MANAGEMENT’S

DISCUSSION

and ANALYSIS
2 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

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) 2020 Agency Financial Report (AFR) by refining 

graphics and providing more useful, balanced, and 

easily understood information about the Coronavirus 

Aid, Relief, and Economic Security Act, also known 

as the CARES Act, and about the Department’s loan 

programs, including additional cost and risk information. 

Additionally, we chose relevant web content to provide 

users with additional 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 help us 

continue to improve the quality and usefulness of 

information provided in our AFR, we encourage our 

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 select challenges.

MISSION A ND ORG A NIZ AT IONA L 

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.

T H E DEPA RT M ENT’S A PPROACH 

TO PERFORMANCE

This section provides a brief summary of the 

Department’s performance goals and results for FY 2020. 

Since the Department has chosen to produce separate 

financial and performance reports, a detailed discussion 

of performance information for FY 2020 will be provided 

in the Department’s FY 2020 Annual Performance Report 

and FY 2022 Annual Performance Plan to be released 

online at the same time as the President’s FY 2022 Budget 

in February 2021. For more information, prior year 

performance reports can be found on the Department’s 

website. We also urge 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 e-mailed 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

The Department expends a substantial portion of its 

budgetary resources and cash on multiple loan and 

grant programs intended to support state and local 

efforts to improve learning outcomes for all 

prekindergarten through 12th grade (P–12) students 

in every community and to expand postsecondary 

education options and improve outcomes to foster 

economic opportunity and informed, thoughtful, and 

productive citizens. Accordingly, the Department has 

included more high-level details about sources and uses 

of the federal funds received and net costs by program.

A NA LYSIS OF S YS T E MS, CON T ROL S, 

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 are 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 Enterprise Risk Management, Direct Loans, 

Next Gen Federal Student Aid (Next Gen FSA), Leveraging 

Data as a Strategic Asset, and Technology Business 

Management Solutions (TBMS).
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 3

MANAGEMENT’S DISCUSSION AND ANALYSIS

ABOUT THE DEPARTMENT

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 research.

The Department makes funds and information available 

to individuals pursuing an education, colleges and 

universities, state education 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 to 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 

statutes. We manage and spend 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.

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.
4 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

OUR ORGANIZATION IN FISCAL YEAR 2020

This chart reflects the coordinating structure of the U.S. Department of Education. A text version of the FY 2020 

coordinating structure of the Department is available.

 

*

 The White House Initiatives are Center for Faith and Opportunity Initiatives, White House Initiative on American Indian and Alaska Native Education, White 

House Initiative on Educational Excellence for Hispanics, and White House Initiative on Educational Excellence for African Americans.
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 5

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018–22 Strategic Goals and Strategic Objectives2

PERFORMANCE MANAGEMENT FRAMEWORK

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

starts with the four-year Strategic Plan, including its two-year Agency Priority Goals (APGs), which serve as the foundation 

for establishing and implementing long-term priorities and performance goals, objectives, and measures by which the 

Department can gauge achievement of its stated outcomes. Progress towards the Department’s strategic goals and its APGs 

is measured using data-driven review and analysis. Additional information on performance management is available in the 

Annual Performance Plans and Annual Performance Reports.

The FY 2018–22 Strategic Plan is comprised of four strategic goals and five FY 2019-20 APGs. The Strategic Plan aims to 

align the Administration’s yearly budget requests and the Department’s legislative agenda, supported by the considerable 

experience and resources available from its staff. The Department continues to welcome input from Congress, state and local 

partners, and other education stakeholders about the Strategic Plan. Questions or comments about the Strategic Plan should 

be emailed to PIO@ed.gov.

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

2 The FY 2020 Statement of Net Cost and related notes align with the FY 2018–22 Strategic Plan.

THE DEPARTMENT’S APPROACH TO PERFORMANCE

Strategic Goal 1: Support state and local efforts to improve learning outcomes for all prekindergarten–grade 12 students in every community.

Strategic Objective 1.1 Increase high-quality educational options and empower students and parents to choose an education that meets their needs.

Strategic Objective 1.2 Provide all prekindergarten - grade 12 students with equal access to high-quality educational opportunities.

Strategic Objective 1.3 Prepare all students for successful transitions to college and careers by supporting access to dual enrollment, job skills development 

and high-quality science, technology, engineering and mathematics (STEM).

Strategic Objective 1.4 Support agencies and institutions in the implementation of evidence-based strategies and practices that build the capacity of school 

staff and families to support students’ academic performance.

Strategic Goal 2: Expand postsecondary educational opportunities, improve outcomes to foster economic opportunity and promote an informed, 

thoughtful and productive citizenry.

Strategic Objective 2.1 Support educational institutions, students, parents and communities to increase access and completion of college, lifelong learning 

and career, technical and adult education.

Strategic Objective 2.2 Support agencies and educational institutions in identifying and using evidence-based strategies or other promising practices to 

improve educational opportunities and successfully prepare individuals to compete in the global economy.

Strategic Objective 2.3 Support agencies and educational institutions as they create or expand innovative and affordable paths to relevant careers by 

providing postsecondary credentials or job-ready skills.

Strategic Objective 2.4 Improve quality of service for customers across the entire student aid life cycle.

Strategic Objective 2.5 Enhance students’ and parents’ ability to repay their federal student loans by providing accurate and timely information, relevant tools 

and manageable repayment options.

Strategic Goal 3: Strengthen the quality, accessibility and use of education data through better management, increased privacy protections 

and transparency.

Strategic Objective 3.1 Improve the Department’s data governance, data life cycle management and the capacity to support education data.

Strategic Objective 3.2 Improve privacy protections for, and transparency of, education data both at the Department and in the education community.

Strategic Objective 3.3 Increase access to, and use of, education data to make informed decisions both at the Department and in the education community.

Strategic Goal 4: Reform the effectiveness, efficiency and accountability of the Department.

Strategic Objective 4.1 Provide regulatory relief to educational institutions and reduce burden by identifying time-consuming regulations, processes and policies 

and working to improve or eliminate them, while continuing to protect taxpayers from waste and abuse.

Strategic Objective 4.2 Identify, assess, monitor and manage enterprise risks.

Strategic Objective 4.3 Strengthen the Department’s cybersecurity by enhancing protections for its information technology infrastructure, systems and data.

Strategic Objective 4.4 Improve the engagement and preparation of the Department’s workforce using professional development and accountability measures.
6 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

THE DEPARTMENT’S AGENCY PRIORITY GOALS (APGs)

The Department identified five APGs for FY 2020-2021. Improving education starts with allowing greater decision-making 

authority at the state and local levels and empowering parents and students with educational options. These goals seek 

to increase education choices, enhance multiple pathways for student success in career and job ready skills, improve the 

Department’s Federal Student Aid customer service, improve student privacy protection and cybersecurity at institutions of 

higher education (IHEs), and provide regulatory relief and burden reduction to stakeholders. The effective implementation 

of the Department’s APGs will depend, in part, on the effective use of high-quality and timely data, including evaluations 

and performance measures. The Goal Action Plans and quarterly updates for the APGs are available on www.Performance.

gov/education/education.html.

APG Related Strategic Objective

Education Freedom: Improve awareness of and access to high-quality K-12 

education opportunities for students and families. By September 30, 2021, the 

Department will increase both the number and percentage of total charter school 

students and total scholarship students nationwide. 

• Charter school enrollment will increase from 3.29 million to 3.51 million (6.90 percent 

of all students in public schools). 

• The number of scholarship students, including participants in state-based vouchers, 

tax-credit scholarship, and education savings account program, will increase from 

482,000 to 579,250 (1.10 percent of the total school age population). 

• The number of parents who receive support and engagement through technical 

assistance and other resources will increase by 5 percent per year.

Strategic Objective 1.1: Increase high-quality educational 

options and empower students and parents to choose an 

education that meets their needs.

Multiple Pathways to Success: Improve nationwide awareness of and access to 

career pathways that support job skills development and career readiness. By 

September 30, 2021, the Department will, through programs such as the Career and 

Technical Education and Adult Education State Grants:

• Support the creation and expansion of integrated education and training (IET) 

programs in all 50 states, Puerto Rico, and the District of Columbia. 

• Increase enrollment of participants in IET programs to 56,000.

• Support the enrollment of Career and Technical Education concentrators in science, 

technology, engineering, and mathematics (STEM) fields. 

• Increase by 25,000 the number of federal financial aid recipients who earn a 

postsecondary credential in STEM.

Strategic Objective 1.3: Prepare all students for 

successful transitions to college and careers by supporting 

access to dual enrollment, job skills development and highquality science, technology, engineering and mathematics 

(STEM).

Strategic Objective 2.3: Support agencies and 

educational institutions as they create or expand 

innovative and affordable paths to relevant careers by 

providing postsecondary credentials or job-ready skills.

FSA Customer Service: Leverage the Next Generation Financial Services 

Environment (Next Gen FSA) to improve and personalize customers’ experience 

with Federal Student Aid (FSA). By September 30, 2021, FSA will transform its 

relationship with prospective and current customers through deployment of significant 

components of the Next Gen FSA that result in a personalized experience:

• The number of individuals submitting a Free Application for Federal Student Aid®

(FAFSA®) through a mobile device will increase to 2.6 million. 

• The overall customer satisfaction level throughout the student aid life cycle, as 

measured by the FSA Customer Satisfaction score1, will increase.

Strategic Objective 2.4: Improve quality of service for 

customers across the entire student aid life cycle.

