MANAGEMENT’S

DISCUSSION

and ANALYSIS

(unaudited)
Management’s Discussion and Analysis (Unaudited)

About the Management’s Discussion 

and Analysis

The U.S. Department of Education (Department) continued to 

enhance the content quality, report layout, and public accessibility 

of the fiscal year (FY) 2023 Agency Financial Report (AFR)

by refining graphics and providing more useful, balanced, and 

easily understood information about the Broad-Based Debt 

Relief, COVID-19 funding relief bills and the Department’s loan 

programs, including additional cost and risk information. 

The Department also chose relevant web content to provide users with more information 

about the Department’s operations and performance. To take advantage of the hyperlinks 

embedded in the report, the Department recommends reading it on the Internet. To 

continue to improve the quality and utility of information provided in the AFR, the 

Department encourages the public and other stakeholders to provide feedback and 

suggestions at AFRComments@ed.gov.

This section highlights information on the Department’s performance, financial 

statements, systems and controls, compliance with laws and regulations, and actions taken 

or planned to address specific challenges.

FY 2023 AGENCY FINANCIAL REPORT 14 U.S. DEPARTMENT OF EDUCATION
FY 2023 AGENCY FINANCIAL REPORT 15 U.S. DEPARTMENT OF EDUCATION

Mission and Organizational Structure

This section provides information about the Department’s mission, an overview of its 

history, and its structure. The active links include the organization chart and principal 

offices and a link to the full list of Department offices with a description of selected offices 

by function.

The Department’s Approach to Performance

This section provides a summary of the Department’s performance goals and results 

for FY 2023. Since the Department has chosen to produce separate financial and 

performance reports, a detailed discussion of performance information for FY 2023 

will be provided in the Department’s FY 2023 Annual Performance Report and FY 2025 

Annual Performance Plan to be released online at the same time as the President’s FY 2025

Budget of the United States Government (President’s Budget) in February 2024. For 

more information, prior year performance reports can be found on the Department’s 

website. The Department also urges readers to seek programmatic data as it is reported 

in the Congressional Budget Justification, as well as on the web pages of individual 

programs. Any questions or comments about the Department’s performance reporting 

should be emailed to PIO@ed.gov. For more details on performance, please refer to the 

Department’s budget and performance web page at www.Performance.gov.

Financial Highlights

This section provides summarized information and analyses about the Department’s 

assets, liabilities, net position, sources and uses of funds, program costs, and related trend 

data. It provides a high-level perspective of the detailed information contained in the 

financial statements and related notes and an analysis of key financial statement changes.

Analysis Of Systems, Controls, and Legal Compliance

The Department’s internal control framework and its assessment of controls, in 

accordance with Office of Management and Budget (OMB) Circular A-123, 

Management’s Responsibility for Enterprise Risk Management and Internal Control, 

provide assurance to Department leadership and external stakeholders that financial data 

produced by the Department’s business and financial processes and systems is complete, 

accurate, and reliable.

Forward-Looking Information

The Forward-Looking Information section describes the challenges that the Department 

aims to address to achieve progress on Direct Loans, Next Generation Federal Student Aid 

(Next Gen FSA), Leveraging Data as a Strategic Asset, and the new G6 modernization.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 16 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

About the Department

Our Mission

The U.S. Department of Education’s mission is to promote 

student achievement and preparation for global competitiveness by 

fostering educational excellence and ensuring equal access.

Who We Are. In 1867, the federal government recognized that furthering education was 

a national priority and created a federal education agency to collect and report statistical 

data. The Department was established as a cabinet-level agency in 1980. Today, the 

Department supports programs in every area and level of education from preschool 

through postdoctoral.

The Department makes funds and information available to individuals pursuing an 

education, colleges and universities, state educational agencies, and school districts by 

engaging in four major categories of activities:

• Establishing policies related to federal education funding, including distributing funds,

collecting on student loans, and using data to monitor the use of funds.

• Supporting data collection and research on America’s schools.

• Identifying major issues in education and focusing national attention on them.

• Enforcing federal laws promoting equal access and prohibiting discrimination in

programs that receive federal funds.

Our Public Benefit. The Department executes the laws passed by Congress to promote 

student academic achievement and preparation for global competitiveness. The 

Department works with students, parents, educational institutions, school districts, and 

states to foster educational excellence and ensure equal access to a high-quality education 

for all students. While recognizing the primary role of states and school districts in 

providing high-quality education, the Department is committed to helping ensure 

students throughout the nation develop skills to succeed in school, pursue postsecondary 

options, and transition to the workforce. The Department’s vision is to improve 

educational outcomes for all students.

Many of the Department’s programs involve awarding grants to state and local 

educational agencies and providing grants and loans to postsecondary students. The 

Department’s largest outlays are for its portfolio of student loans (see the Financial 

Highlights and Notes sections). Grant programs constitute the second-largest driver 

of outlays. The grant programs include student aid to help pay for college through 

Pell Grants, Work-Study, and other campus-based programs; grants awarded based on 

statutory formulas mostly for elementary and secondary education; and competitive 

grant programs to promote innovation. The Department also supports research, collects 

education statistics, and enforces civil rights laws. The Department manages and spends 

financial resources on programs designed to support parents, teachers, principals, school 

leadership, institutions, and states in the pursuit of instilling knowledge and transferring 

skills to students.
FY 2023 AGENCY FINANCIAL REPORT 17 U.S. DEPARTMENT OF EDUCATION

The Department in Fiscal Year 2023

This chart reflects the coordinating structure of the U.S. Department of Education. A text 

version of the FY 2023 coordinating structure of the Department is available.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* The White House Initiatives are: Office of Faith-Based and Neighborhood Partnerships; White House Initiative on Advancing Educational Equity, Excellence, and Economic 

Opportunity for Native Americans and Strengthening Tribal Colleges and Universities; White House Initiative on Advancing Educational Equity, Excellence, and Economic 

Opportunity for Hispanics; White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity for Black Americans; and White House Initiative on 

Advancing Educational Equity, Excellence, and Economic Opportunity through Historically Black Colleges and Universities.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 18 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Department’s Approach to 

Performance

1 GPRA Modernization Act of 2010 amends the Government Performance and Results Act of 1993 (GPRA).

2 The FY 2023 Statement of Net Cost and related notes align with the FY 2022–26 Strategic Plan.

Performance Management Framework

In accordance with the GPRA Modernization Act of 20101, the Department’s framework 

for performance management begins with the Strategic Plan, which serves as the 

foundation for establishing and implementing priorities, highlighting performance goals 

and objectives, and developing performance indicators to gauge progress and outcomes. 

Progress toward the Department’s strategic goals and its two-year Agency Priority Goals 

(APGs) are measured using data-driven review and analysis. Additional information 

on performance management is available in the Annual Performance Plans and Annual 

Performance Reports.

2

The FY 2022–26 Strategic Plan is comprised of five Strategic Goals and three FY 2022 

and FY 2023 APGs. The Strategic Plan aims to address administration priorities, such 

as recovering from the coronavirus disease 2019 (COVID-19) pandemic; ensuring 

high-quality, equitable secondary and postsecondary education; and providing diverse 

learning environments for all students, especially underserved ones. Each supporting 

strategic objective has corresponding performance indicators to assess the Department’s 

progress on achieving the Strategic Goals and objectives. For additional information 

about Performance Management at the Department, visit ED Strategic Plans and Annual 

Reports or email PIO@ed.gov.

FY 2022–26 Strategic Goals and Strategic Objectives

Strategic Goal 1: Promote equity in student access to educational resources, opportunities, and 

inclusive environments.

Strategic Objective 1.1 Prioritize the equitable and adequate distribution of resources to communities of 

concentrated poverty, in an effort to provide underserved students with highquality educational opportunities.

Strategic Objective 1.2 Ensure all students have access to well-rounded, rigorous, engaging, and diverse 

learning opportunities and environments to support their success in school.

Strategic Objective 1.3 Support states, school districts, and institutions of higher education to promote 

and protect students’ nondiscriminatory and equal access to education, as 

provided by Federal civil rights laws.

Strategic Objective 1.4 Promote greater access and supports for youth and adults to engage in learning, 

succeed in postsecondary education, and increase their employability in highdemand occupations.

Strategic Goal 1 focuses on outcomes related to improving and promoting educational 

equities for all students through adequate resources, opportunities, and supports. In 

FY 2023, $54.1 billion was appropriated to the Department in support of Strategic 

Goal 1. 

To thrive academically and be globally competitive, students require access to a broad and 

challenging education that provides equal opportunities to build deep knowledge and 

useful life skills across many disciplines. However, access to a comprehensive and rigorous 
FY 2023 AGENCY FINANCIAL REPORT 19 U.S. DEPARTMENT OF EDUCATION

education is not equitable across all students and communities. Research shows that 

when students have access to rich learning experiences across the spectrum of education, 

they are more likely to be engaged in school, get better grades, attend school more, and 

graduate on time.

In support of Strategic Goal 1, the Department continued to work with state and local 

leaders to expand access to high-quality early learning, rigorous science, technology, 

engineering, and mathematics (STEM) education and arts programming; protect 

students’ civil rights in schools; support students’ financial literacy; and emphasize the 

importance of focusing teaching and learning on the instructional core. In FY 2023, 

the Department hosted “YOU Belong in STEM” National Coordinating Conference 

in Washington, D.C. as a key initiative. The Raise the Bar: STEM Excellence for All 

Students initiative is designed to strengthen STEM education nationwide. This new 

initiative helps implement and scale equitable, high-quality STEM education for all 

students from PreK to higher education—regardless of background—to ensure their 21st 

century career readiness and global competitiveness.

The devastating and adverse impacts of the COVID-19 pandemic exacerbated previously 

documented gaps in educational opportunity. Supporting urgent and wise investing has 

been a major focus of the Office of Elementary and Secondary Education (OESE) State 

and Grantee Relations team’s work on the COVID-relief programs. Additionally, ensuring 

compliance with major fiscal equity provisions further supports student recovery from 

the impacts of the pandemic. In FY 2023, OESE monitored states’ compliance with 

the Maintenance of Effort and Maintenance of Equity provisions of the COVID-relief 

acts. The Department is committed to bring student learning beyond pre-pandemic 

levels and to help close underlying opportunity and achievement gaps by ensuring states 

and districts deploy federal pandemic relief funds in evidence-based ways, promoting 

promising practices, and providing technical assistance and opportunities for new or 

continued grant funding.

Strategic Goal 2: Support a diverse and talented educator workforce and professional growth to 

strengthen student learning.

Strategic Objective 2.1 Strengthen and diversify the educator pipeline and workforce.

Strategic Objective 2.2 Identify and promote evidence-based practices or strategies that support diverse 

districts (including rural districts) with high rates of poverty in recruiting, selecting, 

preparing, and retaining well-qualified (including in-field fully certified) and 

effective teachers, principals, paraprofessionals, and specialized instructional 

support personnel.

Strategic Objective 2.3 Support the professional growth, retention, and advancement of talented, 

experienced educators and other school personnel and their capacity to meet the 

social, emotional, mental health, and academic needs of underserved students.

Strategic Goal 2 focuses on outcomes related to supporting and increasing diversity and 

talent in the educator workforce and professional growth. Every student should have access to 

outstanding, well-prepared, well-supported educators who reflect the diversity of the students 

they serve. In FY 2023, $20.4 billion was appropriated to the Department in support of 

Strategic Goal 2. 

Due to the pandemic, from February to May 2020, the economy lost an estimated 

730,000 local public education jobs. As of March 2023, public education recovered 

600,000 of those jobs (82 percent). However, there are still 130,000 fewer people working 

in local public education than before the pandemic, and schools were already experiencing 

shortages before the pandemic began, with disproportionate impacts on students of 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 20 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

color, students with disabilities, and English learners. The Department is committed to 

working with state and local leaders to elevate the teaching profession by investing in 

and scaling up high-quality and affordable pathways to teaching. The Department also is 

supporting efforts to better prepare, develop, and retain talented and diverse educators in 

America’s schools. 

In support of Strategic Goal 2, the Department launched a partnership with Department of 

Labor to expand the number of registered apprenticeship programs for teachers. The registered 

apprenticeship programs allow teachers to gain robust experience in the classroom and make 

becoming a teacher more affordable. States with Teacher Registered Apprenticeship Programs 

have increased from 2 to 25 since the launch, and enrollees in these programs total more 

than 1,000.

In FY 2023, the Department announced first-ever awards, totaling over $15 million, for the 

Augustus F. Hawkins Centers of Excellence Program (Hawkins Program) grants to increase 

high-quality teacher preparation programs for teachers of color, strengthen the diversity of our 

teacher pipeline, and address teacher shortages. The Hawkins Program, named for Augustus F. 

Hawkins, the first Black politician elected to the U.S. House of Representatives from west of 

the Mississippi River, supports comprehensive, high-quality teacher preparation programs at 

Historically Black Colleges and Universities, Tribally Controlled Colleges and Universities, and 

Minority Serving Institutions.

Strategic Goal 3: Meet students’ social, emotional, and academic needs.

Strategic Objective 3.1 Support the development and implementation of multitiered systems of supports 

to increase students’ engagement; social, emotional, and mental health; wellbeing; and academic success.

Strategic Objective 3.2 Foster supportive, inclusive, and identity-safe learning environments and ensure 

the individual needs of underserved students are met through appropriately 

designed instruction, evidence-based practices, and related supports 

and services.

Strategic Objective 3.3 Strengthen learning environments, support professional development, 

and improve educator credentialing for emergent bilingual students and 

multilingual learners.

Strategic Goal 3 focuses on meeting students’ social, emotional, and academic needs. 

Learning and development across a student’s life span are influenced by several 

interrelated factors, including the individual’s social, emotional, academic, and career 

development. In FY 2023, $26.0 billion was appropriated to the Department in support 

of Strategic Goal 3. 

When students feel connected to school, their mental health and academic performance 

improve; however, the consequences of the pandemic—social isolation, illness, and family 

hardship among them—have led to decreased feelings of connectedness for students. For 

example, approximately 1 in 3 high school students have experienced poor mental health 

amid the pandemic, and rates of poor mental health have been higher for historically 

marginalized groups of students. For students to thrive in school, they need a strong 

foundation of overall wellness. The Department is committed to working with parents, 

families, educators, and others to meet students’ mental health needs.

In support of Strategic Goal 3, the Department announced awards of more than 

$188 million across 170 grantees in over 30 states to increase access to school-based 

mental health services and to strengthen the pipeline of mental health professionals in 

high-needs districts. With funding provided by the Bipartisan Safer Communities Act

(BSCA), these investments help advance the President’s Mental Health Strategy, which 
FY 2023 AGENCY FINANCIAL REPORT 21 U.S. DEPARTMENT OF EDUCATION

directly implements his Unity Agenda priority to tackle the mental health crisis in our 

school communities. These grants enable communities to hire approximately 5,400 

school-based mental health professionals and train an estimated 5,500 more to build a 

diverse pipeline of mental health providers in schools.

To support multilingualism, in FY 2023, the Office of English Language Acquisition 

announced awards of nearly $120 million over five years under the National Professional 

Development Program (NPD) to support educators of English learner students. The 

NPD program provides grants to eligible Institutions of Higher Education and public or 

private entities with relevant experience and capacity, in consortia with states or districts, 

to implement professional development activities that will improve instruction for 

English Learners.

Strategic Goal 4: Increase postsecondary value by focusing on equity-conscious strategies to 

address access to high-quality institutions, affordability, completion, post-enrollment success, and 

support for inclusive institutions.

Strategic Objective 4.1 Support educational institutions and state systems in efforts to raise academic 

quality and college completion for all students, especially for underserved 

students, such as first-generation students, students from low-income 

backgrounds, students of color, and students with disabilities.

Strategic Objective 4.2 Improve the administration of student aid programs to help eligible students 

receive aid; support borrowers in successfully repaying their loans, claiming 

loan forgiveness benefits, and mitigating student loan default; and hold 

contractors accountable.

Strategic Objective 4.3 Increase equitable access to secondary and postsecondary programs that 

have clear on-ramps to both high-quality jobs and additional high-quality 

postsecondary educational opportunities.

Strategic Objective 4.4 Improve the alignment across secondary, postsecondary, and career and 

technical education programs, including through transparent and effective 

transition processes, inclusive pathways, and clear credentialing requirements.

Strategic Goal 4 focuses on increasing the value of postsecondary education by addressing 

access, affordability, and degree and credential completion. This includes aligning our 

education and workforce systems to create college and career pathways that lead to 

industry-recognized credentials and opportunities to secure in-demand jobs. In FY 2023, 

$104.6 billion was appropriated to support Goal 4.

In support of Goal 4, the Department provided over $30 million to colleges and 

universities from five competitive grant programs of the Fund for the Improvement of 

Postsecondary Education (FIPSE), which aims to improve higher education opportunities 

and outcomes for students from underrepresented communities. The five grant programs 

that target critical needs in our higher education system include: Postsecondary 

Student Success Program, Basic Needs for Postsecondary Students Program, Open 

Textbooks Program, Centers of Excellence for Veteran Student Success Program, and the 

Transitioning Gang-Involved Youth to Higher Education Program. 

The Department has made a concerted effort to fix persistent problems in the student loan 

forgiveness and discharge process through regulatory changes and making investments in 

system and customer service upgrades. As of the end of FY 2023, 730,000 student loan 

borrowers were approved for Public Service Loan Forgiveness, compared to only 7,000 

applications that had been approved in total prior to 2021. As of July 2023, more than 

3.4 million borrowers qualified for automatic discharges, Public Service Loan Forgiveness 

benefits, total and permanent disability discharges, and closed school court settlements.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 22 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Department is committed to supporting efforts to dramatically increase the number 

of Americans who possess postsecondary industry-recognized credentials. Education 

programs that incorporate the opportunity to earn an industry-sought credential can give 

students a successful onramp to the workforce when they graduate from high school. 

