for loan program facets, such as consolidations and forbearance. 

Trends in default rates, among other indicating metrics monitored at the Department, 

continue to support proof of favorable outcomes within programs at all levels. The figures 

also effectively convey the synergetic nature of the Department’s mission for improving one 

of the most important building blocks of the nation’s infrastructure. Individual achievements 

fostered by the Department’s investments in human capital and supporting stewardship 

expenses as far back as “the cradle” continue to build a powerful foundation for career 

success and advancement of the nation, in and of itself, and against global competitors.