Student Privacy and Cybersecurity: Improve student privacy and cybersecurity 

at institutions of higher education (IHEs) through outreach and compliance 

efforts. By September 30, 2021, the Department will participate in 12 engagements 

with sector-related non-governmental organizations to inform the development of five 

best practice programmatic improvements.

Strategic Objective 3.2: Improve privacy protections 

for, and transparency of, education data both at the 

Department and in the education community.

Regulatory Reform: Provide regulatory relief to education stakeholders as 

necessary and appropriate. (Related Strategic Objective: 4.1) By September 30, 

2021, the Department will provide regulatory relief for education stakeholders by taking 

no fewer than eight deregulatory actions, which includes reduction in paperwork burden.

Strategic Objective 4.1: Provide regulatory relief to 

educational institutions and reduce burden by identifying 

time-consuming regulations, processes and policies and 

working to improve or eliminate them, while continuing to 

protect taxpayers from waste and abuse.

1 The Federal Student Aid Customer Satisfaction Score is an annual composite metric that measures the overall customer satisfaction level throughout the student aid life cycle for 

Free Application for Federal Student Aid® (FAFSA®) applicants (mobile and FAFSA.gov), Title IV aid recipients in school, and borrowers in repayment. The score is based on the 

American Customer Satisfaction Index surveys.
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 7

MANAGEMENT’S DISCUSSION AND ANALYSIS

Strategic Goal 2 focuses on expanding the Department’s 

efforts to support innovative and accessible paths to 

postsecondary credentials and job-ready skills training. 

In addition to supporting expanded postsecondary 

opportunities, the Department has a number of initiatives 

focused on affordability. These initiatives ensure borrowers 

have the best information available to make postsecondary 

program selection and associated borrowing decisions. The 

Department also continues to help students understand 

their financial aid options and repayment obligations. In FY 

2020, $31.6 billion was appropriated to the Department in 

support of this Strategic Goal 2. More than 5,000 grants were 

awarded to support colleges and universities in their efforts 

to promote and expand access and improvements to postsecondary education that will contribute to the global success 

of our nation. In addition, funding for Strategic Goal 2 also 

supports the Department’s enhancements to customer service 

for customers and stakeholders of Federal Student Aid. 

The Department continues efforts to help prepare the nation’s 

workforce of tomorrow with the right skills and credentials 

of today. In FY 2020, the Department conducted a Teaching 

Skills that Matter symposium with more than 1,000 teachers 

to help adult education instructors integrate employability 

skills development with academic instruction. In addition, 

the Department continued to prioritize workforce preparation 

during the COVID-19 pandemic through various virtual and 

technical outreach activities.

In FY 2020, the Department had much success in 

implementing CARES Act provisions. Approximately $14 

billion in funding was appropriated for the CARES Act

Higher Education Emergency Relief Fund Programs. The 

Department succeeded in distributing 90 percent of the 

funding to IHEs within 30 days of authorization. The 

additional 10 percent was distributed within the following 

Strategic Goal 1 focuses on outcomes related to 

the transition from the No Child Left Behind Act to 

implementation of the Every Student Succeeds Act (ESSA), 

which reauthorized the Elementary and Secondary 

Education Act in December 2015. The hallmark of the 

ESSA is the flexibility it provides for states to do what is 

best for children while preserving important protections 

for economically disadvantaged students, children 

with disabilities, English learners, and other vulnerable 

students. The law requires that states take steps to ensure 

all students have access to excellent teachers and positive, 

safe learning environments that equip them for college 

and career success. The Department supports improved 

learning outcomes by awarding approximately $40 billion 

to states, school districts, and nonprofit organizations. 

The Department encourages families to be aware of 

educational opportunities and choices available so that 

they can make the best choice for their student’s needs. 

Access to high-quality educational opportunities should 

be afforded to all students. In FY 2020, the Department 

conducted outreach to states, schools, and other 

educational organizations to promote school choice. As 

learning outcomes are not just affected in the classrooms, 

the Department launched a state information sharing tool 

on schoolsafety.gov which allows schools to share safety 

plans, compare policies, and learn from each other in an 

effort to create safe learning environments.

In response to the COVID-19 pandemic, the Equity 

Assistance Centers funded by the Department developed a 

set of resources to facilitate equitable learning opportunities 

in virtual educational environments. In FY 2020, the 

Department supported P–12 schools impacted by 

COVID-19 with more than $13.3 billion in funding. 

Funding included Elementary and Secondary School 

Emergency Relief Fund grants and the Education 

Stabilization Fund-Rethink K-12 Education Models Grants. 

Goal 1. Support state and local efforts to 

improve learning outcomes for all P–12 

students in every community.

Goal 2. Expand postsecondary educational 

opportunities, improve outcomes to 

foster economic opportunity and 

promote an informed, thoughtful 

and productive citizenry.
8 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

than 750 technical assistance inquiries. The Department 

was also proactive in its approach to cybersecurity by 

conducting outreach and meeting with IHEs.

Strategic Goal 4 focuses in general on protecting taxpayers 

from fraud, waste, and abuse. This involves improving 

internal decision-making and reducing regulatory burden 

on external stakeholders. In FY 2020, $623 million was 

appropriated to support Goal 4. 

The Department continually performs comprehensive 

reviews of the Department’s regulations, guidance, and 

information collections to identify and take appropriate 

action with regard to those that are overly burdensome, 

inconsistent with Administration priorities, unnecessary, 

outdated, or ineffective. In FY 2020, there was savings 

from burden reduction of $113.5 million (annualized) 

and $1.622 billion (present value), both over a perpetual 

time horizon. 

Strategic Goal 4 also includes the responsibility of the 

Department to implement Enterprise Risk Management 

(ERM). The Department uses a coordinated approach 

to identify, measure, and assess challenges related to 

mission delivery and resource management. In FY 

2020, the Department joined an Office of Management 

and Budget pilot to test, assess, and validate sections 

or components of ERM. The Department continues 

to assess ERM maturity and identify likelihoods and 

impacts to Department operations and mission. 

Strategic Goal 4 also includes the responsibility to ensure 

the Department’s workforce is properly trained and 

accountable. In FY 2020, the Department implemented 

a strategy focused on improving employee engagement, 

performance, and competency development. The 

Department continues its efforts to provide professional 

development where gaps in competency have been 

identified. During the COVID-19 pandemic, the 

Department continues to foster employee engagement 

through virtual platforms as most employees telework.

three days. Portions of this funding were used to provide 

emergency financial aid to students. 

The Federal Student Aid office provides more than $120 

billion annually to students and their families. Enhancing 

the service provided to customers and stakeholders continues 

to be priority. The Department has made improvements 

to the StudentAid.gov website that enhances customers’ 

individual experience by making information readily available 

at any time and educating customers on loan repayment. 

Because the CARES Act put student loans in administrative 

forbearance and eliminated interest, the Federal Student Aid 

office ensured borrowers were aware of the changes and how 

the changes impacted their payments and balance.

Strategic Goal 3 focuses on strengthening data-driven 

decision-making in education by focusing on the ways 

the Department manages and makes available education 

data, while protecting student privacy. The Department 

is committed to improving how staff and stakeholders 

access, use, and share meaningful data on education 

while protecting privacy. These improvements enable 

the Department and other stakeholders in the education 

community to better provide the public with the 

information necessary to make informed decisions on 

behalf of their communities, states, and local districts. 

Approximately $556 million in discretionary resources was 

appropriated to support Strategic Goal 3 in FY 2020. 

The Department is committed to protecting student’s 

education data both within the Department and at 

educational institutions. In support of this commitment, 

in FY 2020, the Department collaborated with IHEs 

to respond to more than 400 cybersecurity incidents by 

providing technical assistance to assist with remediation 

and improving their cybersecurity postures. As the 

COVID-19 pandemic forced many schools to transition 

to virtual learning, the Department responded to more 

Goal 3. Strengthen the quality, accessibility 

and use of education data through better 

management, increased privacy protections 

and transparency.

Goal 4. Reform the effectiveness, efficiency 

and accountability of the Department.
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 9

MANAGEMENT’S DISCUSSION AND ANALYSIS

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.

The Department consistently produces complete, accurate, 

and timely financial information. 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 OMB Circular No. A-136, Financial 

Reporting Requirements. The financial statements, notes, 

and underlying business processes, systems, and controls 

are audited by an independent accounting firm with audit 

oversight provided by the Office of Inspector General 

(OIG). For 19 consecutive years, the Department has 

earned an unmodified (or “clean”) audit opinion. The 

financial statements and notes for FY 2020 are on pages 

40–85 and the Independent Auditors’ Report begins on 

page 90.

The principal financial statements are prepared to report 

the financial position and results of operations of the 

reporting entity, pursuant to 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 realization that they are for a 

component of the U.S. Government.