The Department aims to expand access to work-based learning programs and initiatives 

by helping states and districts identify workforce credentials that have value in the 

labor market, expand opportunities for students to earn these credentials, and eliminate 

barriers to credential attainment. In FY 2023, $1.46 billion was appropriated for Career, 

Technical, and Adult Education.

Strategic Goal 5: Enhance the Department’s internal capacity to optimize the delivery of its mission.

Strategic Objective 5.1 Manage information technology as a strategic resource and driver to 

promote the advancement of the missions executed by the Department’s 

21st-century workforce.

Strategic Objective 5.2 Strengthen agency-wide data governance and build capacity to improve 

data access, data management, and enterprise data analytics in support of 

agency goals. 

Strategic Objective 5.3 Recruit, retain, and develop the workforce needed to meet the Department’s 

mission now and into the future.

Strategic Objective 5.4 Deliver mission outcomes and value for taxpayers through efficient 

acquisition management and proactive industry partnerships while promoting 

small businesses.

Strategic Goal 5 is focused on continuously improving agency operations as the 

Department manages, engages, and empowers the workforce; purchases products and 

services; enhances and secures information technology resources; and leverages data to 

support evidence-based decision-making. In FY 2023, $72 million was appropriated to 

support Goal 5. 

Information technology security was identified as a top management challenge in 2023, 

and the Department has made great strides in strengthening cybersecurity, reliability, 

and privacy protections. In 2023, the Department received an overall Federal Information 

Security Modernization Act of 2014 (FISMA) assessment of “Effective,” or a Level 4 

Cybersecurity Maturity Level. This score was the highest achieved by the Department 

since the scoring metrics were established in 2014. 

The Department was the first cabinet-level Department to receive funding from the 

Technology Modernization Fund (TMF) and successfully adopted a secure access service 

edge (SASE) solution in support of advancing its Zero Trust Architecture (ZTA) capabilities 

in support of federal requirements as outlined in OMB Memorandum M-22-09.

In April 2023, the Office of Chief Data Officer staff received the Federal 2023 Chief 

Data Officers Council Award for Distinguished Achievement for improving data skills 

and culture at the Department and pioneering work in the federal space through the 

advancements of the Data Strategy Goal 2: Building Human Capacity to Leverage Data.

Strategic Goal 5 also prioritizes reducing potential procurement barriers and increasing 

procurement opportunities for small, underserved, and disadvantaged businesses. The 

Department established Creating and Leveraging Acquisition Small Business Strategies to 

elevate the Department’s small business achievement, which resulted in identifying 124 

small business set asides totaling $131 million. The Department also received an “A” on 

the U.S. Small Business Administration’s Federal Scorecard released in July 2023.
FY 2023 AGENCY FINANCIAL REPORT 23 U.S. DEPARTMENT OF EDUCATION

The Office of Business Support Services developed a robotic process automation tool or 

“bot” to automatically close out more than 50 percent of expired but open contracts in 

the Contracts and Purchasing Support System (CPSS). To date, the bot has closed 57 

percent of expired but open contracts, providing approximately $1.15 million in savings 

to the Department.

The Department’s Agency Priority Goals

The Department identified three Agency Priority Goals (APGs) for FY 2022 and FY 2023 

to address the impact of the COVID-19 pandemic, effectively manage federal student 

loans, and reduce disparities in attainment of high-quality degrees and credentials. These 

current APGs concluded in September 2023, and the status reports are available online. 

The Department will focus on three new APGs in FY 2024 and FY 2025.

APG 1 Address the impact of the COVID-19 pandemic on students, educators, and faculty. The Department will be a 

leader and partner in addressing the impact of the COVID-19 pandemic in educational areas. By September 30, 2023, 

the Department will respond to the impact of the COVID-19 pandemic and the need to continuously provide for highquality educational environments and capabilities by supporting state educational agencies, local educational agencies, 

and institutions of higher education to:

• Continue to support schools in maintaining safe, fully in-person instructions for students.

• Utilize COVID-19 relief funds on appropriate, effective, and evidence-based activities to reengage students, address

lost instructional time, and improve educational opportunities by offering 300+ Department-led technical assistance

engagements.

Related Strategic 

Objectives

Strategic Objective 1.1: Prioritize the equitable and adequate distribution of resources to communities of concentrated 

poverty in an effort to provide underserved students with high-quality educational opportunities.

Strategic Objective 1.2: Ensure all students have access to well-rounded, rigorous, engaging, and diverse learning 

opportunities and environments to support their success in school.

Strategic Objective 3.1: Support the development and implementation of multitiered systems of supports to increase 

students’ engagement; social, emotional, and mental health; well-being; and academic success.

Strategic Objective 3.2: Foster supportive, inclusive, and identity-safe learning environments and ensure the individual 

needs of underserved students are met through appropriately designed instruction, evidence-based practices, and 

related supports and services.

APG 2 Effectively manage federal student loans. The Department will provide effective customer service for borrowers to 

simplify the student loan repayment process. By September 30, 2023, Federal Student Aid will improve loan servicer 

quality and accuracy to levels at or above 95 percent, as defined in student loan servicer agreements.

Related Strategic 

Objective

Strategic Objective 4.2: Improve the administration of student aid programs to help eligible students receive aid; 

support borrowers in successfully repaying their loans, claiming loan forgiveness benefits, and mitigating student loan 

default; and hold contractors accountable.

APG 3 Reduce disparities in attainment of high-quality degrees and credentials. The Department will support institutions 

and states to assist low-income students and students of color to enroll in and complete high-quality postsecondary 

education programs, including at community colleges and through career and technical training. By September 30, 2023, 

the Department will increase the number and diversity of higher education grant applicants from community colleges, 

Historically Black Colleges and Universities, Tribally Controlled Colleges or Universities, Minority-Serving Institutions, 

and public four-year colleges by 5 percent to support and assist low-income students and students of color in attaining 

improved educational outcomes.

Related Strategic 

Objectives

Strategic Objective 4.1: Support educational institutions and state systems in efforts to raise academic quality and 

college completion for all students, especially for underserved students, such as first-generation students, students 

from low-income backgrounds, students of color, and students with disabilities.

Strategic Objective 4.2: Improve the administration of student aid programs to help eligible students receive aid; 

support borrowers in successfully repaying their loans, claiming loan forgiveness benefits, and mitigating student loan 

default; and hold contractors accountable.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 24 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Financial Highlights

Introduction

This section provides summarized information and analyses about the Department’s 

assets, liabilities, net position, sources and uses of funds, program costs, and related trend 

data. It also provides a high-level perspective of the detailed information contained in 

the financial statements and related notes. A summary of significant changes in financial 

statement line-item balances is provided in Table 1.

The Department’s financial statements and notes are prepared in accordance with 

accounting principles generally accepted in the United States for federal agencies issued by 

the Federal Accounting Standards Advisory Board and the format and content specified 

by Office of Management and Budget (OMB) Circular No. A-136, Financial Reporting 

Requirements. An independent accounting firm with oversight provided by the OIG was 

engaged to audit the consolidated balance sheet, related notes, and underlying business 

processes, systems and controls. The Consolidated Balance Sheet and related notes for FY 

2023 are presented in the Financial Section. The Consolidated Statement of Net Cost, 

Consolidated Statement of Changes in Net Position, the Combined Statement of Budgetary 

Resources, and related notes for FY 2023 are presented in the Other Information section. 

Table 1. Key Financial Statement Changes

(Dollars in Billions)

Financial Statement Lines 

with Significant Changes

Amount Total Changes Changes Due to COVID-19

 FY 2023 FY 2022 Amount Percentage Amount Percentage

Balance Sheets

Fund Balance with Treasury $ 244.0 $ 317.0 $ (73.0) -23.0% $ (66.1) -20.9%

Loan Receivables, Net – Direct Loan Program 1,030.9 816.5 214.4 26.3% 294.4 36.1%

Debt Associated with Loans – Direct

Loan Program 1,127.0 837.4 289.6 34.6% 325.3 38.8%

Debt Associated with Loans – FFEL Program 60.9 67.0 (6.1) -9.1% 13.9 20.7%

Subsidy Due to Treasury 1.6 27.0 (25.4) -94.1% - 0.0%

Statements of Net Cost (Net Program Costs)

Promote Equity for Prekindergarten through Grade 

12 Students with Access to Educational Resources, 

Opportunities, and Inclusive Environments

 100.0 90.8 9.2 10.1% (14.0) -15.4%

Increase Postsecondary Value by Focusing on 

Equity Strategies to Address Access to Affordability, 

Completion, and Post-Enrollment Success

 (58.6) 472.6 (531.2) -112.4% (733.3) -155.2%

Statements of Budgetary Resources

Unobligated Balance from Prior Year Budget Authority 

(Net) 52.3 65.3 (13.0) -19.9% (18.0) -27.6%

Appropriations (Discretionary and Mandatory) 254.7 597.2 (342.5) -57.4% (424.1) -71.0%

Borrowing Authority (Discretionary and Mandatory) 472.7 178.7 294.0 164.5% 339.3 189.9%

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) 70.5 60.7 9.8 16.1% - 0.0%

New Obligations and Upward Adjustments (Total) 776.9 813.7 (36.8) -4.5% (442.0) -54.3%

Unobligated Balance, End of Year (Total) 73.3 88.3 (15.0) -17.0% (0.1) -0.1%

Outlays, Net 306.5 668.5 (362.0) -54.2% (438.6) -65.6%

Distributed Offsetting Receipts (347.6) (29.1) (318.5) 1,094.5% (333.1) 1,144.7%
FY 2023 AGENCY FINANCIAL REPORT 25 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Consolidated Balance Sheet and related notes for FY 2023 are on pages 80–99, the

Independent Auditors’ Report begins on page 100, and the Other Information section 

begins on page 115.

The financial statements are prepared to report the financial position and results of 

operations of the reporting entity, consistent with the requirements of 31 U.S.C. § 

3515(b). The statements are prepared from the Department’s books and records in 

accordance with generally accepted accounting principles for federal entities and the 

formats prescribed by OMB. Reports used to monitor and control budgetary resources are 

prepared from the same books and records. The financial statements should be read with 

the understanding that they are for a component of the U.S. government.

Financial Statement Impacts of Debt Relief Actions 

During FY 2022 and FY 2023, the Department announced significant actions to 

provide relief to federal student loan borrowers, including extensions to the student loan 

repayment pause through August 31, 2023, and several additional debt relief actions. 

Targeted debt relief actions announced or taken during FY 2023 include:

• Fixing historical inaccuracies in the Income Driven Repayment (IDR) count system

for borrowers who earned forgiveness. These fixes, which were first announced by the

Biden-Harris Administration in April 2022, are part of the Department’s commitment

to address historical failures in the federal

student loan program. Borrowers are eligible

for forgiveness if they have accumulated

the equivalent of either 20 or 25 years of 

qualifying months.

• Creating the most affordable payment plan

ever—the Saving on a Valuable Education

(SAVE) plan. The SAVE plan cuts payments on

undergraduate loans in half compared to other

IDR plans, ensures that borrowers never see

their balance grow as long as they keep up with

their required payments, and protects more of

a borrower’s income for basic needs. A single

borrower who makes less than $15 an hour will

not have to make any payments. Borrowers

earning above that amount will save more than

$1,000 a year on their payments compared to

other IDR plans.

• Making improvements to the Public Service 

Loan Forgiveness (PSLF) program, including

helping borrowers earn progress toward 

PSLF, simplifying criteria to help borrowers 

certify qualifying employment, and providing 

opportunities for borrowers to get help correcting PSLF account problems. Borrowers 

with Direct Loans who work in public service are also likely to benefit from the onetime account adjustment announced by the Department last year, allowing borrowers 

to get credit for past periods of repayment on loans that would not otherwise qualify 

for PSLF.

Of the debt relief actions announced 

by the Biden-Harris Administration, as 

of September 29, 2023, 3.4 million 

borrowers have already had their debt relief 

approved, including:

• 1.3 million borrowers who were taken

advantage of by their school, saw their

school precipitously close, or are covered by

related court settlements.

•	More than 800,000 borrowers who

qualified for relief because of fixes to IDR 

plans implemented by the Biden-Harris 

Administration.

• More than 650,000 borrowers through

improvements to the PSLF program.

• Almost 500,000 borrowers who have a total

and permanent disability.
FY 2023 AGENCY FINANCIAL REPORT 26 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

• Approving borrower defense and school closure discharges for borrowers whose 

institutions took advantage of them, including borrowers who attended Coloradobased locations of CollegeAmerica, Ashford University, and the University of Phoenix.

• Instituting a 12-month “on-ramp” to repayment, running from October 1, 2023, 

to September 30, 2024, so that financially vulnerable borrowers who miss monthly 

payments during this period are not considered delinquent, reported to credit bureaus, 

placed in default, or referred to debt collection agencies.

• Providing additional pathways for borrowers who have a total and permanent 

disability to receive a discharge. This includes allowing borrowers who receive 

additional types of disability review codes from the Social Security Administration 

(SSA) to qualify for a discharge. This also includes borrowers who later aged into 

retirement benefits and are no longer classified by one of these codes. Borrowers who 

have an established onset date of their disability determined by SSA to be at least 5 

years in the past can also establish eligibility.

Although forgiveness of loan principal and interest associated with some of these actions 

will not occur until future fiscal years, these actions have already resulted in significant 

increases in cancellations of loan principal and interest for loans held by the Department. 

As shown in Figure 1, cancellations of loan principal and interest increased 222.3 percent 

during FY 2023, primarily for the Direct Loan Program. A large portion of cancellations 

of loan principal and interest during FY 2023 were associated with the PSLF and 

IDR programs, as they made up 39.7 percent and 41.6 percent of total cancellations, 

respectively. Other notable types of cancellation activity include borrower defense 

discharges, cancellations of loan principal and interest for loans in default status, and 

discharges for total and permanent disability.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1. Loan Cancellations

(Dollars in Billions)

FY 2023 Loan Cancellations

(Dollars in Millions)

FY 2023

Direct Loan 

Program FFEL Program

Loan 

Cancellation Type Principal Interest Principal Interest Fees Other Total

Discharges for 

closed schools $ 36 $ 2 $ 6 $ 1 $ - $ - $ 45 

Discharges due 

to death of the 

borrower

 619 47 41 5 - - 712 

Discharges 

for total and 

permanent 

disability

 2,799 228 458 99 - 1 3,585 

Public service loan 

forgiveness 35,789 1,563 4 - - 1 37,357 

Borrower defense 

discharges 7,210 1 2,362 66 - - 9,639 

Discharges for 

income driven 

repayment plans

 34,601 3,066 1,478 49 - - 39,194 

Cancellation of 

defaulted loans 

held by guaranty 

agencies or the 

defaulted loan 

servicer

 2,525 76 618 73 41 48 3,381 

Other 210 7 3 - - 10 230 

Total Loan 

Cancellations $ 83,789 $ 4,990 $ 4,970 $ 293 $ 41 $ 60 $ 94,143 
FY 2023 AGENCY FINANCIAL REPORT 27 U.S. DEPARTMENT OF EDUCATION

Financial Statement Impacts of COVID-19 Activities 

Many of the significant changes to the Department’s financial statements resulted 

from the impacts due to coronavirus disease 2019 (COVID-19) activities. Congress 

passed multiple COVID-19 relief bills in FY 2020 and FY 2021, including the 

following that provided a total of $282.5 billion of direct appropriation funding for 

educational purposes:

• Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) $31.0 billion

• Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA)

$82.0 billion

• American Rescue Plan Act of 2021 (ARP) $169.5 billion

These appropriations funded a variety of programs administered primarily through grant 

programs. The largest component of the education funding provided by the COVID-19 

relief appropriations established the Education Stabilization Fund which included (1) the 

Elementary and Secondary School Emergency Relief Fund, (2) the Higher Education 

Emergency Relief Fund, (3) the Governor’s Emergency Education Relief Fund, and (4) 

funds for outlying areas. 

The COVID-19 relief legislation and administrative actions also provided support 

during FY 2023 for student loan borrowers by suspending nearly all federal student 

loan payments through August 31, 2023, interest free. Additionally, support for student 

loan borrowers was provided in previous fiscal years by the following COVID-19 relief 

legislative and administrative actions.

• Authorizing Guaranty Agencies to reimburse themselves from the Federal Student

Loan Reserve Fund for lost revenue that resulted from student loan repayment

deferrals. This reimbursement covers the share of what a guaranty agency might have

reasonably collected during the pandemic, but for the suspension.

• Making temporary changes to the PSLF program through a Limited PSLF Waiver

to allow student borrowers to get credit for payments made while working for a

qualifying employer, regardless of loan type or repayment plan.

• Addressing issues with IDR payment counting by allowing any borrower who made

IDR-qualifying payments to count toward IDR, regardless of repayment plan.

Funding for each of these actions was provided through indefinite appropriations. Cost 

impacts of the COVID-19 loan modifications were recorded as loan modifications and 

are a component of subsidy expense, which reduced the overall loan receivable balances 

for the student loan programs. Detailed explanations of the COVID-19 Direct Loan 

Program loan modifications are provided in the Analysis of Direct Loan Program Subsidy 

Expense section beginning on page 36 and in Note 13 in the Other Information section 

beginning on page 127.

The direct and indirect funding stemming from the combined COVID-19 relief legislative

and administrative actions is summarized in Figure 2. Obligated and unobligated

COVID-19 funds remaining to be disbursed as of September 30, 2023, totaled

$75.3 billion. Most of the undisbursed funds are for the Elementary and Secondary School

Emergency Relief (ESSER) Fund. While states may have made subawards for all of their

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 28 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

ESSER funding, subawardees may still be in the process of completing their obligations and 

requesting reimbursement from the states who will then in turn draw down the remaining 

undisbursed funds.

Figure 2. COVID-19 Funding Flow

(Dollars in Billions)

Elementary and Secondary School Emergency Relief (ESSER) Fund—Funds 

provided for state educational agencies (SEAs) and local educational agencies (LEAs) to 

support continued learning for K-12 students whose educations have been disrupted by 

COVID-19, and grants for the specific needs of homeless children and youth to address 

the challenges of COVID-19.

Higher Education Emergency Relief Fund (HEERF)—Funds provided for institutions 

of higher education (IHEs) to address needs directly related to COVID-19, including 

transitioning courses to distance education and granting aid to students for educational 

costs such as food, housing, course materials, health care, and childcare. 

Governor’s Emergency Education Relief (GEER) Fund—Grants provided to state 

governors to ensure education continues for students of all ages impacted by the 

COVID-19 national emergency. 

Outlying Areas, Bureau of Indian Education (BIE), and Discretionary Grants—

Funds provided for outlying areas and discretionary grants to states with the highest 

COVID-19 burdens. 
FY 2023 AGENCY FINANCIAL REPORT 29 U.S. DEPARTMENT OF EDUCATION

Balance Sheet

The consolidated balance sheet presents, as of a specific point in time (the end of the fiscal 

year), the Department’s total assets, total liabilities, and net position.

The Department’s assets totaled $1,318.0 billion as of September 30, 2023. As shown 

in Figure 3, most assets relate to loans receivables, $1,073.0 billion, which comprised 

81.4 percent of all assets. Direct loans comprise the largest share of these receivables. 

Analysis of the net change in Direct Loan Program receivable balances begins on page 30. 

All other assets totaled $245.0 billion, most of which was Fund Balance with Treasury, 

$244.0 billion, which decreased by $73.0 billion during FY 2023, largely due to a 

decrease in undisbursed COVID-19 funds as of September 30, 2023.

The Department’s liabilities totaled $1,213.7 billion as of September 30, 2023. As 

shown in Figure 4, most of the Department’s liabilities are also associated with loan 

programs, primarily amounts borrowed from the U.S. Department of the Treasury 

(Treasury) to fund student loans. Debt associated with the Direct Loan Program totaled 

$1,127.0 billion as of September 30, 2023. Analysis of debt associated with the Direct 

Loan Program begins on page 33.

 

 

 

 

 

 

 

 

 

 

Figure 3. Assets by Type

 

 

 

 

 

 

 

 

 

 

Figure 4. Liabilities by Type

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 30 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Analysis of Direct Loan Program Receivables, Net

Figure 5 shows the changes in the Direct Loan Program receivable components over the 

past five years. The principal amount grew each year since 2019, except 2023, which saw 

a slight decrease. Although total principal has increased during these years, the rate of 

increase in principal slowed as enrollment stagnated and sometimes declined. Even so, 

new loan disbursements continued to exceed overall loan principal repayments—student 

loan borrowers have many options to stretch out their repayment terms and reduce their 

monthly payments, and student loan repayment deferrals were implemented in response to 

COVID-19. Accrued interest amounts have decreased in recent years due to COVID-19 

relief actions to temporarily set borrower interest rates to zero percent until August 31, 2023. 

In accordance with the Federal Credit Reform 

Act of 1990, the Department’s financial 

statements report the value of direct loans 

(credit program receivables) at the net present 

value of their future cash flows, discounted 

at a fixed rate established based on Treasury 

securities. The difference between the recorded 

principal and interest balance and the net 

present value of the loans is referred to as the 

“allowance for subsidy,” which can be positive 

or negative.

A negative allowance for subsidy balance 

means that the present value of funds expected 

to be recovered is less than the principal 

outstanding. The increase in the negative 

allowance from FY 2019 through FY 2022 is 

due primarily to higher subsidy costs, the main 

causes being high participation in IDR plans 

and the COVID-19 deferrals of student loan 

repayments. In addition to these factors, the 

increase in the negative allowance for subsidy 

during FY 2022 was also due to higher subsidy 

costs due to debt relief actions announced 

during the FY. The decrease in the negative 

allowance for subsidy during FY 2023 was 

largely due to a downward modification to 

reverse the inclusion of student loan debt 

relief from the baseline subsidy cost as a result 

of the Supreme Court’s ruling on Biden v. 

Nebraska on June 30, 2023 (see discussion in 

the Analysis of Direct Loan Program Subsidy 

Expense section on page 36).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 5. Components of Direct Loan Receivables, Net

(Dollars in Billions)

Direct Loan 

Component

(Dollars in 

Billions)

Fiscal Year

2019 2020 2021 2022 2023

Principal $ 1,164.9 $ 1,224.8 $ 1,292.2 $ 1,341.8 $ 1,336.2 

Rate of 

Increase 

in 

Principal

7.5% 5.1% 5.5% 3.8% -0.4%

Accrued 

Interest $ 83.3 $ 92.1 $ 86.5 $ 86.7 $ $83.4 

Allowance 

for 

Subsidy

 $ (124.4) $ (216.4) $ (273.9) $ (611.9) $ (388.7)

Total No. 

of Direct 

Loan 

Recipients 

(in Millions)

35.1 35.9 37.0 37.1 38.1 
FY 2023 AGENCY FINANCIAL REPORT 31 U.S. DEPARTMENT OF EDUCATION

Table 2. Payment Status of Direct Loan Principal and Interest Balance

(Dollars in Billions)

Loan Status FY 2019 FY 2020** FY 2021** FY 2022** FY 2023**

Total No. of Direct Loan Recipients (in Millions) 35.1 35.9 37.0 37.1 38.1

Total Dollar Amount of Direct Loans Outstanding $ 1,248.1 $ 1,316.9 $ 1,378.7 $ 1,428.5 $ 1,419.6

Current Repayment1 $ 594.7 $ 14.2 $ 16.2 $ 11.8 $ 999.4

% Current Repayment 47.6% 1.1% 1.2% 0.8% 70.4%

In School, Grace Period, and Education Deferments $ 294.8 $ 282.8 $ 271.9 $ 259.5 $ 255.4

% In School, Grace Period, and Education Deferments 23.6% 21.5% 19.7% 18.2% 18.0%

Forbearance and Noneducation Deferments $ 133.2 $ 887.5 $ 967.8 $ 1,039.7 $ 57.4

% Forbearance and Noneducation Deferments 10.7% 67.4% 70.2% 72.8% 4.0%

Delinquent (Past Due 31–360 Days) $ 90.8 $ 0.5 $ 0.0 $ 0.0 $ 0.0

% Delinquent (Past Due 31–360 Days) 7.3% 0.0% 0.0% 0.0% 0.0%

Default/Bankruptcy/Other* $ 134.6 $ 131.9 $ 122.8 $ 117.5 $ 107.4

% Default/Bankruptcy/Other* 10.8% 10.0% 8.9% 8.2% 7.6%

1

 Loans in Current Repayment status include loans that are being repaid on-time. However, these on-time loans can include loans for which the amount of interest accruing is higher 

than payments that are being made, which can occur in the case of loans on income-driven repayment plans.

*Adjusted to eliminate differences between NSLDS and FSA Total Reported DL Portfolio (principal and interest).

**Student loan payment pause in effect from March 2020 through August 2023.

Table 2 shows the payment status of the direct loan principal and interest balances outstanding 

over the past five years. The Current Repayment category consists of loans that are being paid 

back on time, including the current portion of loans being repaid pursuant to IDR plans. Loans 

in the Delinquent category are past due anywhere from 31 to 360 days. Default/Bankruptcy/

Other includes loans that are more than 360 days delinquent (default status), loans in a 

nondefaulted bankruptcy status, and loans in disability status. 

While technical default is 271 days delinquent, default is defined as 361 days delinquent for 

reporting purposes.

COVID-19 student loan repayment deferrals were in effect from March 2020 through August 

2023, resulting in significantly lower reported balances for Current Repayment and Delinquent 

in FY 2020–2022. The COVID-19 student loan repayment deferrals placed loans in forbearance 

and subsequently cured delinquencies. As a result of the COVID-19 student loan repayment 

deferrals, the delinquent balances have been zero for FY 2021–2023. 

While the COVID-19 student loan repayment deferrals suspended payments for federally 

owned student loans, some borrowers elected to continue to make student loan payments. In 

addition to improving borrowers’ overall financial health, factors that may have influenced 

borrowers to continue making payments on their student loans during forbearance include 

the following:

• Borrower flexibility to make payments or suspend payments as their financial circumstances

permitted without notification to the loan servicer.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 32 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

• Potential earlier loan payoff.

• Lower total cost of a loan over time to the borrower due to the zero percent interest 

rate. (Before the pause, an average of two-thirds of each dollar paid went to principal. 

During the pause, this quickly increased to above 90 percent, and now an average of 

95 percent of each dollar goes toward principal.)

• Potentially improving the borrower’s credit rating by reducing the student debt 

balance. The relative strength of FSA borrower payment activity has been driven, in 

part, by efforts of borrowers to improve their credit stance to purchase homes during 

the period of forbearance. During the pandemic, the U.S. Department of Housing 

and Urban Development and Federal Housing Authority implemented nontemporary 

policy changes to improve the underwriting stance of federal student loan borrowers.

• Potentially improved overall borrower financial health and reduced financial stress by 

reducing student debt.
FY 2023 AGENCY FINANCIAL REPORT 33 U.S. DEPARTMENT OF EDUCATION

Analysis of Debt Associated with Loans, Direct Loan Program 

The Department borrows funds to disburse new loans and pay credit program outlays and 

related costs. The Department repays Treasury after consideration of cash position and the 

liability for future cash outflows. 

The Department’s total debt associated with the Direct Loan Program was $1,127.0 

billion as of September 30, 2023, which was a $289.6 billion increase from FY 2022. 

Total debt increased largely because of new borrowings from Treasury during FY 2023 to 

fund the disbursement of new loans and downward modifications.

Figure 6 shows the Direct Loan Program 

cumulative borrowing and repayment 

activity that resulted in the debt amount on 

the balance sheet. A diagram depicting the 

Direct Loan Program financing process is 

displayed with related trend data as Figure 7 

on page 34 of this report.

 

 

 

 

 

 

 

 

 

Figure 6. Direct Loan Program Cumulative 

Financing Activity

(Dollars in Billions)

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 34 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Treasury Financing and Subsidy Cost of Direct Loans (Dollars in Billions)*

Fiscal Year 2019 2020 2021 2022 2023

Net Borrowing $ 41.5 $ (32.0) $ (17.9) $ (304.8) $ 289.5 

Borrowing from Treasury 137.6 116.9 120.0 162.8 445.0 

Debt Repayments to Treasury (96.1) (148.9) (137.9) (467.6) (155.5)

Interest Expense to Treasury (33.8) (34.7) (33.0) (30.6) (28.2)

Interest Earned from Treasury 4.1 4.8 4.2 7.6 6.3 

Cumulative Taxpayer Cost / (Savings) 124.4 216.4 273.9 611.9 388.7 

Current Subsidy Expense / (Revenue) 61.5 100.9 93.9 385.4 (116.5)

Direct Loan Program Cash Transactions with Borrowers (Dollars in Billions)*

Fiscal Year 2019 2020** 2021** 2022** 2023**

Loan Disbursements $ 130.7 $ 117.4 $ 104.8 $ 120.4 $ 122.3 

Stafford Subsidized 20.0 19.1 18.3 15.7 15.7 

Stafford Unsubsidized 48.1 46.1 44.1 45.5 44.9 

Parent Loan for Undergraduate Students (PLUS) 22.7 21.7 20.8 22.2 23.9 

Consolidation1 39.8 30.4 21.5 36.9 37.8 

Loan Collections2 91.3 69.9 37.2 45.5 45.9 

Principal 67.0 55.3 33.3 41.3 42.1 

Interest 22.4 12.9 2.3 2.6 2.1 

Fees 1.9 1.7 1.6 1.6 1.7 

* Numbers may not add due to rounding.

** Student loan payment pause in effect from March 2020 through August 2023.

1

 Consolidation amounts stem from a number of loan programs, including most notably the FFEL program, in addition to Direct Loans.

2

 Loan collections include prepayments, including prepayments in full due to consolidation of underlying Direct Loans. 

Figure 7. William D. Ford Federal Direct Loan Program: Follow the Funding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
FY 2023 AGENCY FINANCIAL REPORT 35 U.S. DEPARTMENT OF EDUCATION

Statements of Net Cost

The consolidated statements of net cost report the Department’s components of the 

net cost of operations for a given fiscal year. Net cost of operations consists of the gross 

costs incurred less any exchange (i.e., 

earned) revenue from activities. Gross 

costs are composed of the cost of credit 

and grant programs, and operating costs. 

Exchange revenue is primarily interest 

earned on credit program loans. Figure 8 

shows the Department’s gross costs and 

earned revenue over the past five years. As 

discussed in more detail below, significant 

changes in the Department’s net costs 

for FY 2023 were primarily due to loan 

modifications and re-estimates (subsidy 

expense) and grant expenses related to 

COVID-19 activities. 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 8. Gross Costs & Earned Revenue

(Dollars in Billions)

Gross Costs and Earned Revenue by Type 

As shown in Figure 9, the Department’s gross costs and earned revenue include three primary components:

• Credit program interest expense offset by credit program interest revenue and administrative fees as the result of

subsidy amortization.

• Credit program subsidy expense. (See Analysis of Direct Loan Program Subsidy Expense below)

• Grant expenses. (See Figure 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 9. Primary Components of Gross Costs and Earned Revenue 

(Dollars in Billions)

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 36 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Analysis of Direct Loan Program Subsidy Expense 

The Department’s gross costs can fluctuate significantly each year as a result of changes 

in estimated subsidy expenses—primarily subsidy expenses for direct loans. The 

primary components of subsidy expenses include year-end subsidy re-estimates and 

loan modifications. 

Subsidy expenses are estimates of the present value cost of providing direct loans but 

exclude the administrative costs of issuing and servicing the loans. The Department 

estimates subsidy expenses using a set of econometric and financial models as well as cash 

flow models. 

The Department estimates subsidy expenses annually for new loans disbursed in the current

year and updates the previous cost estimates for outstanding loans disbursed in prior years

based on various updated assumptions (subsidy re-estimates). The Department also updates

subsidy expenses due to changes to terms of existing loans (subsidy modifications). Figure

10 shows these three components of the Direct Loan Program subsidy expense for the past

five years. Factors such as interest rates charged to the borrower, interest rates on Treasury

debt, default rates, fees and other costs, and assumptions concerning borrowers’ selection

of repayment plans impact the estimated cost calculation and determine whether the

individual components and overall subsidy expense are positive or negative.

The Direct Loan Program subsidy expense for new loans disbursed was negative in FY 2019

primarily because lending interest rates charged were greater than the historically low rates at

which the Department borrowed from Treasury. In practical terms, a negative subsidy occurs

when the interest and/or fees charged to the borrower are more than sufficient to cover

the interest on Treasury borrowings and the costs of borrower default. Subsidy expense for

new loans disbursed since FY 2020 has been positive due in large part to rising enrollment

in IDR plans, which contributes to a higher expected cost to the government for issuing

student loans by reducing the amount that many borrowers will repay over the life of their

loans and/or creating a student loan forgiveness benefit for amounts remaining after 20 or

25 years, particularly common among high-debt borrowers.

The Department updates it subsidy cost estimates each year for outstanding loans disbursed

in prior years using a process referred to as a subsidy re-estimate. The total of Direct Loan

subsidy re-estimates during FY 2023 was a net $71.4 billion upward subsidy re-estimate.

The components of the Direct Loan Program subsidy re-estimates are summarized in

Figure 10.

The Department also updates previous cost estimates based on any new legislation or

other government actions that change the terms of existing loans and alter the estimated

subsidy cost. This process is referred to as a modification. During FY 2023, the Department

recorded a total of $204.2 billion net downward modifications. The modifications that were

recorded in FY 2023 are summarized in Figure 10. More detail about these modifications

and components of re-estimated subsidy cost can be found in the notes to the financial 

statements beginning on page 122.