FI NA NCI A L STAT E M ENT IMPAC TS OF 

COV ID -19 AC T I V IT IE S 

Most of the significant changes to the Department’s 

financial statements resulted from the impacts due to 

COVID-19 activities. The CARES Act totaled roughly 

$2 trillion dollars and included almost $31 billion of 

direct appropriations to the Department for educational 

purposes. The largest component of this funding 

established a $30.8 billion Education Stabilization Fund 

for K-12 and higher education. This fund is comprised of 

categories including: (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 provided for 

outlying areas and discretionary grants. The CARES Act

also provided other direct appropriations – primarily to 

Table 1. Key Financial Statement Changes

(Dollars in Billions)

Financial Statement Lines with Significant Changes

Amount Total Changes Changes Due to 

COVID-19

FY 2020 FY 2019 Amount Percentage Amount Percentage

Balance Sheets

Fund Balance with Treasury $ 136.0 $ 104.9 $ 31.1 29.6% $ 19.6 63.0%

Statements of Net Cost

Expand Postsecondary Opportunities, Improve Outcomes to 

Foster Economic Opportunity, and Promote Productive Citizenry 149.4 116.0 33.4 28.8% 51.3 153.6%

Statements of Budgetary Resources

Appropriations (Discretionary and Mandatory) 245.0 118.5 126.5 106.8% 73.2 57.9%

New Obligations and Upward Adjustments (Total) 430.8 323.1 107.7 33.3% 72.3 67.1%

Unobligated Balance, End of Year (Total) 42.6 35.1 7.5 21.4% 0.7 9.3%

Outlays, Net 218.0 116.6 101.4 87.0% 53.4 52.7%

Disbursements, Net (42.9) 40.1 (83.0) -207.0% 42.1 -50.7%
10 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

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fund increased grants for Safe Schools & Citizenship 

Education grants, Historically Black Colleges and 

Universities loan deferrals, and loan administration costs. 

The CARES Act provided support for student loan 

borrowers, primarily by suspending nearly all federal 

loan payments until September 30, 2020, interest free. 

The Department extended certain provisions of the 

student loan deferrals not covered by the CARES Act

to defaulted guaranteed loans held by the Department. 

The Administration subsequently issued a Presidential 

Memorandum which extended the student loan deferrals 

through December 31, 2020. The Department also stopped 

all federal wage garnishments and collection actions for 

borrowers with federally held loans in default. Funding 

for the student debt provisions of the CARES Act and the 

Presidential Memorandum are provided through indefinite 

appropriations.

The cost impacts of the student loan repayment deferrals 

were recorded as loan modifications, a component of 

subsidy expense, which reduced the overall loan receivable 

balances for the Direct Loan and Federal Family Education 

Loan (FFEL) programs by $38.6 billion and $3.3 

billion, respectively. Detailed explanations of these loan 

modifications are provided in the Analysis of Direct Loan 

Program Subsidy Expense section beginning on page 16 and 

in Note 5 of the financial statements beginning on page 57.

Figure 1. COVID-19 Funding Flow 

(Dollars in Billions)

The direct and indirect funding stemming from the 

CARES Act and the Presidential Memorandum is reflected 

in Figure 1.

Elementary and Secondary School Emergency Relief 

(ESSER) Fund—$13.2 billion provided for state 

education agencies (SEAs) and local educational agencies 

(LEAs) to support continued learning for K-12 students 

whose educations have been disrupted by COVID-19. 

Higher Education Emergency Relief (HEER) Fund—

$14.0 billion provided for 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 child care. 

Governor’s Emergency Education Relief (GEER) 

Fund—$3.0 billion 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—$0.6 billion provided for outlying 

areas and discretionary grants to states with the highest 

COVID-19 burdens.

 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 11

MANAGEMENT’S DISCUSSION AND ANALYSIS

BALANCE SHEETS

The consolidated balance sheets present, 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 $1,309.4 billion as of 

September 30, 2020. As shown in Figure 2, the vast 

majority of the assets relate to credit program receivables, 

$1,171.0 billion, which comprised 89.4 percent of all 

assets. Direct Loans comprise the largest share of these 

receivables. All other assets totaled $138.4 billion, most of 

which was Fund Balance with Treasury.

The Department’s liabilities totaled $1,264.5 billion as 

of September 30, 2020. As shown in Figure 3, the vast 

majority of the Department’s liabilities are also associated 

with credit programs, primarily amounts borrowed from 

the U.S. Department of the Treasury (Treasury) to fund 

student loans. Debt associated with Direct Loans totaled 

$1,160.1 billion as of September 30, 2020. 

Figure 4 shows the changes in the Direct Loan receivables 

components over the past five years. The principal amount 

has continued to grow as the Direct Loan program has 

Figure 2. Assets by Type Figure 3. Liabilities by Type

originated all new federal loans since July 2010, when 

originations of new FFEL loans ended. However, the 

rate of increase in principal has slowed, as the Direct 

Loan program has disbursed decreased amounts of new 

loans each year since FY 2016 as a result of stagnant 

and in some cases declining enrollment, while accrued 

interest amounts have increased as more loans have 

moved into active repayment statuses. Even so, new loan 

disbursements continue to exceed overall loan principal 

repayments—student loan borrowers have many options 

to stretch out their repayment terms and reduce their 

monthly payments.

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.

 

 
12 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

the main cause being high participation in income-driven 

repayment (IDR) plans. As of FY 2017, the allowance for 

subsidy changed to a negative balance. In practical terms, 

this means that the present value of funds expected to be 

recovered is now less than the principal outstanding.

Participation in IDR plans has increased as (a) new plans 

have become available that are more advantageous to 

borrowers, (b) new plans have become available that expand 

the potential pool of borrowers, and (c) the Department has 

conducted targeted outreach to borrowers to make them 

aware of their potential eligibility for these plans.

In addition to the impact of the IDR plans, the negative 

subsidy allowance also increased in FY 2020 due to actions 

taken to defer student loans in response to COVID-1 (see 

discussion in the Analysis of Direct Loan Program Subsidy 

Expense section on page 16).

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. The balances reported for “Current Repayment” 

and “Delinquent” are significantly lower than prior years, 

primarily due to the COVID-19 student loan deferrals 

that placed loans in forbearance and subsequently 

cured delinquencies. 

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. The percentage of loans in default 

continues to grow, even as delinquencies and new defaults 

have declined, because defaulted loans can be difficult to 

collect or rehabilitate. 

The FY 2020 delinquent balance is zero due to the 

ongoing deferral of all student loans through December 

31, 2020.

The positive allowance for subsidy balance in FY 2016 

represented estimates of funds expected to be recovered 

in excess of principal loaned less anticipated defaults, 

loan cancellations, and other adjustments. This positive 

allowance for subsidy balances resulted primarily from 

the difference between the interest rates charged by the 

Department to borrowers and the interest rates charged to 

the Department on amounts borrowed from Treasury to 

make the loans. The reduction in the positive allowance 

since FY 2016 is due primarily to higher subsidy costs, 

Direct Loan 

Component

(Dollars

 in Billions)

Fiscal Year

2016 2017 2018 2019 2020

Principal $ 902.8 $ 998.8 $ 1,083.7 $ 1,164.9 $ 1,224.8 

Rate of 

Increase in 

Principal

12.7% 10.6% 8.5% 7.5% 5.1%

Accrued Interest $ 50.8 $ 59.5 $ 72.0 $ 83.3 $ 92.1 

Allowance for 

Subsidy $ 5.3 $ (16.8) $ (40.7) $ (124.4) $ (216.4)

Total No. of 

Direct Loan 

Recipients 

(in Millions)

31.5 33.0 34.2 35.1 35.9 

Figure 4. Components of Direct Loan 

Receivables, Net

(Dollars in Billions)

 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 13

MANAGEMENT’S DISCUSSION AND ANALYSIS

Loan Status

Fiscal Year

2016 2017 2018 2019 2020

Total No. of 

Direct Loan 

Recipients 

(in Millions)

31.5 33.0 34.2 35.1 35.9

Total Dollar 

Amount of 

Direct Loans 

Outstanding

953.6 1,058.4 1,155.7 1,248.1 1,316.9

Current 

Repayment1 406.7 467.8 531.2 594.7 14.7

% Current

Repayment 42.6% 44.2% 46.0% 47.6% 1.1%

In School, 

Grace Period, 

and Education 

Deferments

289.5 291.7 295.5 294.8 282.8

% In School, 

Grace Period, 

and Education 

Deferments

30.4% 27.6% 25.6% 23.6% 21.5%

Forbearance 

and 

Noneducation 

Deferments

106.6 122.5 121.5 133.2 887.5

% Forbearance 

and 

Noneducation 

Deferments

11.2% 11.6% 10.5% 10.7% 67.4%

Delinquent 

(Past Due

31-360 Days)

71.9 79.7 92.5 90.8 0.0

% Delinquent 

(Past Due

31-360 Days)

7.5% 7.5% 8.0% 7.3% 0.0%

Default/

Bankruptcy/

Other*

78.9 96.7 115.0 134.6 131.9

% Default/

Bankruptcy/

Other*

8.3% 9.1% 10.0% 10.8% 10.0%

1 Loans in Current Repayment status include loans that are being repaid ontime. 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 

Direct Loan Portfolio (Principal and Interest)

Table 2. Payment Status of Direct Loan Principal 

and Interest Balance

(Dollars in Billions)

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. Figure 

5 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 6 on page 14 of this report.

Figure 5. Direct Loan Program Cumulative 

Financing Activity

(Dollars in Billions)

 
14 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

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

Fiscal Year 2016 2017 2018 2019 2020 

Net Borrowing 84.4 67.3 89.1 41.5 (32.0)

 Borrowing from Treasury 147.0 160.5 155.3 137.6 116.9 

 Debt Repayments to Treasury (62.6) (93.2) (66.2) (96.1) (148.9)

Interest Expense to Treasury (30.5) (31.3) (32.3) (33.8) (34.7)

Interest Earned from Treasury 3.9 4.3 3.9 4.1 4.8 

Cumulative Taxpayer Cost / (Savings) (5.3) 16.8 40.7 124.4 216.4 

Current Subsidy Expense (Revenue) 16.1 5.3 4.4 61.5 100.9 

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

Fiscal Year 2016 2017 2018 2019 2020 

Loan Disbursements 140.5 142.5 134.1 130.7 117.4 

 Stafford Subsidized 23.8 23.4 20.3 20.0 19.1 

 Stafford Unsubsidized 52.3 51.4 49.0 48.1 46.1 

 PLUS 19.0 18.7 23.1 22.7 21.7 

 Consolidation1 45.5 49.0 41.6 39.8 30.4 

Loan Collections2 73.2 82.0 84.9 91.3 69.9 

 Principal 55.9 62.6 63.5 67.0 55.3 

 Interest 15.5 17.6 19.5 22.4 12.9 

 Fees 1.8 1.9 1.9 1.9 1.7 

* Numbers may not add up due to rounding.

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 6. William D. Ford Federal Direct Loan Program: Following the Funding
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 15

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 7 shows the Department’s gross costs and 

earned revenue over the past five years. 

GROSS COSTS A ND E XCH A NGE 

R E V ENU E BY T Y PE 

As shown in Figure 8, 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); and

 Grant expenses (see Figure 10). 

Figure 7. Gross Costs & Earned Revenue

(Dollars in Billions)

Figure 8. Primary Components of Gross Costs and Earned Revenue

(Dollars in Billions)

 

 
16 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 overall subsidy expense is positive 

or negative. Subsidy expense for new loans disbursed in 

the current year has been negative in recent years 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 in the current 

year was positive in FY 2020 due to rising enrollment in 

IDR plans and a reduction in projected future income of 

borrowers in IDR plans.

The Direct Loan program subsidy re-estimate for FY 2020 

totaled $56.1 billion. In addition to the major assumption 

updates described below, the re-estimate reflects several 

other assumption updates, including interest rates provided 

by OMB, loan volume, and contract collection costs.

 IDR Model Changes (including Public Service 

Loan Forgiveness (PSLF)). The Department 

completed a standard IDR data update to reflect the 

immediate prior cycle for defaults, prepayments and 

Death, Disability, and Bankruptcy (DDB). The DDB 

update includes adjustments for the Total Permanent 

Disability for Veterans regulation. In addition, an 

existing borrower income file was calibrated using an 

additional year of IDR application data through 2018. 

The additional year of borrower income data taken 

from IDR applications has been substantially lower 

than projected. As such, the Department reduced 

its projections of future borrower income by 35%, 

increasing costs associated with IDR. The Department 

also analyzed the actual PSLF approval rates and 

supplementary data. As a result of that analysis, the 

PSLF approval rate was adjusted downward for initial 

cohorts to better reflect the actual data. Trends indicate 

that there has been some improvement in PSLF 

approval rates over time as borrowers better understand 

the application process. PSLF estimates were revised to 

reflect the most recent borrower behavior and adjust 

the temporal element to ramp up PSLF forgiveness 

over time. The combined effect of these updates led to 

a net upward re-estimate of $35.5 billion. 

A NA LYSIS OF DIR EC T LOA N 

PROGR A M SU BSIDY E X PENSE 

The Department’s gross costs can fluctuate significantly 

each year as a result of changes in the estimated subsidy 

expense. The increase in the Department’s gross costs 

from FY 2019 is primarily the result of an increase in the 

subsidy expense for Direct Loans in FY 2020, the primary 

components of which included year-end subsidy reestimates and loan modifications.

Subsidy expense is an estimate of the present value cost 

of providing direct loans, but excludes the administrative 

costs of issuing and servicing the loans. The Department 

estimates subsidy expense using a set of econometric and 

financial models, as well as cash flow models. 

The Department estimates subsidy costs annually for new 

loans disbursed in the current year; updates the previous 

cost estimates for outstanding loans disbursed in prior 

years (subsidy re-estimates); and updates previous cost 

estimates based on changes to terms of existing loans 

(subsidy modifications). Figure 9 shows these three 

components of the Direct Loan program subsidy expense 

for the past five years.

2016 2017 2018 2019 2020

Subsidy Expense for 

New Loans Disbursed 

in the Current Year

$ (5.7) $ (2.6) $ (3.1) $ (3.0) $ 5.1

Subsidy 

Re-estimates 21.8 7.9 7.4 64.5 56.1

Loan Modification - - 0.1 - 39.7

Total Subsidy Expense $ 16.1 $ 5.3 $ 4.4 $ 61.5 $ 100.9

Figure 9. Direct Loan Program Subsidy Expense

(Dollars in Billions)

 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 17

MANAGEMENT’S DISCUSSION AND ANALYSIS

 Repayment Plans. The Department updated the 

data and made an adjustment to exclude special 

consolidation of FFEL loans in FY 2012 and FY 2013 

from the model. These loans are modeled separately 

and were less likely to enroll in income dependent 

repayment plans than typical consolidation loans. The 

combined effect of these changes led to a net upward 

re-estimate of $6.5 billion.

 Default. In addition to the adjustments for the 

CARES Act, the Department updated the data and 

incorporated actual unemployment rates from the 

Bureau of Labor Statistics through June 2020. The 

combined effect of these changes led to a net upward 

re-estimate of $1.8 billion.

 2019 Cohort Assumption Changes. The technical reestimate cannot reflect the impacts of certain assumption 

changes applicable to the current year loan cohort until 

the following fiscal year per OMB guidance. The current 

year’s re-estimate includes a net upward adjustment of 

$4.8 billion for these current year assumption changes 

attributable to the FY 2019 cohort.

 Interest on the Re-estimate. Interest on re-estimates 

is the amount of interest that would have been earned 

or paid by each cohort on the subsidy re-estimate, if 

the re-estimated subsidy had been included as part of 

the original subsidy estimate. The interest on the reestimate calculated on the overall subsidy re-estimate 

resulted in a net upward re-estimate of $5.9 billion.

 Interactive Effects. The re-estimate includes a net 

upward re-estimate of $1.5 billion attributed to 

the interactive effects of the assumption changes 

described above. Each assumption described above is 

run independently. The interactive effect is a result of 

combining all assumptions together to calculate the 

final re-estimate. 

The Direct Loan program modifications were primarily 

the result of student loan deferral actions provided 

by Congress and the Administration in response to 

COVID-19. The student loan deferrals increased the 

government’s cost of student loans and were recognized 

as loan modifications for FY 2020. These modifications 

included the following:

 CARES Act. The CARES Act automatically suspended 

principal and interest payments and set interest rates 

to 0 percent on federally held student loans starting in 

March through September 30, 2020. The relief for 

borrowers resulted in an upward modification cost 

of $24.6 billion, with an additional $459 million for 

cancelled loans for students that did not complete the 

semester due to a qualifying emergency. There was 

a net positive $82 million modification adjustment 

transfer associated with this modification, bringing 

the total to $25.0 billion.

 Presidential Memorandum. On August 8, 2020, the 

President signed a Presidential Memorandum that 

continued the temporary suspension of payments 

and the waiver of all interest on federally held student 

loans through December 31, 2020. The relief for 

borrowers resulted in an upward modification cost of 

$13.5 billion. There was a net negative $66 million 

modification adjustment transfer associated with this 

modification, bringing the total to $13.6 billion.

 Total and Permanent Disability. The Department 

recorded an upward modification for costs associated 

with the regulatory action to provide proactive 

discharge (unless the borrower elects to reject the 

discharge) to borrowers for whom the Department 

of Veterans Affairs provides information showing the 

borrower has a total and permanent disability. These 

discharges resulted in an upward modification cost 

of $1.0 billion. There was a net negative $98 million 

modification adjustment transfer associated with this 

modification, bringing the total to $1.1 billion.

GRANT EXPENSES

Figure 10. Grant Expenses by Program Areas

(Dollars in Billions)

 
18 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

As shown in Figure 10, overall grant expenses increased 

primarily as a result of the CARES Act—primarily the 

Education Stabilization Fund grants described on 

pages 76–77.

In addition to the CARES Act funded grants, the 

Department has more than 100 other grant and loan 

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. 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 Staterun institutions, attending community day programs, 

and correctional facilities.

 Special Education—primarily consists of Individuals 

with Disabilities Education Act (IDEA) 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 assists states in 

providing early intervention services for infants 

and toddlers from birth through age two 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 parenttraining, and information centers.

In addition to student loans and grants, the Department 

offers other discretionary grants under a variety of 

authorizing legislation, with approximately 90 percent of 

non-student aid funds awarded by formula and 10 percent 

through competitive processes. 

STAT E M ENTS OF CH A NGE S I N 

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 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.

STAT E M ENTS OF BU DGETA RY 

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 11 shows the components of the Department’s 

budgetary resources which totaled $473.4 billion for 

the year ended September 30, 2020, increasing from 

$358.2 billion, or approximately 32.2 percent from the 

prior year. This increase was primarily due to increases in 

appropriations received totaling $126.5 billion, of which 

$73.2 billion was for direct and indirect appropriations 

for COVID-19 activity. An increase of $45.5 billion in 

appropriations received for executed re-estimates in FY 

2020 versus FY 2019 also contributed to this overall 

increase (see the following outlay discussion). 

Figure 11. Components of Budgetary Resources

(Dollars in Billions)

 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 19

MANAGEMENT’S DISCUSSION AND ANALYSIS

New obligations incurred increased by $107.7 billion, 

or approximately 33.3 percent, due primarily to grants 

funded by the CARES Act and loan modifications for 

COVID-19 student loan deferrals. 

The combined statements of budgetary resources also 

present the Department’s summary disbursement and 

collection amounts for which Table 3 provides 

additional detail.