The FY 2023 year-end subsidy re-estimates also resulted in a $25.4 billion decrease in the 

Subsidy Due to Treasury shown in Table 1 on page 24 of this report. This represents the 

amount of accrued downward re-estimates of subsidy expense that will be transferred to 

Treasury in the succeeding fiscal year upon receipt of authority from OMB. More detail 

on Subsidy Due to Treasury can be found in the notes to the Consolidated Balance Sheet 

beginning on page 81.
FY 2023 AGENCY FINANCIAL REPORT 37 U.S. DEPARTMENT OF EDUCATION

Figure 10. Direct Loan Program Subsidy

(Dollars in Billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FY 2019 FY 2020 FY 2021 FY 2022 FY 2023

Subsidy Expense for New Loans 

Disbursed in the Current Year $ (3.0) $ 5.1 $ 1.6 $ 7.3 $ 16.3 

Subsidy Re-Estimates 64.5 56.1 24.0 (21.9) 71.4 

Loan Modifications - 39.7 68.3 400.0 (204.2)

Total Subsidy Expense $ 61.5 $ 100.9 $ 93.9 $ 385.4 $ (116.5)

Subsidy Re-estimate Components FY 2023 FY 2022

Income-Driven Repayment (IDR) 

Model Changes $ 26.5 $ (24.0)

Prior Year’s Cohort Assumption Changes 0.2 7.7 

Interest on the Re-Estimate 16.8 (0.4)

Default (0.6) 3.0 

Repayment Plan Selection 4.2 (3.0)

Discount Rates 0.8 (16.6)

Non-IDR Discharges 29.9 2.9 

Deferment and Forbearance (2.3) 2.6 

Collections 16.4 (1.7)

Interactive Effects (18.2) 7.4 

Other Assumptions (2.3) 0.2 

Total Direct Loan Program Subsidy 

Re-Estimates $ 71.4 $ (21.9)

Modification Costs

Loan Modification Components FY 2023 FY 2022

Student Loan Repayment Deferrals $ 23.3 $ 48.6 

Broad-Based Debt Relief - 337.3

Shift to Business Process Operations - (9.1)

PSLF Waiver 4.1 9.1

IDR Waiver - 14.1

Total and Permanent Disability Discharges 4.4 -

Interest Capitalization 3.5 - 

Closed School Discharges 3.7 - 

Borrower Defense to Repayment & Arbitration 4.1 - 

IDR SAVE Regulation 70.4 -

Broad-Based Debt Relief Reversal (319.9) - 

Fresh Start/On Ramp 2.2 - 

Total Direct Loan Program 

Loan Modifications $(204.2) $400.0 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 38 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Grant Expenses

As shown in Figure 11, overall grant expenses changed primarily because of COVID-19

grants. More detail concerning COVID-19 grants can be found in Note 16 in the 

Other Information section beginning on page 142. In addition to COVID-19 funded 

grants, the Department has more than 100 other grant programs. The three largest of 

these grant program areas are:

• Pell Grants—Provides need-based grants to students to promote access to

postsecondary education. Grant amounts are dependent on the student’s expected

family contribution, the cost of attendance (as determined by the institution), the

student’s enrollment status (full-time or part-time), and whether the student attends

for a full academic year or less. Pell Grants are the single largest source of grant aid for

postsecondary education.

• Education for the Disadvantaged—Primarily consists of grants that provide financial

assistance through SEAs to LEAs and public schools with high numbers or percentages

of poor children to help ensure that all children meet challenging state academic

content and student academic achievement standards. The program also provides

funds to states to support educational services to children of migratory farmworkers

and fishers and to neglected or delinquent children and youth in state-run institutions,

attending community day programs, or in correctional facilities.

• Special Education—Primarily consists of Individuals with Disabilities Education

Act grants that provide funds by formula to states to assist them in providing a free

appropriate public education in the least restrictive environment for children with

disabilities ages 3 through 21 and assist states in providing early intervention services

for infants and toddlers from birth through age 2 and their families. Also provides

discretionary grants to IHEs and other nonprofit organizations to support research,

demonstrations, technical assistance and dissemination, technology, personnel

development and parent training, and information centers.

The Department also offers other discretionary grants under a variety of authorizing 

legislation, with approximately 90 percent of nonstudent aid funds awarded by formula 

and 10 percent through competitive processes.

Figure 11. Grant Expenses by Program Areas

(Dollars in Billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COVID-19 Grant Expenses

(Dollars in Millions)

COVID-19 Grants FY 2023 FY 2022

Education Stabilization Fund:

Elementary and Secondary School 

Emergency Relief Fund $ 52,832 $ 48,502 

Higher Education Emergency 

Relief Fund 7,238 25,976 

Governor’s Emergency Education 

Relief Fund 2,354 2,654 

Outlying Areas & Discretionary Grants 406 312 

Total Education Stabilization Fund 62,830 77,444 

Other COVID-19 Grants 1,451 865 

Total COVID-19 Grants $ 64,281 $ 78,309 
FY 2023 AGENCY FINANCIAL REPORT 39 U.S. DEPARTMENT OF EDUCATION

Statements of Changes in Net Position

The consolidated statements of changes in net position report the beginning net position, 

the summary effect of transactions that affect net position during the fiscal year, and the 

ending net position. Net position is the residual difference between assets and liabilities 

and consists of unexpended appropriations and cumulative results of operations. 

Unexpended appropriations include undelivered orders and unobligated balances for 

grant and administrative operations. Cumulative results of operations represent the net 

difference since inception between (1) expenses and (2) revenues and financing sources.

Statements of Budgetary Resources

The combined statements of budgetary resources present information on how budgetary 

resources were made available and their status at the end of the fiscal year. Information in 

the statements is based on budgetary transactions as prescribed by OMB and Treasury.

Figure 12 shows the components of the Department’s budgetary resources, which 

totaled $850.2 billion for FY 2023, decreasing from $902.0 billion, or 5.7 percent, 

from the prior year. This decrease was primarily due to a net $342.5 billion decrease 

in appropriations received, of which $337.7 billion was for a decrease in Direct Loan 

Program appropriations for subsidy re-estimates and modifications. The decrease in 

appropriations was offset by a new $293.9 billion increase in borrowing authority, 

primarily for the Direct Loan Program, which increased by $281.4 billion.

Other significant changes to the Department’s combined statement of budgetary resources 

compared to the prior year include the following:

• Unobligated Balances from Prior Year

Budget Authority (Net) decreased by

$13.0 billion, or 19.9 percent. Of this

decrease, ($18.0) billion was due to

COVID-19 funded balances.

• New Obligations and Upward

Adjustments (Total) decreased by $36.8

billion, or 4.5 percent, primarily due to a

net $20.1 billion decrease for the Direct

Loan program. The change in the Direct

Loan program includes the combined

effect of differences in subsidy cost reestimates and modifications that were

executed during the two fiscal years.

• Unobligated Balance, End of

Year decreased by $15.0 billion,

or 17.0 percent. This decrease

was largely due to a $13.6 billion

decrease in unobligated balances for

the FFEL guaranteed loan program

financing account.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 12. Components of Budgetary Resources

(Dollars in Billions)

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 40 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The combined statements of budgetary resources also present the Department’s summary 

disbursement and collection amounts shown in Table 3.

Table 3. Outlays, Distributed Offsetting Receipts, and Disbursements, Net

(Dollars in Billions)

FY 2023 FY 2022

Outlays, Net

Credit Programs $ 155.6 $ 510.0 

Grants 147.6 155.3 

Contractual Services 2.5 2.5 

Personnel Compensation and Benefits 0.8 0.7 

Total Outlays, Net $ 306.5 $ 668.5 

Distributed Offsetting Receipts

Negative Subsidies and Downward Re-Estimates of Subsidies (346.7) (28.2)

Repayment of Perkins Loans and Capital Contributions (0.5) (0.7)

Other (0.4) (0.2)

Total Distributed Offsetting Receipts $ (347.6) $ (29.1)

Disbursements, Net

Direct Loan Program

Gross Disbursements $ 483.0 $ 177.6 

Offsetting Collections (195.5) (526.6)

Total Direct Loan Program Disbursements, Net 287.5 (349.0)

FFEL Program

Gross Disbursements 26.0 10.3 

Offsetting Collections (16.9) (43.6)

Total FFEL Program Disbursements, Net 9.1 (33.3)

Other Loan Programs

Gross Disbursements 0.3 0.5 

Offsetting Collections (0.2) (0.5)

Total Other Loan Program Disbursements, Net 0.1 - 

Total Disbursements, Net $ 296.7 $ (382.3)

Outlays, Net is comprised of gross outlays and offsetting collections in the Department’s 

budgetary funds. Outlays, Net decreased $362.0 billion (54.2 percent) due primarily 

to a decrease of $330.1 billion in Direct Loan Program outlays, including upward loan 

modifications and re-estimates. 

Distributed Offsetting Receipts primarily represents amounts paid from the Direct 

Loan Program and FFEL Program financing accounts to Treasury General Fund 

receipt accounts for downward current fiscal year executed subsidy re-estimates and 

modifications, and negative subsidies. Of the $318.5 billion net decrease in FY 2023 

versus FY 2022, $304.7 billion was attributed to the Direct Loan Program. 

Disbursements, Net is comprised of gross outlays and offsetting collections in the 

Department’s credit program nonbudgetary financing funds. Of the $679.0 billion net 

increase in FY 2023 versus FY 2022, $636.5 billion was attributed to the Direct Loan 

Program and primarily attributed to changes in the subsidy re-estimates and modifications 

during the fiscal years.
FY 2023 AGENCY FINANCIAL REPORT 41 U.S. DEPARTMENT OF EDUCATION

Analysis of Systems, Controls, and 

Legal Compliance

Management Assurances

Management Control Program

The Department’s system of internal control is comprehensive and requires all Department managers 

to establish cost-effective systems of management controls to ensure U.S. Government activities 

are managed effectively, efficiently, economically, and with integrity. All levels of management are 

responsible for ensuring adequate controls over all Department operations. As such, the Department’s 

management is responsible for managing risks and maintaining effective internal control.

The Federal Managers’ Financial Integrity Act (FMFIA) requires the head of each agency to conduct 

an annual evaluation in accordance with prescribed guidelines and provide a Statement of Assurance 

(SOA) to the President and Congress. The Secretary of the Department of Education’s Fiscal Year 2023 

SOA provided below is the final report produced by the Department’s annual assurance process.

SECRETARY’S STATEMENT OF ASSURANCE 

 FISCAL YEAR 2023 

November 16, 2023

The Department of Education’s (the Department’s) management is responsible for managing risks and 

maintaining effective internal control to meet the objectives of the Federal Managers’ Financial Integrity 

Act of 1982 (FMFIA).

In accordance with Section 2 of FMFIA and Office of Management and Budget (OMB) Circular 

A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control, management

assessed risk and evaluated the effectiveness of the Department’s internal controls to support effective

and efficient operations, reliable reporting, and compliance with applicable laws and regulations.

Section 4 of FMFIA and the Federal Financial Management Improvement Act of 1996 (FFMIA) require 

management to ensure the Department’s financial management systems provide reliable, consistent 

disclosure of financial data. Management evaluated the Department’s financial management systems 

for substantial compliance with FFMIA requirements. The Department also conducted a separate 

assessment of the effectiveness of its internal control over reporting with consideration of its Data 

Quality Plan (DQP) in accordance with Appendix A of OMB Circular A-123.

The Department’s management is responsible for managing risks and maintaining effective internal control 

to meet the objectives of Sections 2 and 4 of the FMFIA. The Department conducted its assessment of 

risk and internal control in accordance with OMB Circular No. A-123, Management’s Responsibility for 

Enterprise Risk Management and Internal Control. Based on the results of the assessment, the Agency can 

provide modified assurance that internal control over operations, reporting, and compliance were operating 

effectively as of September 30, 2023, due to the following material weakness:

The material weakness is related to the subsidy estimate for the Department’s Direct Loan (DL) and 

Federal Family Education Loan (FFEL) student loan portfolios. The Department is required to perform 

interest rate and technical re-estimates of the subsidy costs (commonly referred to as subsidy re-estimates) 

of its direct loan and loan guaranty programs as of September 30th every year. These subsidy re-estimates 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 42 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

are calculated using an internally developed cash flow model, the Student Loan Model 

(SLM). In FY 2023, the external financial statement auditor and FSA separately identified 

errors in the data in the system that was used in key assumptions for the SLM. FSA has 

corrected some of the identified errors and is continuing to research other known issues to 

identify and implement corrective actions.

Miguel A. Cardona, Ed.D.

Introduction

The FMFIA requires the Government Accountability Office (GAO) to prescribe standards 

of internal control in the Federal Government, which is titled GAO’s Standards for 

Internal Control in the Federal Government commonly known as the Green Book. These 

standards provide the internal control framework and criteria Federal managers must use 

in designing, implementing, and operating an effective system of internal control. The 

Green Book defines internal control as a process effected by an entity’s oversight body, 

management, and other personnel that provides reasonable assurance that the objectives 

of an entity are achieved. These objectives and related risks can be broadly classified into 

one or more of the following categories:

• Operations—Effectiveness and efficiency of operations.

• Reporting—Reliability of reporting for internal and external use.

• Compliance—Compliance with applicable laws and regulations.

Strong risk management practices and internal control help the Department run its 

operations efficiently and effectively, report reliable information about its operations and 

financial position, and comply with applicable laws and regulations. The FMFIA requires 

federal agencies to establish internal controls that provide reasonable assurance that 

agency objectives will be achieved. OMB Circular A-123, Management’s Responsibility 

for Enterprise Risk Management (ERM) and Internal Control implements FMFIA and 

defines management’s responsibilities for ERM and internal control. The circular provides 

guidance to federal managers to improve accountability and effectiveness of federal 

programs and mission-support operations. This is achieved through implementation 

of ERM practices and by establishing, maintaining, and assessing internal control 

effectiveness. Furthermore, the guidance requires federal agencies to provide reasonable 

assurance that it has met the three objectives of internal control. This section describes 

the Department’s internal control framework and explains assurances provided by the 

Department’s leadership. 

Internal Control Framework

The Department’s internal control framework helps ensure that the Department achieves 

its strategic goals and objectives related to delivering education services effectively and 

efficiently, complies with applicable laws and regulations, and prepares accurate reports. 

The Department’s comprehensive internal control framework and assurance process is 

depicted in the following diagram in Figure 13.
FY 2023 AGENCY FINANCIAL REPORT 43 U.S. DEPARTMENT OF EDUCATION

Figure 13. Department of Education Internal Control Framework

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Department worked to evolve its existing internal control framework to be more 

value-added and provide for stronger risk management for the purpose of improving 

mission delivery. The Department’s Senior Management Council (SMC) oversees the 

Department’s management control program. Individual SOAs from Assistant Secretaries 

in Principal Office Components (POCs) serve as the primary basis for the Department’s 

FMFIA SOA issued by the Secretary. The SOAs are based on information gathered 

from various sources including managers’ personal knowledge of day-to-day operations 

and existing controls, management program reviews, and other management-initiated 

evaluations. In addition, the Office of Inspector General and the GAO conduct reviews, 

audits, inspections, and investigations that are considered by management.

The Department’s Office of Finance and Operations (OFO) employs an integrated 

process to perform the work necessary to meet the requirements of OMB Circular A-123’s 

Appendix A and Appendix C (regarding Payment Integrity), the FMFIA, and GAO’s 

Green Book. Green Book requirements directly relate to testing entity-level controls, 

which is a primary step in operating an effective system of internal control. Entity-level 

controls reside in the control environment, risk assessment, control activities, information 

and communication, and monitoring components of internal control in the Green 

Book, which are further analyzed by 17 underlying principles of internal control. For 

the Department, all five internal control components and 17 principles were assessed in 

support of the Department’s FY 2023 SOA. 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 44 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Department employs a risk-based approach in evaluating internal controls over 

reporting on a multi-year rotating basis, which has proven to be efficient. Due to the 

broad knowledge of management involved with the Appendix A assessment, along with 

the extensive work performed by the divisions who assess key controls, the Department 

was able to evaluate issues on a detailed level. The Department’s management controls 

program is designed to ensure full compliance with the goals, objectives, and requirements 

of the FMFIA and various Federal laws and regulations. Numerous Department 

organizational entities provided oversight during FY 2023 for the internal controls 

over reporting program in place to meet the requirements of OMB Circular A-123, 

Appendix A. These entities include the Division of Enterprise Data Analytics and Risk 

Management (EDARM), Financial Data Integrity and Controls Division (FDICD), 

Contracts and Acquisitions Management (CAM), Office of the Chief Information Officer 

(OCIO), and Federal Student Aid (FSA). To that end, the Department has dedicated 

considerable resources to administer a successful management control program. As 

noted in the Secretary’s Statement of Assurance, the Department identified one material 

weakness in control operation and design. 

The Department also places emphasis on the importance of continuous monitoring. It 

is the Department’s policy that any organization with a material weakness or significant 

deficiency must prepare and implement a corrective action plan to correct the weakness. 

The plan, combined with the individual SOAs and Appendix A assessments, provide the 

framework for monitoring and improving the Department’s management controls on a 

continuous basis. Management will continue to direct and focus efforts to resolve any 

deficiencies in internal control identified by management and auditors. 

The Department continues to focus on streamlining and coordinating internal control 

activities to ensure efficiency of operations, recognize the connection points across areas, 

and enable transparency of information across the Department. This framework enables 

increased compliance, process efficiency, oversight, and more informed monitoring of 

internal controls and risk management by all offices and governance bodies, including 

the Department’s Senior Management Council. The framework also allows for the 

Department to obtain outcomes from an improved control system and reduced risk 

landscape. Furthermore, this streamlined approach helps the Department provide 

reasonable assurance to internal and external stakeholders that the data produced by the 

Department is complete, accurate, and reliable; internal controls are in place and working 

as intended; and operations are efficient and effective. 

Additionally, during FY 2023, the Department continued taking important steps to 

advance its Enterprise Risk Management (ERM) program.

Enterprise Risk Management Framework

The Department’s Enterprise Risk Management (ERM) program supports agencywide efforts to maximize the Department’s value to students and taxpayers through 

achievement of strategic goals and objectives. The Department’s ERM program 

strategically focuses on the complete spectrum of the organization’s significant risks 

and the combined impact of those risks as an interrelated portfolio rather than simply 

addressing risks within silos. This coordinated approach leverages data and analytical 

solutions to identify, measure, and assess challenges related to mission delivery and 

resource management. Through ERM, the Department has established a systematic and 

deliberate view of risk into key management practices, ultimately yielding more effective 

performance and operational outcomes. 
FY 2023 AGENCY FINANCIAL REPORT 45 U.S. DEPARTMENT OF EDUCATION

The Division of Enterprise Data Analytics and Risk Management (EDARM), within the 

Office of Finance and Operations (OFO), leads the agency’s overall ERM strategy and 

formally aligns ERM and internal controls processes. EDARM leverages partnerships with 

agency leaders (e.g., the Senior Management Council, the Senior Executive Cadre, political 

leadership) to identify, measure, and assess challenges related to mission delivery, policy 

development, and operations to develop coordinated, actionable response plans.