Outlays, net is comprised of gross outlays and offsetting 

collections in the Department’s budgetary funds. Outlays, 

net increased $101.4 billion (87.0 percent) due primarily 

to transfers from the Department’s credit program 

budgetary funds to its credit program non-budgetary 

financing funds for (1) increased executed re-estimates 

in FY 2020 versus FY 2019 ($45.5 billion), and (2) 

COVID-19 related loan modifications recognized in FY 

2020 ($42.2 billion). 

Disbursements, net is comprised of gross outlays and 

offsetting collections in the Department’s credit program 

non-budgetary financing funds. Disbursements, net 

decreased $83.0 billion, primarily due to the transfers 

to the Department’s credit program non-budgetary 

financing funds from its credit program budgetary 

funds for the aforementioned executed re-estimate and 

COVID-19 loan modifications. 

FY 2020 FY 2019

Outlays, Net

Credit Programs $ 129.8 $ 36.8 

Grants 85.5 76.9 

Contractual Services 2.0 2.2 

Personnel Compensation and Benefits 0.7 0.6 

Other - 0.1 

Total Outlays, Net $ 218.0 $ 116.6 

Distributed Offsetting Receipts

Negative Subsidies and Downward 

Reestimates of Subsidies (12.3) (12.1)

Repayment of Perkins Loans and Capital 

Contributions (1.3) (0.1)

Other - (0.1)

Total Distributed Offsetting Receipts $ (13.6) $ (12.3)

Disbursements, Net

Direct Loan Program

Gross Disbursements $ 158.2 $ 175.5 

Offsetting Collections (188.1) (128.7)

Total Direct Loan Program Disbursements, 

Net (29.9) 46.8 

FEEL Program

Gross Disbursements 17.5 14.7 

Offsetting Collections (30.6) (21.5)

Total FEEL Program Disbursements, Net (13.1) (6.8)

Other Loan Programs

Gross Disbursements 0.5 0.3 

Offsetting Collections (0.4) (0.2)

Total Other Loan Program Disbursements, 

Net 0.1 0.1 

Total Disbursements, Net $ (42.9) $ 40.1 

Table 3. Outlays, Distributed Offsetting Receipts, 

and Disbursements, Net

(Dollars in Billions)
20 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

ANALYSIS OF SYSTEMS, CONTROLS, 

AND LEGAL COMPLIANCE

MANAGEMENT ASSURANCES

The Secretary of the Department of Education’s Fiscal Year 2020 Statement of Assurance provided below is the final report 

produced by the Department’s annual assurance process.

STATEMENT OF ASSURANCE

FISCAL YEAR 2020

November 16, 2020

The Department of Education’s (the Department) 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 in 

accordance with Appendix A of OMB Circular A-123.

With the exception of a material weakness in financial reporting reported in the 

Independent Auditors’ Report, the Department has not identified any material weaknesses 

in operations, reporting, or compliance with applicable laws and regulations. 

Based on the results of the Department’s assessments described above, our system of 

internal controls provides the Department’s management with reasonable assurance that 

the objectives of Sections 2 and 4 of the FMFIA were achieved as of September 30, 2020.

Betsy DeVos
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 21

MANAGEMENT’S DISCUSSION AND ANALYSIS

INTRODUCTION

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 as well as mission support 

operations through implementation of ERM practices and by establishing, maintaining, and assessing internal control 

effectiveness. The guidance requires federal agencies to provide reasonable assurance that it has met the three objectives of 

internal control:

 Operations—Effectiveness and efficiency of operations. 

 Reporting—Reliability of reporting for internal and external use. 

 Compliance—Compliance with applicable laws and regulations. 

This section describes the Department’s internal control framework, offers an analysis of the effectiveness of its internal 

controls, and explains assurances provided by the Department’s leadership that internal controls were in place and working 

as intended during FY 2020 to meet the three objectives.

Internal Control Framework

The Department’s internal control framework helps to 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 maintains a comprehensive internal control framework and assurance process as depicted 

in the following diagram.

Figure 12. Department of Education Internal Control Framework

 
22 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

evaluate program performance and inform management 

decisions. The establishment of a Data Quality Plan 

integrated into testing of controls is helping to address this 

challenge identified by the OIG.

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 and 

compliance with key financial management laws and 

regulations, as described below. 

Internal Control over Reporting 

The Department maintains processes and procedures 

to identify, document, and assess internal control over 

reporting. Key activities include: 

 Maintaining process documentation for the 

Department’s significant business processes 

and subprocesses.

 Maintaining an extensive library of key financial, 

operations, and Information Technology (IT) controls.

 Providing technical assistance to principal offices to 

help them understand and monitor key controls.

 Refining the Data Quality Plan 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.

In FY 2020, the Department tested 86 key financial 

controls for both grants and non-grants areas. The internal 

controls assessment detected some control deficiencies, 

but none that would rise to the level of material weakness. 

Corrective actions have been initiated for the deficiencies 

identified. In addition, numerous recommendations have 

been provided to process owners to strengthen internal 

controls in their processes, such as verifying immaterial 

differences, obtaining electronic signatures, and updating 

policies and procedures.

Further, operational internal controls have been formally 

aligned with the agency’s overall ERM strategy and 

assessed accordingly. No control deficiencies have been 

reported for FY 2020 related to this assessment.

The Department continues to focus on streamlining and 

coordinating internal control activities to ensure efficiency 

of operations, recognizing the connection points across 

areas, and enabling transparency of information across the 

Department. This framework enables increased visibility 

across compliance processes to allow for greater oversight 

and more informed monitoring of activities related to 

internal controls and risk management by all offices and 

governance bodies, including the Department’s Senior 

Management Council (SMC). This framework also allows 

for the Department to obtain the outcomes of a better 

control system and a 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, that internal controls are in place 

and working as intended, and that operations are efficient 

and effective.

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 for all employees, 

to provide 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 U.S. Government Accountability Office (GAO) 

publication, Standards for Internal Control in the Federal 

Government (commonly referred to as the “Green Book”) 

and OMB Circular A-123, Management’s Responsibility for 

Enterprise Risk Management and Internal Control. 

In FY 2020, the Department identified no material 

weaknesses related to effective, efficient program operations 

and no areas of noncompliance with laws and regulations 

other than those noted in the Analysis of Legal Compliance 

section below. The Department acknowledges that it has 

areas of control that need further strengthening, such as 

those identified elsewhere in this report, as well as the major 

challenges identified by the Department’s OIG in its FY 

2021 Management Challenges report. As an example, data 

quality and reporting are a challenge identified by 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 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 23

MANAGEMENT’S DISCUSSION AND ANALYSIS

 Financial Management Support System (FMSS).

 Contracts and Purchasing Support System (CPSS).

 Grants Management System (G5).

 E2 Travel System.

Across all its components, EDCAPS is serving 

approximately 2,800 Departmental internal users in 

Washington, D.C. and 10 regional offices throughout 

the United States and territories. EDCAPS is serving 

approximately 40,500 external users, mostly users of the 

G5. In FY 2020, the Department conducted an annual risk 

assessment of EDCAPS and tested 82 IT security controls 

out of a baseline of 630 IT security controls. No significant 

deficiencies or material weaknesses were identified.

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 2020: 

 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 (FFATA) and Digital Accountability and 

Transparency Act of 2014 (DATA Act).

 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 outside the financial 

management segment:

 Hyperion Budget Planning module—currently only 

the license fees are included in FMSS investment.

 ED Facilities Loan System (Nortridge)—currently only 

the license fees are included in FMSS investment.

 The Invoice Processing Platform (IPP).

 FSA-Financial Management System financial data.

A NA LYSIS OF FI NA NCI A L 

MANAGEMENT SYSTEMS

The Federal Financial Management Improvement Act of 

1996 (FFMIA) requires management to ensure that the 

Department’s financial management systems consistently 

provide reliable data that comply with federal financial 

management 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 Federal Financial 

Management Improvement Act of 1996, and OMB Circular 

A-130, Managing Federal Information as a Strategic 

Resource, provide specific guidance to agency managers 

when assessing conformance to FFMIA requirements. 

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 together under 

common management control as part of the Education 

Central Automated Processing System (EDCAPS). 

EDCAPS is a suite of financial applications (subsystems), 

including commercial off-the-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.

 Receivable management.

 Cost management.

 Recipient management.

 Administrative processes (e.g., purchasing, travel, and 

miscellaneous payments).

EDCAPS is composed of four main 

integrated components: 
24 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

acceptance of a defaulted debt). As of September 30, 

2020, the Department and FSA were not in compliance 

with the DCIA TOP referral requirement for Title IV 

debt as interpreted by Treasury because FSA had not yet 

revised its loan servicing systems, procedures, and internal 

processes in response to this interpretation. During FY 

2020, FSA continued to implement changes to its default 

loan servicing systems, procedures, and internal business 

process for referring eligible debts to the Treasury Offset 

Program sooner. FSA will build DCIA requirements 

into the NextGen FSA servicing platform. This area of 

noncompliance is noted in the independent auditors’ 

report, Exhibit C.

This determination of noncompliance with the DCIA 

does not represent a material weakness in the Department’s 

internal controls.

Federal Information Security Modernization Act 

of 2014

The Federal Information Security Modernization Act of 2014

(FISMA) requires federal agencies to develop, document, 

and implement an agency-wide program to provide 

security for the information and information systems that 

support the operations and assets of the agency and ensure 

the confidentiality, integrity, and availability of systemrelated information.

The Department’s and FSA’s information security 

programs completed several significant activities in FY 

2020 to improve cybersecurity capabilities and functions, 

some of which included:

 Office of the Chief Information Officer (OCIO) 

established the Department’s cybersecurity risk tolerance 

and appetite which integrates with the Department’s 

overall Enterprise Risk Management (ERM) program. 

Key Performance Indicators (KPIs) and Key Risk 

Indicators (KRIs) have been established to support 

tracking and reporting progress made towards the 

Department’s OCIO ERM target profile. 

 OCIO publishes monthly Department Cyber Security 

Framework (CSF) Risk Scorecards as part of the 

Department’s Information Security Continuous 

Monitoring efforts to identify cybersecurity risks, issues, 

and opportunities for improvements in our cybersecurity 

protections. The Department CSF Risk Scorecard 

provides a detailed analysis tool for Authorizing 

Officials, Information System Owners, and Information 

System Security Officers to prioritize and mitigate risks 

to the Department’s information systems. 

 Lockbox. 

 Department of the Treasury systems.

 Department of Interior systems.

The Department’s financial management systems are 

designed to support effective internal control and produce 

accurate, reliable, and timely financial data and information. 

Based on self-assessments, system-level general controls 

tests, and the results of internal and external audits, the 

Department has not identified any material weaknesses 

in controls over these systems. The Department has 

also determined that its financial management systems 

substantially comply with FFMIA requirements. However, 

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. Below 

are some examples:

Debt Collection Improvement Act of 1996

The Debt Collection Improvement Act of 1996 (DCIA), 

Pub. L. 104-134, 110 Stat. 1321-358, was enacted into 

law as part of the Omnibus Consolidated Rescissions and 

Appropriations Act of 1996, Pub. L. 104-134, 110 Stat. 

1321. The primary purpose of the DCIA is to increase the 

collection of nontax debts owed to the federal government. 

Additionally, the DATA Act, Pub. L. 113-101, 128 Stat. 

1146, amended Section 3716(c)(6) of the DCIA to require 

referral of delinquent debt to Treasury’s Offset Program 

within 120 days. 

Due to unique program requirements of the Higher 

Education Act of 1965 (HEA), the Department requested 

guidance from the Chief Counsel of the Department of 

the Treasury’s Bureau of the Fiscal Service to interpret 

the impact of this revised DATA Act’s delinquent debt 

referral requirement on Title IV debt. In July 2015, the 

Fiscal Service’s Chief Counsel determined compliance 

for Title IV debt requires that the Title IV debt be: 1) 

in technical default (i.e., 271 days delinquent per Title 

IV aging) and 2) a receivable of the federal government. 

Therefore, the DCIA Treasury Offset Program (TOP) 

referral requirement for Title IV debt owned by FSA 

at the time of delinquency is 271 days delinquent, and 

the requirement for debt acquired via a FFEL guarantee 

default claim or default Perkins Loan assignment is 120 

days delinquent (per DCIA aging, which begins upon 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 25

MANAGEMENT’S DISCUSSION AND ANALYSIS

factor authentication solution providing continuity 

of critical business functions. Additionally, OCIO 

identified, analyzed, and recommended a cloud-based 

solution to provide rapid expansion of the Department’s 

VPN capacity supporting the workforce during 

COVID-19 telework phase. OCIO also performed 

outreach for increased vigilance during the COVID-19 

telework phase. OCIO implemented proactive security 

monitoring of PIV-A VPN connections by utilizing 

new data-lake-based Security Information and Event 

Management (SIEM) software solution. Department 

employees have also been educated regarding increased 

phishing and other cybercriminal scams targeting a 

largely at-home workforce (stimulus checks, spoofing 

legitimate Government Health organizations, etc.).

 OCIO completed the enhancement of the Department’s 

Network Access Control (NAC) capability for nongovernment furnished equipment (GFE) within the 

Department’s new IT environment that is superior to 

capabilities that existed prior to the FY 2019 transition. 

This provides a foundation to further implement the 

Department’s zero-trust architecture.

 To bolster the Department’s email security, OCIO fully 

deployed and monitored the Office 365 (O365) email 

Data Loss Prevention (DLP) capability. This capability 

enhances the Department’s overall DLP capabilities 

and works in concert with network and desktop DLP 

solutions. OCIO also deployed DLP desktop agents 

on nearly 100 percent of Department endpoint devices 

to further enhance the identification of personally 

identifiable information such as Social Security and 

credit card numbers. In FY 2020, the Department’s 

DLP solution identified and blocked 9,809 emails which 

prevented potential sensitive personally identifiable 

information security incidents. 

 Through enhanced reporting of email and web 

security posture, the Department was able to 

significantly increase U.S. Department of Homeland 

Security (DHS) Binding Operational Directive 

(BOD) 18-01 compliance from 54 percent to 100 

percent for email security and 87 percent to 96 

percent for Hypertext Transfer Protocol Secure 

(HTTPS) tracking. Additionally, there were no 

overdue critical or high vulnerabilities in FY 2020 for 

ED’s public facing assets reported in accordance with 

DHS BOD 19-02 Cyber Hygiene.

 In FY 2020, the CSF Risk Scorecard was enhanced to 

include risk scoring and reporting for privacy controls 

as well as additional reporting views for the recently 

released security authorization documentation and 

incident response plan testing status scoring risk factors. 

These enhancements further enable the Department’s 

stakeholders to effectively manage system level 

security and privacy risks while ensuring authorization 

documentation and processes are continuously 

monitored for effectiveness. CSF Risk Scorecard 

visualizations were also expanded upon to include 

specific views for FSA servicers and pertinent investment 

review board reporting to streamline communication 

of risk to appropriate stakeholders. These recent CSF 

Risk Scorecard enhancements have provided the 

Department’s executives with new capabilities to identify 

trends, patterns, and opportunities for improvement 

across the organization. Additionally, the scorecard is 

now updated daily for a timely view of risk.

 OCIO disseminated monthly ‘State of IT’ principal 

office-level reports for continued outreach to executive 

stakeholders to take the appropriate actions as 

necessary based on cyber data, trends, metrics, and key 

insights specific to their organization offered through 

cybersecurity data visualizations. 

 The average time to close a Plan of Action and 

Milestones (POA&M) was reduced from 167 days 

in 2019 to 47 days in 2020. The number of accepted 

POA&Ms also dropped from 53 to 29 during the 

same time period. At the closing of FY 2020, the 

Department achieved a 68 percent net reduction in 

past due POA&Ms since starting the reporting period 

on October 1, 2019.These positive metrics are direct 

indicators of the progress achieved in maturing risk 

management capabilities and reduction capabilities.

 OCIO authorized the FedRAMP compliant Splunk 

Cloud as the Department’s cybersecurity data lake and 

began initial configuration for ingestion of Continuous 

Diagnostics and Mitigation and continuous monitoring 

data. Currently, ten data sources have been identified 

for initial operational capabilities. These enhancements 

allow for better cyber risk visibility and monitoring of 

Department information systems to enable prompt data 

driven decisions. 

 To mitigate operational impacts of the COVID-19 

pandemic, OCIO delivered Personal Identity 

Verification authentication (PIV-A) as alternative multi-
26 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

 Quarterly Risk Management Assessment score. 

 Department Cyber Risk score. 

 Previous year IG FISMA maturity score. 

 DHS Cyber Hygiene Scorecard. 

 OCIO continued supporting the Scholarship for 

Service (SFS) program which is managed by the 

National Science Foundation in collaboration with 

the U.S. Office of Personnel Management (OPM) 

and DHS. This initiative reflects the critical need for 

IT professionals, industrial control system security 

professionals, and security managers in federal, state, 

local, and tribal governments. Upon graduation, 

scholarship recipients are required to work for a 

federal, state, local, or tribal government organization 

in a position related to cybersecurity. The Department 

spoke to students from SFS about the Department’s 

internship and upcoming employment opportunities. 

Over 100 students stopped by to learn about the 

Department’s cybersecurity initiatives and how their 

interests, knowledge, skills, and abilities aligned with 

future employment opportunities. OCIO continued 

to support the SFS program during COVID-19 by 

virtually onboarding a student internship team of 

eight students who performed a gap analysis, provided 

recommendations, and aided with next steps for 

adopting a Zero Trust Architecture environment at 

the Department.

 OCIO removed and blocked the Zoom video 

teleconferencing software across the enterprise after 

increased reports of security vulnerabilities. After 

thorough review of the risks associated with Zoom to 

Department users, updated guidance and notifications 

were communicated, allowing the use of Zoom for 

external hosted meetings with the understanding 

that there was no expectation of privacy, and meeting 

contents could be made public.

 OCIO nominated Subject Matter Experts (SMEs) to 

support the DHS Supply Chain Risk Management 

initiative, C-SCRM Cybersecurity Standards 

Innovation Group (CyberSIG). The SMEs contribute 

as key members of the CyberSIG under the 

sponsorship of the General Services Administration 

and OMB. The CyberSIG provides input into 

 Cybersecurity and personnel security requirements 

were incorporated into the Department’s acquisition 

regulations in December 2019. The Office of 

Acquisition Management issued Acquisition Alert 

2020-01, “Education Acquisition Regulation Class 

Deviation: Cyber and Personnel Security Requirements 

for Contractors”. This deviation ensures active contracts, 

solicitations, and future contracts communicate the 

Department’s cybersecurity and personnel security 

requirements to contractors and prospective contractors. 

 The Department deployed a “Report Phishing” button 

on March 25, 2020, to all Department email clients, 

allowing users to directly report suspicious emails 

to ED’s Security Operations Center (EDSOC) with 

a single click of a button. Prior to deployment, the 

average reporting rate for simulated exercises in FY 

2019 was 15.21 percent (the highest reporting rate was 

27.82 percent in March 2019). A phishing exercise 

conducted in the third quarter of FY 2020 resulted in 

a 41 percent reporting rate, with 91 percent of those 

who reported using the new “Report Phishing” button. 