The ERM Annual Assessment process includes the following key steps:

EDARM collaborated with every Principal Office Component (POC) to identify and 

evaluate risk priority within each POC and at the Department-wide level. The FY 2023 

Department of Education ERM profile was published with the aggregated result and 

analysis from the annual assessment process. This profile highlights the top 15 risks for the 

Department around the following 6 main functional processes:

• Financial Management: Student Loan Cost Estimation, Budget Formulation.

• Human Capital Management: Recruitment & Hiring, Workforce & Succession

Planning, Employee Training & Development, Employee Engagement & Retention.

• Information Technology Management: IT Process Governance, Cybersecurity, and

Infrastructure.

• Business Process Management: Acquisition/Budget Strategy.

• Data Management: Information Security and Data Protection, Data Quality.

• Oversight and Compliance: Grants and Contracts Management.

In FY 2023, after launching the ERM digital tool for collecting, analyzing, and reporting 

risk data, EDARM continued to enhance the tool based on user feedback and is building 

additional capabilities and visual analysis for all stakeholders to further monitor and 

evaluate trends and results.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 46 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

EDARM continues to make progress in developing and implementing new trainings, 

tools, and helpful content to better educate and promote healthy risk culture, a culture 

of continuous improvement within the Department—where data and awareness of 

enterprise risk are used to objectively inform strategic and operational decisions and 

optimize agency performance.

Analysis of Controls

Overall, the Department relies on annual assurances provided by the heads of its principal 

offices, supported by risk-based internal control evaluations and testing—as well as annual 

internal control training provided for all employees—to demonstrate reasonable, but 

not absolute, assurance that its internal controls are well-designed, in place, and working 

as intended. The Department’s annual assurance process conforms to the requirements 

contained in the revised Green Book and OMB Circular A-123, Management’s 

Responsibility for Enterprise Risk Management and Internal Control. 

In FY 2023, the Department and Federal Student Aid (FSA) did identify one material 

weakness related to the reliability of reporting. The Department acknowledges that it has 

areas of control that need further strengthening, as well as major challenges identified 

by the Department’s Office of Inspector General (OIG) in its FY 2024 Management 

Challenges report. As an example, data quality and reporting are a challenge identified 

by the OIG. The Department, its grantees, and its subrecipients must have effective 

controls to ensure that reported data are accurate and complete. The Department relies on 

program data to evaluate program performance and inform management decisions. The 

establishment of a Data Quality Plan (DQP) integrated into testing of controls is helping 

to address this challenge identified by the OIG.

The Department maintains processes and procedures to identify, document, and assess 

internal control over reporting and operations. Key activities include: 

• Maintaining process documentation for the Department’s significant business

processes and subprocesses.

• Maintaining an extensive library of key financial, operational, and information

technology (IT) controls.

• Providing technical assistance to principal offices to help them understand and

monitor key controls.

• Refining the DQP to improve reporting controls and data quality.

• Implementing a risk-based control testing strategy.

• Developing corrective action plans when internal control deficiencies are found and

tracking progress against those plans.

• Recommending and assisting with implementation of robust tools to design more

efficient and effective operating procedures.

In accordance with OMB Circular A-123, the Department also conducted a separate 

assessment of the effectiveness of the Department’s internal control over reporting, 
FY 2023 AGENCY FINANCIAL REPORT 47 U.S. DEPARTMENT OF EDUCATION

operations, and compliance with key financial management laws and regulations, as 

described below. 

Internal Control Over Reporting 

Annually, the Department evaluates its POCs’ internal control system using the 17 GAO 

Green Book principles to ensure entity level control objectives are met. These evaluations 

assist POCs in producing a letter of assurance each year by September 30, documenting 

their internal control system, identifying any control deficiencies, and noting any major 

improvements or challenges.

In FY 2023, the external financial statement auditor and FSA separately identified 

errors in the data in the system that was used in key assumptions for the SLM. FSA has 

corrected some of the identified errors and is continuing to research other known errors to 

identify and implement corrective actions. 

In FY 2023, the Department tested a proportionate number of key financial controls in 

significant business processes based on qualitative process risk assessments and rotational 

test plans. The internal controls assessment did not find any material weaknesses. 

However, recommendations have been provided to process owners to strengthen internal 

controls, such as verifying immaterial differences, obtaining electronic signatures, and 

updating policies and procedures.

In addition, the Department’s shared service provider, the U.S. Department of the 

Interior (DOI)/ Interior Business Center (IBC), uses the Federal Personnel and Payroll 

System (FPPS) to process its payroll. DOI’s auditor tested FFPS and the results of 

their FY 2023 review indicated that the controls tested were operating effectively, 

providing reasonable assurance that the control objectives specified were achieved during 

that period.

Internal Control Over Operations 

In FY 2023, the Department reviewed a number of operational processes based on 

qualitative risk assessments (in alignment with the Department’s ERM profile) and 

detected some control deficiencies but none that would rise to the level of material 

weakness. As a result, tools have been developed in the areas of stakeholder outreach, 

acquisition planning and the procurement process to better utilize resources, improve the 

flow, timeliness, and quality of information, and allow for more effective decision-making. 

A significant achievement has been the creation of the acquisition portal and dashboard, 

which enhances and streamlines the acquisition management process by providing a 

solitary access point for gathering, editing, and reviewing submissions and enabling 

accountability and transparency throughout the Department. The dashboard provides the 

Department with the ability to present decision-makers with clearly understood data to 

spot important acquisition trends and resources across the agency.

Analysis of Financial Management Systems

The FFMIA requires management to ensure that the Department’s financial management 

systems consistently provide reliable data that comply with system requirements, 

applicable federal accounting standards, and the U.S. Standard General Ledger at 

the transaction level. Appendix D to OMB Circular A-123, Compliance with the 

FFMIA, and OMB Circular A-130, Managing Federal Information as a Strategic 

Resource, provide specific guidance to agency managers when assessing conformance to 

FFMIA requirements. 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 48 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Department’s vision for its financial management systems is to provide objective 

financial information to stakeholders to support data-driven decision-making, promote 

sound financial management, and enhance financial reporting and compliance activities. 

The Department’s core financial applications are integrated under common management 

control as part of the Education Central Automated Processing System (EDCAPS). 

EDCAPS is a suite of financial applications (subsystems), including commercial offthe-shelf, custom code, and interfaces that encompass the Department’s core financial 

management processes. Specifically, EDCAPS provides the following functions:

• General ledger—Preparation of financial statements and reconciliation of general

ledger balances with subsystems maintained in program areas and Treasury.

• Funds management—Budget formulation, budget execution, and funds control.

• Grants pre- and post-award processing, including grant payment processing.

• Contract pre-and post-award processing.

• Receivables management.

• Cost management.

• Recipient management.

• Administrative processes (e.g., purchasing, travel, and miscellaneous payments).

EDCAPS is composed of five main integrated components: 

• Financial Management Support System (FMSS)—FMSS is the Department’s core

financial system. It provides financial management functions such as the general

ledger, financial statement preparation, funds control and budget execution, purchase

receiving, accounts receivable, and accounts payable.

• The FMSS Oracle E-Business Suite application resides behind the Department firewall

and is not an external-facing application.

• Contracts and Purchasing Support System (CPSS)—CPSS provides the Department

with a central repository to enter, retrieve, manage, and view acquisition/contractrelated data. The centralized data provides enhanced information dissemination, with

the ability to respond to both internal and external information requests.

• Grants Management System (G5)—G5 provides the Department with a platform

to manage all grant activities, from initial recipient contact to grant processing

to payments and grant closeout. This single-system approach provides improved

grant information management, recipient response time, and accuracy of financial

management information.

• E2 Travel System—E2 provides the Department, under a GSA contract with third

party, with a platform to manage travel functions. EDCAPS interfaces with E2 in

accordance with an established Memorandum of Understanding and Information

Security Agreement between the Department and the vendor.
FY 2023 AGENCY FINANCIAL REPORT 49 U.S. DEPARTMENT OF EDUCATION

The following diagram provides the data flow in and out of EDCAPS, including data flow 

with other Department applications/systems and external applications/systems.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Across all its components, EDCAPS is serving numerous Departmental internal users in 

Washington, D.C. and 10 regional offices throughout the United States and territories, 

as follows: 

• G5 – 825

• CPSS - 710

• FMSS - 400

• E2 – 3,720

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 50 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

EDCAPS is serving approximately 45,790 external users, mostly users of Grants 

Management System (G5). In FY 2023, the Department conducted an annual risk 

assessment of EDCAPS and tested 86 IT security controls out of a baseline of 630 IT 

security controls, as follows:

• EDCAPS—15

• FMSS—3

• CPSS—27

• G5—33

• E2—8

The Department designated the FMSS as a mission-critical system that provides core 

financial management services and focused its system strategy on the following areas 

during FY 2023: 

• Managing and implementing cross-validation rules throughout the fiscal year to 

prevent invalid accounting transactions from being processed.

• Transmitting the Department’s spending data related to contracts, grants, loans, and 

other financial assistance awards for the USASpending.gov initiative as part of the 

Federal Funding Accountability and Transparency Act of 2006 and Digital Accountability 

and Transparency Act of 2014.

• Transmitting the entire Department’s payments through the Department of Treasury 

Secure Payment System.

The FMSS Oracle E-Business Suite application is behind the Department firewall and not 

external-facing. FMSS includes the following interfaces to multiple applications which are 

either not part of the Oracle suite of applications in the Enterprise Resource Plan or are 

external systems:

• Department Systems:

– Oracle Enterprise Performance Management Cloud Planning 

(formerly Hyperion).

– Fiserv Frontier.

– G5.

– CPSS.

• External Systems:

– Treasury systems (Invoice Processing Platform [IPP] invoices/receipts/obligation 

data, IPP invoice status, payment files, debt referrals, Centralized Receivables 

Service invoices, warrants, Treasury confirmations, Collections Information 

Repository collections and administrative return, collections/payments). 

– E2 Travel System.

The Department’s financial management systems are designed to support effective internal 

control and produce accurate, reliable, and timely financial data and information, except 

for the material weakness reported in the Secretary’s Statement of Assurance. The financial 
FY 2023 AGENCY FINANCIAL REPORT 51 U.S. DEPARTMENT OF EDUCATION

statement auditors, in their independent assessment, concluded that the Department did 

not substantially comply with FFMIA requirements, and the Department concurred. As 

noted below in the Analysis of Legal Compliance section, the Department continues to 

address issues and improve its controls over systems.

Analysis of Legal Compliance

The Department is committed to maintaining compliance with applicable laws and 

regulations. However, the Department reports some areas of non-compliance:

The Federal Managers’ Financial Integrity Act (FMFIA)

Federal Managers Financial Integrity Act of 1982 (FMFIA), Pub. L. 97-255 – (H.R. 

1526) was enacted into law on September 8, 1982. 

The FMFIA establishes overall requirements with regard to internal control and requires 

the agency head to certify annually to the President and Congress whether there is 

reasonable assurance that the Department’s internal controls are achieving their intended 

objectives. This is also noted in the Office of Management and Budget Circular A-123 

(OMB A-123), Management’s Responsibility for Enterprise Risk Management and Internal 

Control, which implements the FMFIA. 

The Department’s management performed an internal control assessment as required 

under FMFIA; however, management’s assessment did not comply with limited 

requirements within the FMFIA and the related OMB A-123 requirements. Specifically, 

the Department did not identify and document specific and limited financial statement 

risks and the associated controls that were responsive to those specific risks. Additionally, 

the Department’s management internal controls did not properly identify specific risks 

impacting the data used to calculate the subsidy re-estimates used in the consolidated 

financial statement. This resulted in the lack of timely identification of errors in data that 

impacted subsidy re-estimates in the consolidated financial statements.

Federal Financial Management Improvement Act of 1996 (FFMIA)

Federal Financial Management Improvement Act of 1996 (FMFIA), Pub. L. 104-208, 

Title VIII (31 U.S.C. 3512 note) was enacted into law on September 30, 1996. 

The FFMIA requires the Department to establish and maintain financial management 

systems that comply substantially with Federal financial management systems 

requirements, applicable Federal accounting standards, and the United States 

Government Standard General Ledger at the transaction level. Appendix D to the Office 

of Management and Budget (OMB) Circular A-123 provides the FFMIA Compliance 

Determination Framework that is used in determining whether the Department’s financial 

management systems comply substantially with FFMIA requirements. Per section 806 

of the FFMIA, “financial management systems” includes the financial systems and the 

financial portions of mixed systems necessary to support financial management, including 

automated and manual processes, procedures, controls, data, hardware, software, and 

support personnel dedicated to the operation and maintenance of system functions. 

The Department did not meet limited FFMIA requirements due to an inadequate 

risk assessment over specific key processes and data used in the consolidated financial 

statement. As a result, the Department did not comply with FFMIA, increasing the risk 

that transactions are incorrectly recorded to the general ledger, impacting the completeness, 

existence, and accuracy of the balances in the consolidated financial statement.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 52 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Payment Integrity Information Act of 2019 (PIIA)

The Payment Integrity Information Act of 2019 (PIIA), Pub. L. 116-117, 134 Stat. 113, 

was enacted into law on March 2, 2020. 

The primary purpose of the PIIA is to reorganize and revise several existing improper 

payments statutes,3

 which establish requirements for federal agencies to cut down on 

improper payments made by the federal government. PIIA requires federal agencies 

to report improper payments annually for programs that are deemed susceptible 

to significant improper payments. PIIA also requires each agency’s OIG to review 

the agency’s improper payment reporting in its Agency Financial Report (AFR) 

and accompanying materials, and to determine whether the agency has met six 

compliance requirements. 

In its annual improper payment compliance audit for FY 2022, the OIG concluded that 

the Department did not comply with the PIIA for the FY 2022 reporting period because it 

did not meet one of the six compliance requirements. Specifically, the Department reported 

improper payment and unknown payment estimate rates that exceeded 10 percent. 

For the Title I program, the Department reported an improper payment and unknown 

payment estimate that exceeded 10 percent for the second consecutive year. To comply with 

31 U.S.C. section 3351(2)(F), an agency must report an improper payment rate of less than 

10 percent for each program and activity for which an estimate was published. In addition, 

the Department’s OIG determined that the improper payment and unknown payment 

estimates for each of the five programs (Title I, Special Education, Education Stabilization 

Fund, Pell Grant, and Direct Loan) were not reliable. Specifically, for the Title I and 

Special Education programs, the improper payment and unknown payment estimates were 

based on inaccurate sampling populations. Further, for the Title I, Special Education, and 

Education Stabilization Fund programs, the Department’s testing results were inaccurate.

This determination of noncompliance with PIIA does not represent a material weakness in 

the Department’s internal controls. 

Additionally, auditors determined that the Department’s overall IT security program and 

practices are effective, as eight out of the nine FISMA domains met the requirements 

needed to operate at a Level 4 maturity rating, indicating the systems security is Managed 

and Measurable.

Federal Information Security Modernization Act of 2014 (FISMA)

The Federal Information Security Modernization Act of 2014 (FISMA) requires federal 

agencies to develop, document, and implement an agencywide program to provide security 

for the information and relevant information technology systems. The Act supports the 

operations and assets of the agency and helps to ensure the confidentiality, integrity, and 

availability of all system-related information.

The Department’s and FSA’s information security programs completed numerous 

significant activities in FY 2023 to improve cybersecurity capabilities and functions, some 

of which include:

• In FY 2022, the Department received an overall FISMA assessment of “Effective,”

or a Level 4 Cybersecurity Maturity Level. This score was the highest achieved by

3 Improper Payments Information Act of 2002 (IPIA), Pub. L. 107-300, 116 Stat. 2350, as amended by the Improper 

Payments Elimination and Recovery Act of 2010 (IPERA), Pub. L. 111-204, 124 Stat. 2224, and the Improper Payments 

Elimination and Recovery Improvement Act of 2012 (IPERIA), Pub. L. 112-248, 126 Stat. 2390.
FY 2023 AGENCY FINANCIAL REPORT 53 U.S. DEPARTMENT OF EDUCATION

the Department since the scoring metrics were established in 2014. In FY 2023, 

the Department was again assessed to be overall “Effective.” However, in FY 2023, 

all five cybersecurity functions were assessed to be operating at Level 4. This is the 

first time the Department has achieved such a result which reflects significant strides 

in advancing the Department’s cybersecurity maturity and effectiveness across all 

functions and 8 of 9 security domains which make up those functions as supported by 

information in the graphics below.

Security 

Function Metric Domain Maturity Level Change 

from 2022

Met Federal 

Goal

Identify Risk Management Managed and Measurable ▲ 

Identify Supply Chain Risk Management Managed and Measurable ▲ 

Protect Configuration Management Managed and Measurable = 

Protect Identity and Access Management Consistently Implemented =

Protect Data Protection and Privacy Managed and Measurable ▲ 

Protect Security Training Managed and Measurable = 

Detect Information Security Continuous 

Monitoring Managed and Measurable = 

Respond Incident Response Managed and Measurable = 

Recover Contingency Planning Managed and Measurable = 

 

 

 

 

 

 

 

 

 

 

IG FISMA Audit Recommendations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

IG FISMA Metrics at Effective Maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Security Domains at Effective Maturity

 

 

 

 

 

 

 

 

 

Cyber Functions at Effective Maturity

 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 54 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

• In FY 2023, the Department continued advancing its cybersecurity capabilities, 

policies, and procedures as well as implementing priority capabilities to reduce risk 

in support of requirements levied from Office of Management and Budget (OMB) 

and Department of Homeland Security (DHS), including those documented 

within Executive Order on Improving the Nation’s Cybersecurity (EO 14028). The 

Department was the first cabinet-level Department to receive funding from the TMF 

and successfully adopted a SASE solution in support of advancing its ZTA capabilities 

in support of federal requirements as outlined in OMB Memorandum M-22-09. 

SASE has modernized the Department’s cybersecurity posture through migrating away 

from legacy Virtual Private Networks (VPN). The new solution leverages cloud native 

capabilities to enhance the teleworking employees’ experiences, including providing 

10x faster connection speed than the legacy VPN access, reducing the number 

of logins required for applications, and increasing performance for tools such as 

Microsoft Teams, Outlook, Zoom, and other applications and data while modernizing 

the Department’s Cybersecurity posture. 

• The Department issued a contract with a professional service provider to modernize 

and enhance its Enterprise ICAM (Identity, Credential, and Access Management) 

solution beginning in September 2022 and aligns with the OMB Memorandum 

M-22-09, Moving the U.S. Government Toward Zero Trust Cybersecurity Principles 

requirements to meet specific cybersecurity standards and objectives by the end of 

FY 2024. The ICAM program continues to provide improved security features and 

functionality which enhance the security posture of the Department. The Enterprise 

ICAM service has been working to integrate all Department information systems with 

modern, phishing resistant authentication services, and has instituted a single signon (SSO) capability through a centralized user portal for Department employees and 

contractors to access their Microsoft Office 365 applications. 

– Enterprise ICAM provides the following new capabilities to the Department: 

self-service password reset functionality and security information registration; 

certificate-based authentication to support native personal identity verification 

(PIV) in cloud service provider SSO; and identity lifecycle management 

capabilities to enable automated user account provisioning and deprovisioning. 

Enterprise ICAM has also integrated with the ED Cyber Data Lake (EDCDL) 

to develop a centralized identity dashboard to improve transparency into 

identity related metrics that align with OMB Memorandum M-22-09, Moving 

the U.S. Government Toward Zero Trust Cybersecurity Principles, and OMB 

Memorandum M-21-31, Improving the Federal Government’s Investigative 

and Remediation Capabilities Related to Cybersecurity Incidents, for user and 

privileged user logging requirements.

– The Department’s ICAM program was successful in integrating with Login.

gov for public users and was integral to instituting multifactor authentication 

(MFA) deployment across the Department through integrating PIV validation 

of Department organizational users. Through the implementation of ICAM, 

Department online resources are more secure for users to access through 

implementation of phishing resistant authentication and improved visibility. 

Implementation also strengthens the Department’s access management 

capabilities by reducing the risk of successful phishing cyber-attacks across the 

Department’s enterprise and ensuring the right people have the right level of 

access to Department resources. Users experience a superior interaction with the 

Department’s services as they will log on substantially fewer times and will need to 

remember fewer passwords and pins.
FY 2023 AGENCY FINANCIAL REPORT 55 U.S. DEPARTMENT OF EDUCATION

• The Department’s accomplishments in maturing its risk management capabilities,

specifically the maturation of the Cybersecurity Framework (CSF) Risk Scorecard,

has been recognized by other Federal Agencies, including OMB, as an optimized

capability in managing and communicating cybersecurity risk. The Department of

Commerce, Department of Justice, Department of Transportation, and Nuclear

Regulatory Commission have all requested playbooks for the development and

implementation of CSF-based risk scoring capabilities in their environments based

upon our constructs. Released in November 2022, version 3.0 of the ED CSF Risk

Scorecard now aligns National Institute of Standards and Technology (NIST) Special

Publication (SP) 800-53, Revision (Rev.) 5 security and privacy controls to the NIST

CSF objectives as well as the NIST Privacy Framework (PF) Ver. 1.0. The ED CSF

Risk Scorecard provides continuous measurement and risk prioritization of key metrics

for system stakeholders, POC leadership, and Department executive leadership on a

daily, monthly, and quarterly basis.

• On April 14, 2022, the Department’s CISO issued a memorandum for Recission

of Department Standard PR.AC: Emergency PIV Alternative. On May 5, 2020, to

address the closure and limited operating capacity of Federal Government badging

offices due to the coronavirus 2019, OCIO issued Standard PR.AC: Emergency PIV

Alternative Standard. This standard provided authorization to access Department

systems for those who did not hold a valid PIV but have been cleared by the

Department’s Office of Personnel Security. OCIO has determined Standard PR.AC:

Emergency PIV Alternative Standard is now unnecessary as Federal Government

badging offices are now open and are at normal operating capacity. This memo serves

to drive actions necessary to ensure the Department’s workforce is using the strongest

multifactor authentication possible in alignment with Executive Order 14028.

• The integration of supply chain risk management (SCRM) assessments with the

Department’s Enterprise Architecture Technology Insertion process, also known as the

(EATI) process, successfully identified 15 CFR Part 7 concerns with Eclipse DB and

7-zip resulting in Deep Dive reviews and the creation of plan of action and milestones

for mitigation. SCRM has also been integrated into the CSF Risk Scorecard to

strengthen the ability to measure and monitor supply chain risk. This integration has

allowed the Department to identify risks and empowered senior leadership the ability

to accept, mitigate, or transfer supply chain risk appropriately within the Department.

• The Department continued to build on FY 2022 awards and received multiple

recognitions and multiple awards in FY 2023 from the Federal Information

Security Educators Association (FISSEA). FISSEA is an organization run by and for

Federal government information security professionals to assist Federal agencies in

strengthening their employee cybersecurity awareness and training programs. These

awards include Awareness Training Category award for the Cybersecurity and Privacy

Awareness Escape Room course; Innovative Solutions award for badges awarded for

high levels of symposium participation and top reporters of phishing exercises; and

Awareness Newsletter award for the Department’s Bits and Bytes awareness newsletter.

Following receipt of these awards, the Department of Energy, Postal Regulatory

Commission, Social Security Administration, Department of Health and Human

Services, Department of Labor, Department of Commerce, and Consumer Financial

Protection Board reached out to the Department and requested meetings to learn

more about the Department’s program and obtain guidance and direction on how to

build and maintain an effective training program.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 56 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

• From an incident response perspective, there have been no major cybersecurity

incidents across the Department in FY 2023. To bolster collaboration and interagency

coordination, the Department has also allocated a dedicated resource to work with law

enforcement and the National Cyber Investigative Joint Task Force. The Department

also continued maturing its cyber threat intelligence and cyber hunt capabilities by

establishing dedicated resourcing to interface with the intelligence community for

Department of Education-specific threat indicators.

• The Department, in coordination with 18 Federal agencies through the Memorandum

21-31 (M-21-31) working group, is leading the government’s efforts to determine

impact, applicability, and legal ramifications for statistical data collection for event

logging. Adhering to Executive Order (EO) 14028 (Section 8) to improve the Nation’s

Cybersecurity, the implementation M-21-31 will strengthen the Department’s event

logging capabilities to better identify, investigate and prevent cyber-attacks such as data

breaches, identity theft, and other types of cybercrime. Without this capability, the

Department will be unable to aid law enforcement and national security partners when

a cyber-attack impacts the Department. This can lead to prolonged attacks degrading,

disrupting, and limiting services. Furthermore, Department staff will be unable to

answer questions to Congress and oversight bodies about what happened, when it

started, and how staff resolved the issue in cybersecurity breaches and incidents.

• On February 27, 2023, OMB Memorandum M-23-13, “No TikTok on Government

Devices” Implementation Guide, was issued. The Department issued the appropriate

CISO memorandum to all Department employees and contractors to remove TikTok

and any successor application or service developed or provided by ByteDance Limited

or subsidiary from ED devices and providing instructions and deadlines for its

removal. Further the Department was able to leverage its newly deployed ZTA tools,

SASE, to begin blocking TikTok by its application identifier.

• In support of the Department’s maturation plan for the Education’s Security

Operations Center (EDSOC), efforts are underway to build out a consolidated and

centralized SCIF for use by the Department and FSA. This new SCIF will provide a

secure room for classified briefings as well as serve as a disaster recover site to ensure

continuity of business operations in the event of an emergency and deemed necessary.

– In February 2023, the Department and FSA combined Security Information and

Events Management licenses and migrated FSA’s data to the EDCDL in August

2023. In doing so, the Department saved in FY 2023, this migration drastically

increased the opportunity for information sharing between EDSOC and FSA

Security Operations Center incident response analysts allowing the Department to

adhere to EO 14028 and OMB M-21-31.

– The Department also enhanced its data loss prevention (DLP) capability through

an engagement with DHS CISA under the Secure Cloud Business Applications

project which provided guidance and capabilities to secure cloud business

application environments and protect federal information that is created, accessed,

shared, and stored. The Department has also gone above and beyond by taking

the next steps to include DLP looking for things like Federal Tax Information and

Employer Identification Number.
FY 2023 AGENCY FINANCIAL REPORT 57 U.S. DEPARTMENT OF EDUCATION

• The Department’s Information System Security Support Services (I4S) executed

a Blanket Purchase Agreement (BPA), as well as I4S BPA Call Order1 to provide

Support Services related to Program Management Support, Governance, Risk and

Compliance Tool (CSAM) Support, and Contractor Information System Security

Officer (ISSO) Support. The Department will now be able to execute call orders

against this BPA to procure Information System Owner, ISSO, and Vulnerability

Management and Security Engineering services.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 58 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Forward-Looking Information

4 https://www.stlouisfed.org/publications/regional-economist/2023/mar/return-investing-college-education

This section summarizes information pertinent to the Department’s future progress 

and success.

Direct Loan Program

The Department’s largest program, the William D. Ford Federal Direct Loan (Direct 

Loan) Program, provides students and their families with funds to help pay for their 

postsecondary education costs. The following describes (1) the steps the Department has 

taken to help make student debt more manageable and (2) the risks inherent in estimating 

the cost of the program.

Managing Student Loan Debt

Each year, federal student loans help millions of Americans obtain a college education—

an investment that, on average, has high returns. While the average return to having a 

college degree remains high,4

 some students leave school poorly equipped to manage 

their debt.

Traditionally, federal student loans had fixed-payment 10-year repayment schedules, 

making it difficult for borrowers to begin repaying at the start of their career when their 

salaries are low. The recent expansion of income-driven repayment (IDR) plans allows 

students the opportunity for greater financial flexibility as it pertains to their monthly 

repayment. For more details on these plans, visit FSA’s How to Repay Your Loans Portal.

Recent trends in student loan repayment data show that:

• More than 75 percent of the direct loan portfolio was in mandatory administrative

forbearance when the student loan repayment deferral period ended on

August 31, 2023.

• As of September 2023, more than 9.9 million direct loan recipients were enrolled in

IDR plans. Overall, as of September 2023, about 50 percent of direct loan dollars

and more than 32 percent of direct loan borrowers in repayment are enrolled in an

IDR plan.

The Department continues to work relentlessly to make student loan debt more 

manageable. Looking to the future, the Department will:

• Continue conducting outreach efforts to inform student loan borrowers of their

repayment options.

• Work to improve customer service and student aid systems and processes by

implementing FSA’s Next Gen FSA, see page 63.

• Continue to support the development of additional tools, such as the College

Scorecard and College Financing Plan, to increase transparency around higher

education costs and outcomes that may help students and families make informed

decisions before college enrollment.
FY 2023 AGENCY FINANCIAL REPORT 59 U.S. DEPARTMENT OF EDUCATION

Managing Risks and Uncertainty Facing the Direct Loan Program’s 

Cost Estimates

Direct Loan Program costs are estimated consistent with the requirements of the Federal 

Credit Reform Act of 1990. Under the act, the future disbursements and collections 

associated with a cohort of loans are estimated for the entire life of the loan, up to 40 

years in this case. The actual performance of a loan cohort tends to deviate from the 

estimated performance during that time, which is not unexpected in developing estimates. 

Estimation of Federal credit programs involves inherent risk. The Department utilizes 

the best data available with modeling techniques that have been examined over time by 

several outside entities. Management has confidence over the estimates by using several 

different tools to analyze cost estimates. Re-estimates on the loan portfolio are performed 

twice a year ensuring that the most up to date data and models are used. There are four 

types of inherent risk, described below, that make estimating lifetime program costs a 

difficult task.

Legislative, Regulatory, and Policy Risk

There are inherent risks to estimating future lifetime disbursements and collections for 

a cohort stemming from legislative, regulatory, or administrative actions. For instance, 

the cost structure of the Direct Loan Program may be significantly altered if policies 

around loan forgiveness are expanded. In addition, the effects on financial modeling and 

estimation associated with recent legislative, regulatory, and policy action is difficult to 

interpret given the lack of actual trend data availability. Some examples of current risks 

include the following:

Return to Repayment: The emergency relief measures in the Direct Loan Program, 

including suspending loan payments, halting collections on defaulted loans, and setting 

interest rates to 0 percent have ended. Interest began accruing on September 1, 2023, 

and the first payments were due in October. To help borrowers successfully return to 

repayment, the Department created a temporary on-ramp period through September 30, 

2024. This on-ramp period protects borrowers from having a delinquency reported to 

credit reporting agencies. This prevents the worst consequences of missed, late, or partial 

payments. While payments will be due and interest will accrue, interest will not capitalize 

for the duration of the on-ramp period. There is uncertainty regarding cost estimates as 

millions of borrowers have not been required to make monthly payments on their federal 

student loans since March 2020 and a large portion of those borrowers have no previous 

experience in making loan payments.

Income-Driven Repayment Plans: On July 10, 2023, the Department published a Final 

Rule to revise the current Revised Pay As You Earn (REPAYE) repayment plan which 

may also be referred to as the Saving on a Valuable Education (SAVE) plan. The revised 

plan will result in lower monthly payments for nearly all qualifying borrowers (among 

those who did not already have a $0 monthly payment). Provisions of the plan are being 

implemented on a tiered schedule with some provisions currently effective and others 

effective July 1, 2024. 

IDR plans tend to be more costly to the government than non-IDR plans. For the 2023 

loan cohort, it is estimated that the government will recover 57 percent less for loans 

in IDR plans as compared to loans in standard plans. It is important to be careful in 

making such comparisons, however, as the underlying characteristics of borrowers (and 

the corresponding behavioral dynamics driving selection of plans) also impact the overall 

cost of loans under each plan. Also, having more repayment plan options complicates 

repayment plan selection, since the tradeoff decisions when selecting the plans vary by 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 60 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

borrower and may not always be entirely clear. In general, however, the introduction of 

the SAVE plan has made IDR terms more generous and more costly to the government. 

Selected comparisons between projected originations and borrower repayments under the 

different IDR plans are available on the Department’s website. Future commitment to 

promote these programs, and potential increased participation in these plans, are areas of 

uncertainty. Future legislative and/or regulatory activity could also affect the underlying 

cost of IDR plans.

Public Service Loan Forgiveness: Enacted in 2007, the Public Service Loan Forgiveness 

(PSLF) program allows a direct loan borrower to have the balance of their direct loans 

forgiven after having made 120 qualifying monthly payments under a qualifying 

repayment plan, while working full time for a qualifying public service employer (such 

as government or certain types of nonprofit organizations). In general, forgiveness 

provided via PSLF raises the cost of the Direct Loan Program; however, there is still 

uncertainty as to how many borrowers will take advantage of the program. Much of this 

uncertainty arises because borrowers are not required to apply for the program or provide 

any supporting documentation on their employment until after having made the 120 

qualifying monthly payments.

On October 5, 2021, the Department announced a temporary change to the PSLF 

program to allow previously ineligible loans to be immediately eligible for forgiveness, 

or additional progress toward forgiveness, with no further action from the borrower. 

The changes included a limited PSLF waiver that allows all payments by student 

borrowers to count toward PSLF, regardless of loan program or payment plan and a 

review of denied PSLF applications for errors, giving borrowers the ability to have 

their PSLF determinations reconsidered. Borrowers who have not previously certified 

employment have been able to apply for the waiver. Two permanent changes to military 

borrowers working toward PSLF were also implemented. This opportunity ended on 

October 31, 2022. 

The Consolidated Appropriations Act, FY 2018, and the Department of Education 

Appropriations Act, FY 2019, each provided $350 million toward Temporary Expanded 

Public Service Loan Forgiveness (TEPSLF) for borrowers who met eligibility for public 

service employment but were not enrolled in a qualified repayment plan. The Consolidated 

Appropriations Act, FY 2020, and the Consolidated Appropriations Act, FY 2021, each 

provided $50 million for TEPSLF. 

Data on approved PSLF applications first became available in FY 2018 since borrowers 

first became eligible for PSLF discharges starting October 1, 2017, after having made 

120 qualifying payments. As of September 30, 2023, the total number of borrowers who 

received forgiveness from the PSLF waiver exceeded 673,000. The value of this forgiveness 

totaled $46.6 billion. Including TEPSLF and PSLF discharges processed before the waiver 

period, the value of forgiveness exceeded $52.1 billion and included 730,000 borrowers.

As of September 30, 2023, the number of borrowers with certified employment totaled 

2.09 million. The low number of approved PSLF applications in relation to employment 

certifications may be partially due to the complicated nature of the program, in particular 

the determination of what constitutes a qualifying payment. In addition, many borrowers 

who file employment certification forms early in their careers may also move into private 

sector employment before completing the 10 years of qualifying payments and thus may 

(a) never apply for forgiveness or (b) apply for forgiveness much later after returning

to public service work. Borrowers may certify public service employment one year at a

time, rather than certifying all 10 years at once, and this process also makes the number
FY 2023 AGENCY FINANCIAL REPORT 61 U.S. DEPARTMENT OF EDUCATION

of borrowers with certified employment higher than the number who have received 

forgiveness. Any future congressional or regulatory action that may affect eligibility for 

PSLF continues to be an area of uncertainty.