The highest reporting rate noted in FY 2020 was 52.5 

percent in August 2020 in response to an exercise 

which appeared to contain an attachment. This was the 

highest reporting rate since the launch of the phishing 

program in FY 2014. The Department also improved 

its overall response time in reporting. During FY 2018 

and FY 2019 exercises, the first report from an end user 

was within an average of two minutes of the exercise 

launch. In FY 2020, the first report was received within 

an average of one minute of the exercise launch. In the 

event the email was an actual attack, early notification 

would enable the Department to block the internet 

addresses or domains associated with the email and 

reduce the potential impact and risk.

 OCIO continued conducting quarterly Departmentlevel system-tailored Incident Response and 

Contingency Plan testing tabletop exercises virtually, 

which focused on system contingency planning in the 

event of a cyber incident and how the Department 

would respond to such an incident. As of July 2020, 

100 percent of the Department’s FISMA reportable 

systems had a valid contingency plan test. Feedback 

reports were provided to system stakeholders on 

weaknesses and opportunities for improvement to their 

contingency plans:
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 27

MANAGEMENT’S DISCUSSION AND ANALYSIS

 OCIO completed an engagement with the 

National Institute of Standards and Technology’s 

(NIST) Security and Privacy Implementation 

Collaboration Tiger Team to integrate cybersecurity 

and privacy more effectively across government 

and to promote collaborative working relationships 

between cybersecurity and privacy, regardless of 

organizational structure/reporting. As a result of this 

engagement, NIST determined they will not include 

the collaboration index in revision 5 but will instead 

develop a template of the index as a supplemental 

resource for individualized agency use.

capabilities and requirements that will be used for 

C-SCRM government wide shared services.

 OCIO established initial operating capabilities in 

support of standing-up the Department’s Information 

and Communications Technology SCRM program. An 

inter-agency agreement with the Department of Energy 

was established to use their operationalized enterprise 

SCRM program to help identify and reduce potential 

risks associated with third party vendor relationships. 

Through this shared service, the Department will 

receive vendor-specific risk assessment services for our 

information systems and our vendors. 
28 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

FORWARD-LOOKING INFORMATION

This section summarizes information pertinent to the 

Department’s future progress and success.

ENTERPRISE RISK MANAGEMENT

The Department’s Enterprise Risk Management (ERM) 

program supports agency-wide 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 seeks to embed a systematic and 

deliberate view of risk into key management practices, 

ultimately yielding more effective performance and 

operational outcomes. The Department’s implementation 

of ERM includes three critical strategies that are more 

fully described under Strategic Objective 4.2, Identify, 

assess, monitor and manage enterprise risks:

1. Creating a risk-aware culture that includes transparent 

discussions of risks.

2. Implementing an ERM framework and capability 

that leverages existing risk management activities and 

governance bodies.

3. Managing risks in a more coordinated and 

strategic manner.

In FY 2020, the Department took significant steps to 

further develop the ERM program by establishing the 

Office of Enterprise Data Analytics and Risk Management 

(OEDARM), within the Office of Finance and Operations 

(OFO), to direct the agency’s overall ERM strategy and 

formally align ERM and internal controls processes. 

OEDARM leadership established a formal Enterprise Risk 

Management Working Group (ERMWG) with senior 

representation across the agency to further solidify the 

Department’s ERM governance structure. The ERMWG 

helped to conduct coordinated risk assessments and 

incorporated the risks highlighted or exacerbated by the 

COVID-19 pandemic into short- and long-term risk 

planning. OEDARM leveraged partnerships with agency 

leaders to identify, measure, and assess challenges related 

to mission delivery and develop coordinated, actionable 

response plans.

OEDARM leadership actively sought to enhance 

strategic partnerships with ERM colleagues across the 

government as well as with Department’s own Office 

of Inspector General. To better understand how the 

Department’s ERM program has evolved over time, the 

Department enrolled in the Office of Management and 

Budget’s Pilot to validate the Federal ERM Maturity 

Model V1.0, a pilot that will extend through FY 2021. 

Through the pilot, the Department seeks to 1) test, assess, 

and validate sections or components of the Model for 

its iterative refinement; and 2) assess the maturity of the 

Department’s own ERM program. Evaluation will focus 

on an assessment of the Model’s operational viability and 

the influence of the Model on the Department’s riskinformed culture—including executive engagement and 

resourcing processes—with a goal of identifying potential 

improvements to the Model. 

Throughout FY 2021, the Department plans to further 

integrate ERM with key management processes to 

ensure risk indicators and considerations inform budget 

formulation, strategic planning, and performance 

management. OEDARM seeks to support 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. To that end, in FY 

2021, OEDARM plans to develop and implement a 

comprehensive ERM training program for all levels of 

the organization as well as to enhance digital tools for 

collecting, analyzing, and reporting risk data to promote 

transparency and accountability across the Department. 

In light of the current COVID-19 pandemic, the 

Department has intentionally shifted to an even more 

comprehensive, strategic approach to risk management—

one that seamlessly considers national health emergencies 

or other significant crises that could adversely impact 

continuity of operations.
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 29

MANAGEMENT’S DISCUSSION AND ANALYSIS

 Continue to support the development of additional 

tools, such as the College Scorecard and Financial Aid 

Shopping Sheet, to increase transparency around higher 

education costs and outcomes that may help students 

and families make informed decisions before 

college enrollment.

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 given the inherent uncertainty involved in 

developing estimates. 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. 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:

CARES Act and Presidential Memorandum 

(“Memorandum on Continued Student Loan Payment 

Relief During the COVID-19 Pandemic”): The CARES 

Act provided emergency relief measures in the Direct Loan 

program, including suspending loan payments, halting 

collections on defaulted loans, and setting interest rates 

to 0 percent through September 30, 2020. On August 

8, 2020, the President directed the Secretary to continue 

these measures through December 31, 2020. These actions 

have largely insulated federal student loan performance 

from economic disruption caused by the coronavirus 

pandemic, while at the same time reducing the amount 

of loan repayments being remitted to the Department 

of Education. As the pandemic is ongoing, there is great 

uncertainty regarding cost estimates as future legislative 

and administrative actions could extend these emergency 

relief measures past December 31, 2020.

Income-Driven Repayment Plans: Without 

consideration of impacts from the pandemic, IDR plans 

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,1

 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:

 Nearly 70 percent of the Direct Loan portfolio is in 

administrative forbearance, the suspended payment 

status provided to students through the CARES Act.

 As of June 2020, nearly 8.2 million Direct Loan 

recipients were enrolled in IDR plans, representing a 

7 percent increase from June 2019 and a 16 percent 

increase from June 2018. Overall, more than 50 

percent of Direct Loan dollars and 32 percent of 

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 

before the emergency loan relief measures expire on 

December 31, 2020. 

 Work to improve customer service and student aid 

systems and processes by implementing FSA’s Next 

Generation Federal Student Aid (Next Gen FSA), see 

page 33. 1 https://libertystreeteconomics.newyorkfed.org/2019/06/despite-rising-costscollege-is-still-a-good-investment.html
30 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

organization continues to increase. As of September 30, 

2020, the number of borrowers with certified employment 

totaled 1,357,699. 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. 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, provided $50 

million for TEPSLF. Future congressional action that 

may affect eligibility for PSLF continues to be an area of 

uncertainty. Lastly, although the Department continues 

to remain informed on and manage the risk associated 

with estimating participation in this program, uncertainty 

remains about further borrower outreach to boost 

participation in the PSLF program.

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 2020 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, 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 status 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 during times of unprecedented 

tend to be more costly to the government than nonIDR plans. For the 2020 loan cohort, it is estimated that 

the government will recover 40 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. In general, the proliferation of IDR plans 

has made IDR terms more generous and made the plans 

available to a greater number of borrowers; however, these 

plans are traditionally more costly to the government. 

Also, having more repayment plan options complicates 

repayment plan selection, since the tradeoff decisions 

when selecting the plans vary by borrower and may not 

always be entirely clear. Selected comparisons between 

projected originations and borrower repayments under 

the different IDR plans are available on the Department’s 

website. Future commitment to market and increased 

participation in these plans are areas of uncertainty. Future 

legislative and 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 student loan borrower to have the balance of 

their Direct student 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, 

and data on actual PSLF forgiveness remains rather 

limited, as borrowers first became eligible in FY 2018.

Data on approved PSLF applications first became available 

in FY 2018 since borrowers first became eligible for PSLF 

loan forgiveness starting October 1, 2017, after having 

made 120 qualifying payments. As of September 30, 2020, 

the total number of borrowers who received forgiveness 

totaled 3,469. The value of this forgiveness totaled 

$260.49 million. Despite the relatively modest numbers 

of approved applications to date, the number of borrowers 

who have certified their employment in a public service 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 31

MANAGEMENT’S DISCUSSION AND ANALYSIS

issued to use alternative assumptions. Consequently, the 

Department explored the possibility of using economic 

factors from other sources, including, but not limited 

to, the Congressional Budget Office (CBO). Ultimately, 

the Department made the decision after extensive 

consultations with Education leadership and OMB to 

calculate the FY 2020 financial statement re-estimate 

using the President’s Budget 2021 assumptions (OMB 

assumptions). Factors contributing to this decision include 

the fact that any available economic projections have a 

high degree of uncertainty due to the uniqueness of the 

potential economic conditions caused by the pandemic. 