Broad-Based Debt Relief: On June 30, 2023, the Supreme Court ruled that the 

Secretary does not have authority under the Higher Education Relief Opportunities for 

Students Act of 2003 (HEROES Act) to establish a student loan forgiveness program. In 

response, the Secretary initiated a rulemaking process aimed at opening an alternative 

path to debt relief using the authority under the Higher Education Act.

Borrower Defense to Repayment: On June 22, 2022, the Department and the 

plaintiffs reached a proposed settlement in the case titled Sweet v. Cardona (formerly 

Sweet v. DeVos). The court granted final approval to the settlement as fair, adequate, 

and reasonable on November 16, 2022. In the settlement, if the borrower defense 

application is related to federal student loans taken out to pay for attendance at any 

school on the list of schools attached to the settlement agreement, the borrower will 

receive “Full Settlement Relief.” Full Settlement Relief means that the federal student 

loan(s) associated with the borrower’s attendance at the school will be discharged, the 

Department will refund any amounts paid to it on those loans, and the credit tradeline 

for those loans will be deleted from the borrower’s credit report.

Estimation Risk

Actual student loan outcomes may deviate from estimated student loan outcomes, which 

is not unexpected given the long projection window of up to 40 years. The Direct Loan 

Program is subject to a significantly large number of borrower-level events and future 

economic factors that heavily impact the ultimate cost of student loans. For example, 

assumptions that need to be estimated for loans originating in FY 2023 include how long 

students will remain in school; what repayment plan will be chosen; whether the loan will 

be consolidated; whether the borrower will die prior to completing repayment, become 

disabled, bankrupt, or have another claim for discharge or forgiveness (closed school loan 

discharge, borrower defense to repayment, etc.); whether the loan will go into deferment 

or forbearance; whether the loan will go into default and, if so, what collections will be 

received on the defaulted loan; and, if the loan is in an IDR plan, what the borrower’s 

employment (public sector or not) and income and family size will be over the next 

25 years. These projections are generally made based on historical data about borrower 

characteristics and behavior, which are more difficult to estimate. Lastly, the direct loan 

portfolio has grown from approximately $356 billion in FY 2011 to more than $1.3 

trillion as of the end of FY 2023. This growth naturally results in larger re-estimates, since 

a re-estimate worth 1 percent of the portfolio today would be more than three times as 

large as a similar re-estimate in FY 2011.

Macroeconomic Risk

The ultimate amount, timing, and total value of future borrower repayments under the 

Direct Loan Program are heavily affected by certain economic factors, especially since the 

introduction of IDR plans.

From the second quarter of 2020 until the expiration of the federal Public Health 

Emergency on May 11, 2023, the COVID-19 pandemic caused widespread disruption 

to the American economy. The emergency relief measures provided by Congress and 

the President resulted in flexibilities for federal student loan borrowers, continuing to 

prevent spikes in delinquency and default rates. Involuntary loan collections from wage 

garnishment, tax refund reductions, and reductions of federal benefits such as Social 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 62 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Security were also suspended. However, the ultimate impact of the pandemic on longterm Direct Loan Program costs will depend on, among other things, short- and longterm unemployment, economic growth trends, and potential structural changes in the 

overall economy and job markets. Some types of macroeconomic risk are inherent to 

student loan cost estimation, and the Department analyzes them regularly—though 

some of these risks have been exacerbated by the unprecedented worldwide pandemic. 

New risks have also developed due to the conditions surrounding the pandemic. Specific 

examples of macroeconomic risk include:

Interest Rates: Direct Loan Program cost estimates are very sensitive to changes in 

interest rates. Under the current program terms, the fixed borrower rates for direct loans 

are established in advance of the upcoming school year, while the Treasury fixed interest 

rate on the Department’s borrowings to fund those loans is not set until after those awards 

are fully disbursed, which can be as much as 18 months later. Unexpected changes in 

interest rates during this time can significantly impact Direct Loan Program cost.

Unemployment: Unemployment rates have been shown to affect both student loan 

volume and student loan repayment decisions and behavior. During periods of economic 

downturn, displaced workers have tended to pursue higher education opportunities in 

high numbers to strengthen their credentials, change career paths, or improve future 

employment opportunities. The exact impact on the cost estimates from the current 

period remains an area of uncertainty. For instance, higher short-term unemployment 

rates could have an impact on future collections of already defaulted loans by increasing 

the risk of fewer collections from wage garnishment and tax refund reductions. A 

sensitivity analysis examining the impact of a 5 percent reduction in default collections, 

limited to cohorts 2018–22, resulted in a projected increase in the re-estimate of 

$3.0 billion.

Wage Growth: The estimated costs of IDR plans are largely dependent on trends in 

observed wage growth. To the extent that future wage growth deviates significantly from 

prior wage growth, actual costs of IDR plans may deviate from estimated costs. The 

Department will continue to closely monitor wage growth following the pandemic. The 

estimates are sensitive to slight changes in model assumptions. The Department continues 

to manage risks in this area by building its knowledge about its borrower base and 

remaining informed of labor market statistics.

Operational Risk

Unforeseen issues in administering and servicing student loans may impact the 

cost estimates. For example, in December 2019, the President signed the Fostering 

Undergraduate Talent by Unlocking Resources for Education Act (FUTURE Act), which 

amends Section 6103 of the Internal Revenue Code to allow the IRS to share taxpayer 

data directly with the Department. Once implemented, this will make it easier for 

borrowers to stay enrolled in an IDR plan by allowing automated data sharing between 

federal agencies and eliminating the need for borrowers to annually recertify their 

income. A timeline for implementation of the FUTURE Act is uncertain. Similarly, 

the Department is working to implement the FAFSA Simplification Act, which makes 

significant changes to the need analysis formula that will also introduce operational 

challenges. The Department invests significant resources to ensure continuous 

improvements in cybersecurity defenses based on current and emerging threats. Despite 

this investment, security threats to operations are ongoing and incidents may happen 

without warning, potentially disrupting student loan administration and ultimately 

borrower cash flows, which can be impacted by the timing of when collections or 
FY 2023 AGENCY FINANCIAL REPORT 63 U.S. DEPARTMENT OF EDUCATION

disbursements are processed. Hence, there is an inherent risk that future, unpredictable 

disruptions in the administrative status quo may impact student loan cost estimates.

Another potentially unforeseen issue that may impact cost estimates is when federal loan 

servicers or private collection agencies exit the student loan servicing program, as several 

have in recent years. The Department remains committed to ensuring that borrowers 

receive high-quality service that helps them access the benefits granted by law.

Next Gen FSA

About FSA

As the nation’s largest provider of financial aid for education beyond high school, Federal 

Student Aid (FSA) delivers approximately $114.1 billion in aid each year to students and 

their families. Through programs authorized under the Higher Education Act of 1965, as 

amended, FSA provides grants, loans, and work-study funds for college and career school. 

FSA’s loan portfolio has grown to more than $1.6 trillion. FSA also provides oversight of 

approximately 5,400 postsecondary institutions that participate in the federal student aid 

programs. In every interaction with students and their families, FSA strives to be the most 

trusted and reliable source of student financial aid information and services in the nation.

The Vision

Through the Next Generation Federal Student Aid (Next Gen FSA) initiative, the 

Department continues to modernize FSA’s programs, technology, processes, and 

operations to improve student, parent, and borrower experiences and outcomes, as well 

as those of student aid partners. Moreover, through Next Gen FSA, the Department 

continues to strengthen cybersecurity protections for students, parents, borrowers, 

institutions, and other financial partners.

Legacy Environment

In the legacy federal student aid environment, students and families navigated a complex 

and fragmented landscape and interacted with multiple systems, vendors, processes, 

and interfaces across a multitude of brands and user experiences. This poor customer 

experience created confusion and resulted in customers failing to understand how to apply 

for and maintain their aid eligibility. As a result, federal student loan borrowers often do 

not know for which loan forgiveness and repayment options they qualify. Additionally, 

operational complexities resulted in higher administrative costs and hindered effective 

oversight of the Department’s vendors. 

Next Gen FSA Environment

As part of the Next Gen FSA initiative, FSA combined multiple websites, contact centers, 

and other customer interfaces into a simplified, consistent, and engaging customer 

experience, which has been enhanced by standardized training and tools. FSA’s website—

StudentAid.gov—continues to be customers’ single front door on the web. In addition, 

the FSA Partner Connect website—fsapartners.ed.gov, which was launched as a part 

of the Next Gen FSA initiative—serves as a resource for entities that participate in the 

federal student aid programs. FSA also continues to enhance its modern self-service and 

consumer information tools that help customers understand the aid they have received, 

their remaining eligibility, for what loan forgiveness programs they may be eligible, and 

how they can manage loan repayment in a way that meets their goals. 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 64 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

During FY 2023, FSA enhanced many of its Digital and Customer Care (DCC) tools, 

including the Public Service Loan Forgiveness (PSLF) Help Tool, Loan Simulator, Aidan® Virtual Assistant, and the Federal Student Aid Estimator. In FY 2023, FSA significantly 

updated the PSLF Help Tool to allow users, for the first time, to fully complete the PSLF 

application process digitally using the new digital signature and submission components 

of the PSLF Help Tool. Previously, borrowers had to follow multiple, disjointed steps 

to complete the PSLF Form, including printing and signing the form and having their 

employers sign the paper form as well. Digital signature and submission created a faster, 

more straightforward, and more transparent process for borrowers applying for PSLF. FSA 

updated Loan Simulator to improve borrowers’ experience and allow users to compare 

different repayment plans more easily. FSA enhanced Aidan to give borrowers information 

about a wider range of topics. 

FSA also updated the Federal Student Aid Estimator, which helps students determine how 

much and for what types of federal student aid they may be eligible. The newly updated 

tool now provides an estimate of the amount of federal student aid that a student may be 

eligible to receive using criteria that align with the 2024-25 Free Application for Federal 

Student Aid (FAFSA®) form. 

Finally, FSA enhanced other resources and tools across StudentAid.gov to help borrowers 

prepare for student loan payments to restart when the COVID-19 payment pause ended 

in fall 2023. 

Throughout FY 2023, FSA completed several updates to the Enterprise Data 

Management and Analytics Platform Services (EDMAPS), including three successful 

packages of updates that support tools on StudentAid.gov, including the PSLF Help Tool 

digital signature and submission functionality and updates to the IDR application.

As a part of the Next Gen FSA initiative, FSA also successfully awarded new contracts to 

five companies to modernize and enhance servicing for federal student loan borrowers. 

These contracts, awarded during FY 2023 through the Unified Servicing and Data 

Solution (USDS) solicitation, mark the first step toward implementing the new servicing 

environment during FY 2024, which will be FSA’s long-term loan servicing solution. This 

new servicing environment will replace the legacy loan servicing environment, which can 

be confusing for borrowers as legacy loan servicers operate under their own brands. 

The new environment is designed to provide all federal student loan borrowers with a 

high-quality customer experience, deliver enhanced support for at-risk borrowers, and 

ensure vendor accountability. FSA’s goals for the new loan servicing environment include:

• providing all federally managed borrowers with complete account management

capabilities on StudentAid.gov;

• increasing servicer accountability to reduce loan delinquencies and defaults and other

customer service benchmarks through clear, measurable service-level agreements and

performance incentives;

• allowing FSA to collect more and better data from legacy loan servicers to improve

account transfers, borrowers’ access to information, and FSA’s ability to monitor

servicer performance; and

• bringing legacy loan servicers up to enhanced cybersecurity standards.
FY 2023 AGENCY FINANCIAL REPORT 65 U.S. DEPARTMENT OF EDUCATION

Awarding the contracts for the new loan servicing environment is the culmination of 

nearly a decade of work to overhaul federal student loan servicing, and borrowers will 

begin to see the benefits when the new servicing environment goes live in spring 2024. 

The Next Gen Business Process Operations (BPO) vendors continue to provide support 

for customers by answering questions through the Federal Student Aid Information 

Center. In FY 2023, BPO vendors handled a higher volume of calls and chats, exceeding 

forecasted volumes in summer 2023, despite reduced hours of operations that went 

into effect earlier in FY 2023 due to budget reduction. BPO vendors provided efficient 

and effective customer experiences about topics that include return to repayment; the 

SAVE Plan and other IDR plans; PSLF, including processing employer adjudication 

cases; and borrower defense to repayment. In addition, BPO vendors also staffed FSA’s 

debt relief hotline, which received a significant number of inquiries, and supported 

users who needed to reset their StudentAid.gov accounts. Finally, the BPO team hosted 

an all-BPO vendor meeting in June 2023 to focus on vendors’ concerns and explore 

BPO recommendations. 

The FSA Partner Connect website, fsapartners.ed.gov, consolidates the tools that 

partners use regularly onto a single digital platform that streamlines operational 

information by award year, provides notifications related to a partner’s specific school 

activities, tracks scheduled system outages, and more. During FY 2023, FSA further 

updated the website by transitioning the FSA Conference website and the FSA Learning 

Management System (LMS) to the Partner Connect website. The new website aligns with 

the overall design of FSA Partner Connect and the new look and feel provide an improved 

user experience for partners. Conference information and resources that were available 

on the FSA Conference website—including session materials and recordings from past 

conferences—were also moved into Partner Connect. 

Finally, during FY 2023, FSA began work on the Title IV Origination and Disbursement 

(TIVOD) Modernization Project. This project will award one or more contracts to 

replace contracts expiring in January 2025. The project will ensure the continuation of 

functionality delivered by Common Origination and Disbursement (COD), the National 

Student Loan Data System (NSLDS®), EDMAPS, and critical back-end services, such as 

data integration and customer service for schools and other partners.

Leveraging Data as a Strategic Asset

The Department continues its focus on leveraging its data as a strategic asset by 

continuing to implement requirements in the Foundations for Evidence-Based Policymaking 

Act of 2018 (Evidence Act; P.L. 115-435) and the Federal Data Strategy. Throughout 

FY 2023, the Department continued to strengthen data governance while overseeing an 

unprecedented investment in students and schools through the Education Stabilization 

Fund, created and subsequently augmented through the triad of COVID relief laws. This 

section highlights five areas guiding the Department towards realizing the power of data 

in daily operations and national policy: (1) the ED Data Strategy; (2) Open Data; (3) 

the Education Stabilization Fund Transparency Portal; (4) Data Quality; and (5) the ED 

Learning Agenda.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 66 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

The Department’s Data Strategy

The Department’s inaugural Data Strategy (December 2020) and the agency’s updated Data 

Strategy—published in August 2023—collectively set forth the agency’s plan to meet its 

longstanding vision: to realize the full potential of data to improve education outcomes and 

lead the nation in a new era of evidence-based policy insights and data-driven operations. 

The mission of the Data Strategy is to optimize the Department’s ability to provide trusted 

data and insights to internal and external stakeholders, guided by the principles of ethical 

governance, conscious design, and a learning culture. The four goals of the Data Strategy 

focus the Department’s efforts on strengthening agency-wide data governance, building 

human capacity to leverage data, advancing the strategic use of data, and improving 

data access, transparency, and privacy. These interconnected goals continue to build the 

Department’s capacity for data governance and management to promote evidence-based 

decision-making. 

Since the publication of the agency’s inaugural Data Strategy in 2020, the Department 

has established an agency-wide data governance program and released foundational 

governance policies, created a data skills training program, made progress on essential 

data infrastructure modernization projects, developed guidance around data quality, data 

privacy, open data, performance measures, and other topics, and built staff capacity for 

data visualization and storytelling. By the end of FY 2023, the Department had made 

substantial progress toward completing planned activities and action plans aligned with 

each of the 19 objectives established in its inaugural Data Strategy. Specifically, the agency 

fully executed 16 of 19, or 84 percent of the original Data Strategy objectives, exceeding 

the Department’s FY 2022–2026 Strategic Plan Objective 5.2 performance metric for 

FY 2023.

The 2023 Data Strategy establishes 16 new objectives that reflect the agency-wide progress 

to date to build data maturity, processes, and outcomes. For example, buttressed by the 

progression achieved through the inaugural Data Strategy, the Department is now focused 

on advancing agency-wide data maturity, developing a data valuation methodology to 

ensure strategic data investments, fully implementing a cohesive data quality plan, and 

improving intra- and inter-agency data sharing as part of the Goal One focus for the next 

few years. Under Goal Two, the data workforce plan aspires to address agency staffing and 

training needs while the Department continues to build out the pioneering Data Literacy 

and Data Science training programs to tailor support for all proficiency levels and help staff 

develop data visualization and storytelling capacity. To advance the strategic use of data 

under Goal Three, the agency will strengthen the evidence-building pipeline by addressing 

the Learning Agenda’s priority learning questions and identifying gaps in Department data 

while supporting the agency’s grant management and student loan servicing systems. Finally, 

under Goal Four, the agency plans to publish and implement an Open Data Plan, continue 

to expand the comprehensive data inventory, enhance transparency through access to agency 

administrative data, and strengthen the data release and disclosure review processes. 

The agency’s pioneering work and accomplishments continue to be recognized by other 

federal agencies and affiliates. For example, in April 2023, the Department’s Data Skills 

Team—leading Data Strategy Goal Two—was bestowed the 2022 Federal Chief Data 

Officers Council (CDOC) Distinguished Achievement in Federal Data Award. The 

Federal CDOC Awards recognize both civilian and military employees and teams 

of federal agencies that demonstrate innovative data policy and practices to advance 

government mission achievement and increase the benefits to the Nation through 

improvement in the management, use, protection, dissemination, and generation of data 
FY 2023 AGENCY FINANCIAL REPORT 67 U.S. DEPARTMENT OF EDUCATION

in decision-making and operations. The award category for Distinguished Achievement in 

Federal Data highlights individuals or teams who make truly exceptional contributions to 

Federal Data and the use of data in policymaking. 

Open Data

Improving access to Department data, while maintaining its quality and confidentiality, 

is key to expanding the agency’s ability to generate evidence to inform policy and 

program decisions. Increasing access to data for Department staff, federal, state, and local 

lawmakers, and researchers can help the Department make new connections and foster 

evidence-based decision making. 

The Department’s Open Data Platform (ODP) at https://data.ed.gov/ was publicly 

launched in December 2020, with an initial population of public data profiles. A central 

repository for Department data assets, ODP is a fully featured, robust, and highly scalable 

data repository that maintains all data assets in a fully searchable catalog. As required by 

Title II of the Foundations for Evidence-Based Policymaking Act of 2018 and guided by 

Data Strategy Goal Four, throughout FY 2023, the Department continued to advance 

toward the development of the comprehensive data inventory by further expanding on 

the ODP; increasing its catalogued data assets for both externally available open data and 

internal sources subject to open data priorities; reviewing all data assets for release; and 

growing the number of Department open data assets listed in the Federal Data Catalogue. 

In FY 2023, the number of data assets categorized in the agency’s comprehensive data 

inventory grew to over 800, demonstrating the Department’s commitment to providing 

the public with quality data that can be freely accessed and used. Progress attained 

exceeded the FY 2023 target for performance indicator 5.4.5 in the Department’s FY 

2022–2026 Strategic Plan.

In FY 2023, ODP was upgraded to support accounts for public users through the General 

Services Administration’s login.gov service. This innovation allows participating users to 

follow offices or specific data assets and receive notifications when the items they follow 

are updated. Future public engagement features through the Open Data Platform are 

planned to build on this foundational capability.

Future Open Data activities include the development, publication, and implementation 

of an Open Data Plan aligned with ED’s Data Strategy, further detailing the agency’s 

efforts to make government data open for the public. Aligned with statutory 

requirements, the following four goals will guide the development of the agency’s Open 

Data Plan: 1) to improve the usability of ED’s data assets, 2) to identify what data assets 

are being used, and how they are being used, 3) to grow the data inventory to help the 

agency find and use available data, and 4) to create processes to improve the quality, 

completeness, accuracy, and timeliness of ED’s data. The agency conducted an OMBapproved public Customer Survey in the summer of 2023, engaged CFO Act agencies, 

and collaborated with stakeholders across the Department to garner input on the 

development of the Open Data Plan and ways to improve the agency’s comprehensive 

data inventory.

The Department awaits further guidance from OMB through the annual Federal Data 

Strategy Action Plan—the last one was published in 2021—as well as the next phase 

of guidance on Title II of the Foundations for Evidence-Based Policymaking Act of 2018, 

known as the OPEN Government Data Act.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 68 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

Education Stabilization Fund Public Transparency Portal

The Department launched the Education Stabilization Fund Transparency Portal in 2020 

to provide transparency into how the $263 billion investment in education provided for 

state and institutional COVID-19 recovery and rebuilding efforts was awarded and spent. 

The ESF Transparency Portal was established by the Coronavirus Aid, Relief, and Economic 

Security Act (CARES Act) in March 2020, with subsequent allocations to the Fund codified 

through the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA Act), 

signed into law in December 2020, and the American Rescue Plan Act (ARP Act), signed 

into law in March 2021. The ESF Transparency Portal includes four primary emergency 

relief funds: (1) the Elementary and Secondary School Emergency Relief (ESSER) Fund, 

(2) the Governor’s Emergency Education Relief (GEER) Fund, (3) the Emergency

Assistance to Non-Public Schools (EANS) Fund, and (4) the Higher Education Emergency

Relief (HEER) Fund. In September 2023, the Department upgraded the website to

improve overall usability and public accessibility of the site’s data assets and reports.

Throughout FY 2023, the work to communicate ESF award expenditures by states, 

local school districts, and institutions of higher education, continued unabated but with 

a renewed focus on improving data collection and accurate and timely reporting via 

the ESF Transparency Portal. In December 2022 and January 2023, the Department 

publicly released, via the ESF Transparency Portal, the Calendar Year (CY) 2021 

Annual Performance Reports (APRs) received from more than 4,600 institutions of 

higher education and 52 FY 2021 APRs for the ESSER Fund grantees. In addition, 

the Department published reports summarizing expenditures and highlighting how 

funds were used to support students, schools, institutions, and their communities while 

spotlighting grantees’ work to reengage students and address learning needs. 

Throughout the spring and summer of 2023, the agency coordinated, planned, and 

conducted the CY 2022 (Year 3) APR data collection for nearly 4,000 institutions of 

higher education. In the summer of 2023, the APR data collections for FY 2022 ESSER 

Fund Year Three, ESF-SEA Fund Year Three, GEER Fund Year Three, and EANS Fund 

Year Two State and outlying area grantee submissions were conducted. To support 

grantees and improve data quality in FY 2023, the agency provided enhanced technical 

assistance through increased customer communications, live webinars, published business 

rules and forms, and the provision of grantee-specific Help Desk support.

The outcome of these interventions and initiatives was a distinguishable increase in the 

timeliness of grantee submission of APR data. In 2023, 100 percent of ESSER grantees 

reported during the allotted initial reporting period and for HEERF, 400 fewer IHEs 

failed to submit their HEERF reports during the allotted initial reporting period than in 

2022. Through the end of FY 2023, the Department continued to work with grantees 

to address data quality issues to provide the public with more accurate information 

on the expenditure of the education relief funds. These FY 2023 initiatives to improve 

communications and the quality of the data the agency receives from ESF grantees 

increases the reliability of and promotes greater transparency into the expenditures of 

CARES, CRRSA, and ARP funds.

Additionally, in July 2023, an audit report managed by the Pandemic Response 

Accountability Committee in coordination with the Department’s Office of Inspector 

General (OIG) and other Inspector Generals across a host of agencies studying the 

sources, intended purpose, and impacts of federal pandemic response program funds 

provided to six select geographic areas, acknowledged ED’s ESF Transparency Portal
FY 2023 AGENCY FINANCIAL REPORT 69 U.S. DEPARTMENT OF EDUCATION

for “clearly distinguishing ESF funding by subprogram, like HEERF, and for providing 

information on how funds are being used by recipients and subrecipients, i.e., local school 

districts, which supports increased public transparency of specific programs.” 

Data Quality

The Department’s Data Quality Program aims to improve the quality of data collected 

and published by the agency, serves as a component part of the response to OIG’s 

annual Management Challenges report, and will be executed in concert with supporting 

initiatives. The agency has published a data quality playbook for grant staff, a data quality 

plan template and instructions for POCs, and offered data quality trainings to support 

the procedures outlined in the agency’s revised Information Quality Act (IQA) guidelines 

which were published in September 2023. 

The agency has determined that there are three root causes to the persistent data quality 

challenges, identifying them initially in the 2020 response to the Department OIG’s 

findings in the Data Quality and Reporting section of its Management Challenges 

report. The first root cause is prime grant recipients’ capacity, as they are focused on 

programming to serve students. They have limited time and fiscal resources to improve 

data quality and reporting. Additionally, prime grantees are responsible for the quality 

of data reported to them by their own subgrantees. Data errors in subgrantee reporting 

become aggregated to larger errors in prime grantee reporting. Second, grants staff 

at the Department have large portfolios, in which looking at data quality is just one 

responsibility during the limited time they must spend monitoring, providing technical 

assistance to grantees, preparing required paperwork, and taking training on grants 

administration. Third, the agency has worked on this issue over the past three years, 

the Department has acknowledged the need to communicate to grantees that there are 

credible consequences for failing to report accurate data at an acceptable level of quality.

The agency is working to implement data quality policies that encourage and support 

principal offices to establish a data quality plan in advance of seeking internal approvals 

for collecting, creating, processing, storing, or otherwise managing data. Additionally, 

the agency has developed and, throughout FY 2024, will deploy templates, training, and 

other resources to support agency staff that are engaged in implementing these policies.

Further progress in improving data quality is reliant on the FY 2023 publication of the 

revised IQA Guidelines. The FY 2023 Guidelines revision reflects in-depth collaboration 

and consultation with leaders across the agency. The Guidelines encourage offices to 

establish and publish data quality plans for all agency data assets disseminated to the 

public. These plans will set measurable data quality targets that are appropriate for how 

the data will be used. Principal offices will also set explicit data quality expectations so 

the data they disseminate will be fit for its intended purpose and, accordingly, those 

offices will need to figure out how to resource their efforts to meet those expectations. 

Publication of the revised IQA Guidelines publication will initiate review of a new Data 

Governance Policy on Data Quality by the agency’s Data Governance Board. The policy 

describes actions offices can take at each stage of the data management lifecycle so that the 

agency uses data for decision making to best serve our nation’s students and educators.

The agency has consolidated access to a suite of data quality resources for staff with a new 

Data Quality page on the agency’s internal website, connectED. The Department released 

a Data Quality Playbook that provides practical strategies, or plays, to improve data 

quality across the data management lifecycle, including checklists and questions to guide 

staff planning data collections for grants programs. The Department also conducted the 

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 70 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

first quarterly instructor-led training on the Playbook in August 2023, and, in addition, 

on-demand, self-paced training has been posted to the agency’s Learning Management 

System, FedTalent. Beginning in FY 2024, the agency plans to pilot a Data Quality 

Plan Template and instructions for completing the Data Quality Plan. The plan will 

help ensure that the quality of a Department data asset is planned for, documented, and 

assessed throughout the data management lifecycle. 

Current data quality capacity is not sufficient to support principal offices as they start to 

use these resources to ensure their data quality is high enough for their intended uses. An 

additional agency staffer hired to lead the Data Quality Initiative, an agency-wide data 

quality coordinator, will serve a vital role in coordinating implementation and assessment 

of these policies and resources. The incumbent in that role will be responsible for 

reviewing data quality plans and providing feedback and technical assistance to principal 

offices, developing and monitoring the inventory of data quality plans, and reviewing 

the impact of these policies against both the agency’s desired near-term and longerterm outcomes.

The Department’s Learning Agenda 

The Department’s FY 2022–FY 2026 Learning Agenda was published in July 2022 

in conjunction with the release of the Department’s Strategic Plan. It establishes the 

plan for how the agency will improve high-quality evidence building to strengthen the 

nation’s education system. The Learning Agenda is aligned to the Department’s goals and 

strategic objectives, reflecting the Secretary’s priorities for the Department over the next 

four years. The Learning Agenda is complemented by an Annual Evaluation Plan. The 

Annual Evaluation Plan includes a listing of the Department’s most significant evaluation 

activities in a given fiscal year and is released in conjunction with the President’s Budget 

request each spring. Both the Learning Agenda and the Department’s Annual Evaluation 

Plan can be found at https://evaluation.gov/agencies/department-of-education.

The Learning Agenda was developed in consultation with the Department’s Evidence 

Leadership Group (ELG). The ELG is co-chaired by the Department’s Evaluation Officer 

and the Director of the Department’s Grants Policy Office (GPO) and includes members 

from the Department’s primary grant-making offices as well as mission-support units, 

such as the Department’s Budget Service and the Office of the General Counsel, and 

ex-officio representatives such as the Chief Data Officer, the Statistical Official, and 

the Performance Improvement Officer. Feedback from OMB and consultation with 

stakeholders across government, education, and the general public was also used to inform 

the Department’s Learning Agenda. 

In collaboration with the Department’s Data Governance Board, the Evidence Leadership 

Group has begun work to align the Department’s evidence-building and data strategies. 

This includes considering whether and how new information collections can be used to 

address agency priority learning questions; how existing collections might be put to use in 

new ways to build evidence related to the Department’s Learning Agenda; and where gaps 

in Department data may suggest the need to collaborate with other partners to meet the 

Department’s learning goals. 
FY 2023 AGENCY FINANCIAL REPORT 71 U.S. DEPARTMENT OF EDUCATION

Continuous Improvement

Improving critical infrastructure, systems and overall capacity, and ensuring sound 

strategic decision-making regarding allocation of resources are essential to the 

Department’s future progress and success. Implementing the new G6 modernization is 

one of the Department’s key initiatives.

G5 Modernization/G6 

The G5 modernization project is an initiative that started in 2019 to develop a new 

grants management system that will support the Department’s grant programs and the 

broader grants community. G6 is the modernized system that will replace G5, allowing 

users to apply, track, and manage all grants through an improved user experience. It 

will modernize and consolidate existing business processes and manual workarounds 

into one platform and streamline the grants management lifecycle, improving oversight 

and monitoring. 

Project Objectives 

The Department’s Grants Management System, G5, is a custom-built, full life cycle 

grants management and payment system that has reached the end of life. Despite years 

of ongoing G5 maintenance, stakeholders continue to identify concerns regarding the 

system’s functionality and/or ease of use. The Department’s current grant processes rely on 

multiple systems utilizing various technologies. Much of the data is duplicated, there is a 

lack of visibility, and there are ad-hoc workarounds. 

To effectively address the needs of all users, the Business Systems Support Division within 

the Office of Finance and Operations initiated the G5 Modernization Initiative to replace 

G5 and implement a state-of-the-art grants management system. The objective of this 

program is to implement an enterprise-wide grants management platform that achieves 

the following objectives: 

1. Improved effectiveness of grant programs by streamlining grant processes, tools, and

technology agency wide.

2. Enhanced and modularized grants platform with superior customer experience using

industry best practices.

3. Reduced cost by minimizing disjointed grants systems, lowering maintenance, and

reducing paper.

4. More informed decision-making by Program Offices by utilizing advanced analytics

and collaboration tools.

5. An evergreen platform capable of easily incorporating future technology

advancements and compliance requirements.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 72 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

System Components 

The “system” consists of two main components. 

Education Grants Platform (EGP). The EGP will serve as the foundation for the 

entire Grants Segment Portfolio of Systems. The EGP, implemented as a “Platform 

of Platforms,” will house Grants Management functionality and capabilities needed 

across the Department. The EGP, depicted below, is a grants platform that incorporates 

Infrastructure as a Service provided by Amazon Web Services, Platform as a Service 

provided by Red Hat OpenShift, and a host of Software as a Service and traditionally 

deployed tools that establish a framework for advanced analytics, technology 

development, and data integration for improved grant operations. Over time, the EGP 

will be used to both develop and host the Department’s grants ecosystem (technology and 

services). G6 is considered the nucleus of the EGP. 

G6. The Department’s Grants Modernization Initiative will implement an incremental 

modern, modular, and secure application that segments the grants process into granular 

modules using microservices that are interdependent, yet autonomous enough to be 

maintained separately. Managing the end-to-end grants process, G6 will combine stateof-the-art Interactive Experience and Customer Experience frameworks to provide users 

with a cognitive grants experience powered by Artificial Intelligence, Natural Language 

Processing, and advanced analytics.

Agile Development 

The Grants Modernization Initiative is developing G6 through a user-centered and 

incremental approach using the Agile methodology over multiple years. The subsequent 

years will be used to roll out G6 capabilities in an incremental manner to production 

and retire the corresponding capabilities from the legacy G5 system. As functionality is 

built, groups of grant users will test and validate what is built prior to it being released in 

the system. OFO has facilitated multiple working groups, user research interviews, and 

outreach sessions that all keep stakeholders informed and include them in the planning 

efforts around development. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
FY 2023 AGENCY FINANCIAL REPORT 73 U.S. DEPARTMENT OF EDUCATION

G6 Capabilities 

G6 is being developed to execute the G5 business processes and functionality across the 

grant lifecycle. The G6 system will: 

• Include all the Department’s core requirements.

• Maintain an advanced security posture for the data and infrastructure.

• Utilize Advanced Business Intelligence and Collaboration features to allow Program

Officers to make more informed decisions with increased communication and

visibility into data.

• Provide an intuitive user experience.

The G6 system will have the following characteristics:

• Modular with the ability to turn off or restrict a module or sub-module as needed.

• Based on an open architecture and OMB-approved grant standards.

• Built to ensure flexibility, adaptability, interoperability, and configurability.

• Built using a modern technology stack that ensures the underlying technology

components do not become outdated before reaching their end of life.

• Mobile-enabled.

• Highly automated.

• Compliant with legislative changes.

• Roles-based and rules-driven.

Timeline 

In Year 1 (FY 2022), the modernization program implemented the EGP. 

In Year 2 (FY 2023), the program began its first phase of the G5 modernization to G6. 

The team is implementing the Pre-award phase of the grants’ lifecycle, including Planning 

and Scheduling, Applications, Application Packages (Grants.gov, Impact Aid, Fellowship), 

Discretionary Grants, Formula Grants, and Loans. These capabilities are identified 

based on what is available in the current G5; however, the Department expects that the 

implementation team will design the G6 system with a much superior user experience 

using the industry best practices, human-centered design, and federal guidelines. 

The Department is planning for the development effort for the remaining years and 

capabilities. FY 2024 to FY 2025 will be dedicated to Phases 2, 3 and 4, when we will 

migrate different modules to the new platform and decommission the corresponding 

modules from the legacy system, therefore stabilizing the G6. In FY 2026, we envision 

decommissioning the legacy G5 and moving into steady state G6.

Management’s Discussion and Analysis (Unaudited)
FY 2023 AGENCY FINANCIAL REPORT 74 U.S. DEPARTMENT OF EDUCATION

Management’s Discussion and Analysis (Unaudited)

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