In addition, there is little historical data comparable 

to the current crisis that can be used to extrapolate 

and adjust student loan assumptions. Finally, current 

legislation and the presidential memorandum (i.e., the 

CARES Act) provided temporary relief to student loan 

borrowers through December 31, 2020; as a result, there 

is no meaningful data on the impact of current economic 

conditions on student loan performance. Alternatively, 

the Department conducted targeted sensitivity analysis to 

address potential economic impacts of the pandemic. 

The Department conducts sensitivity analyses as one 

way to assess the degree of uncertainty around the 

economic assumptions. In the analysis reported here, the 

Department replaced the most important inputs from 

the President’s Budget 2021 economic assumptions used 

in the models with the numbers from CBO’s July 2020 

economic package. The following examples show the 

projections of cohorts 1994-2019, where one specific 

assumption is varied from the assumption used in the 

financial statement re-estimate.

The monthly unemployment rate is an assumption 

used in the default projection model. For the sensitivity 

analysis, the CBO projected quarterly unemployment 

rate assumptions were used after June of 2020. Actual 

data from the Bureau of Labor Statistics was available 

for unemployment prior to June 2020; therefore, the 

rates used in the financial statement re-estimate do not 

differ from those used in the sensitivity analysis for 

that timeframe. Changing this assumption resulted in a 

projected increase to the re-estimate of $3.7 billion. The 

chart below shows the changes to the default rate for a sub 

population of loans.

uncertainty facing students and borrowers in repayment 

plans today. Lastly, the Direct student loan portfolio has 

grown from approximately $356 billion in FY 2011 to more 

than $1.2 trillion as of the end of FY 2020. 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.

In 2020, the coronavirus 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, 

preventing spikes in delinquency and default rates. 

Involuntary loan collections from wage garnishment, 

tax refund reductions, and reductions of federal benefits 

such as Social Security are also suspended. However, the 

ultimate impact of the pandemic on long-term Direct 

Loan program costs is subject to significant uncertainty 

and will depend on, among other things, short and 

long-term 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:

Economic Assumptions: As part of its technical reestimate process for the financial statement re-estimates, 

the Department updates economic assumptions 

used to calculate forecasted borrower cash flows. The 

Department obtains the information used to update 

economic assumptions from the OMB. OMB typically 

provides an economic assumption package for MidSession Review (MSR) which updates the economic 

assumptions used for the President’s budget in November 

of the previous year. The Department historically has 

used the MSR assumptions for calculation of financial 

statement re-estimates.

OMB did not release a MSR economic assumptions 

package in FY 2020, and no official guidance was 
32 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

as a way to strengthen their credentials, change career 

paths, or improve future employment opportunities. 

While the coronavirus pandemic has been accompanied 

by a spike in unemployment (at least in the short term), 

the impact on student loan volume has been more mixed, 

as higher education has struggled to provide students the 

level of instruction they were receiving pre-pandemic. 

The exact impact on the cost estimates from the current 

recession remains a significant 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 for three years, starting in the second 

quarter of FY 2021 when the pandemic relief provisions 

are set to expire, resulted in a projected increase in the reestimate of $1 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 

closely monitor impacts to wage growth as a result of the 

pandemic. Data is not available for the FY 2020 financial 

statements, and the ultimate cost may not be known for 

some time. The estimates are sensitive to slight changes 

in model assumptions. For instance, a 10 percentage 

point increase in borrowers reporting zero discretionary 

income from FY 2020 to FY 2022 and a 5 percentage 

point increase for FY 2023 to FY 2025 would result in 

a projected increase to the re-estimate of $2.9 billion. 

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, 

which can make predicting the impact on student loan 

The IDR model is used to develop cash flows for Direct 

Loans being repaid under any of the IDR repayment 

plans, including the income contingent repayment (ICR) 

plan, the income based repayment (IBR) plan, the Pay as 

You Earn (PAYE) plan, and the Revised Pay as You Earn 

(REPAYE) plan. The IDR model also uses information 

from the OMB economic package on the Consumer Price 

Index (CPI-U) as a factor for borrower income inflation, 

balances, and poverty guidelines. A sensitivity analysis that 

replaces the CPI-U with the assumptions from the July 

CBO estimates resulted in a projected increase to the reestimate of $1.7 billion.

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 

Figure 13. Default Rates Using Different 

Unemployment Rate Assumptions

(Subsidized Stafford Cohort 2012 Example)

4 Year Junior/Senior Standard Enter Repay=4

 
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 33

MANAGEMENT’S DISCUSSION AND ANALYSIS

failing to understand how to apply for and maintain 

their aid eligibility, which repayment options they qualify 

for, and the financial implications of their student debt. 

Additionally, operational complexities and out-of-date 

contracts result in higher administrative costs and hinder 

effective oversight of our vendors.

Next Gen FSA Environment

Multiple websites, mobile applications, contact centers, 

and other customer interfaces have been combined into a 

simplified, consistent, and engaging customer experience, 

which will be enhanced by standardized training and 

tools. Since December 2019, FSA has launched a single 

front door on the web, Studentaid.gov, and has launched 

multiple modern self-service and consumer information 

tools that help our customers understand the aid they have 

received, their remaining eligibility, and how they can 

manage loan repayment in a way that meets their goals. 

While FSA’s digital platform helps customers cut through 

the information clutter and access robust self-service, other 

components of Next Gen will bring onboard multiple 

contact centers that provide customers and partners with 

support across the entire student aid lifecycle, all under the 

FSA brand.

In addition to an improved customer experience, Next 

Gen FSA will completely modernize FSA’s back-end 

systems and infrastructure. This transformation will pave 

the way for improved application and loan processing and 

management of customer accounts. The contracts that 

bring onboard these new systems will include objective 

performance standards and accountability measures to 

ensure customers receive accurate, timely responses to 

their inquiries. These new technologies will also integrate 

modern cybersecurity protections, and a new enterprisewide data analytics platform will drive improved data and 

governance standards.

Solicitation and Procurement Process

In January 2019, FSA awarded a major contract for 

Digital and Customer Care, which provides FSA with 

new digital, marketing and communications, and 

customer care platforms that enable the implementation 

of a modern StudentAid.gov and myStudentAid mobile 

application, as well as improved tools for customer 

outreach. In June 2020, FSA awarded five Business 

Process Operations contracts, which bring on board 

vendors that will eventually provide enterprise-wide 

contact centers and back-office processing for all of FSA’s 

customers and institutional partners. In October 2020, 

FSA released a solicitation for the Interim Servicing 

Solution (ISS) which will provide the core processing 

cost estimates a challenge. 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 disbursements are 

processed. Hence, there is an inherent risk that future, 

unpredictable disruptions in the administrative status quo 

may impact student loan cost estimates.

NEXT GEN FSA

About FSA

As the nation’s largest provider of financial aid for education 

beyond high school, FSA delivers more than $115 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 workstudy funds for college or career school. FSA also oversees 

the approximately 5,600 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

FSA manages one of the largest consumer loan portfolios 

in the country, valued at $1.6 trillion.2

 It is critical that 

we provide an environment that provides customers with 

the services and experiences that they expect and the 

outcomes that they deserve. The Next Generation Federal 

Student Aid (Next Gen FSA) initiative is enabling FSA 

to realize this vision by modernizing the way we connect 

with our customers and streamlining our student aid 

systems and processes. This broad effort will deliver an 

improved customer experience for millions of Americans 

across the entire student aid life cycle, from fostering 

greater awareness about the availability of financial aid, 

to applying for aid, to repaying loans, to improving the 

participation experiences and oversight of our partners at 

postsecondary institutions.

Legacy Environment

In the current federal financial aid process, students 

and families must negotiate a complex and fragmented 

landscape, interacting with multiple systems, vendors, 

processes, and interfaces across a multitude of brands 

and user experiences. Too often, this poor customer 

experience creates confusion, resulting in borrowers 

2 Includes lender-held FFEL loans and school-held Perkins loans.
34 FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

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Open Data

The Evidence Act requires agencies to make data “open by 

default.” The Department is planning to develop, release, 

and execute the Act’s required open data plan consistent 

with OMB guidance. The Department will balance 

privacy and security with the open data mandate and the 

priority of the Department to enable broader public use 

of data paid for by its citizens. The Department is also 

developing an Open Data Platform (ODP), a central 

repository for its data assets. Recently released in beta, it is 

a fully featured, robust, and highly scalable data repository 

that maintains all data assets in a fully searchable catalog. 

As required by the Evidence Act, the Department will build 

towards a comprehensive data inventory by expanding on 

the ODP and 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 

consistent with Evidence Act mandates and exclusions, and 

incrementally expanding the number of Department open 

data assets listed in in the Federal Data Catalogue.

Evaluation Officer and Evidence 

Leadership Group

The Evidence Act created a new role, a Department 

Evaluation Officer (EO), who is responsible for: (a) 

developing the Department’s Learning Agenda by 

assessing the Department’s portfolio of evaluations, policy 

research, and ongoing evaluation activities; (b) assessing 

the Department’s capacity to support the development 

and use of evaluation; (c) establishing and implementing 

the Department’s evaluation policy; and (d) coordinating 

a Department-wide evidence-building plan. IES’s 

Commissioner of the National Center for Education 

Evaluation and Regional Assistance is the Department’s EO. 

As required by the Evidence Act, the Department submitted 

its Draft Learning Agenda to OMB at the end of fiscal 

year 2020. The Learning Agenda was developed in 

consultation with the Department’s Evidence Leadership 

Group (ELG). The ELG is co-chaired by the EO 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 Office of General 

Counsel, and ex-officio representatives from the Office 

of 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 will be used to inform the 

system, fulfillment, and labor servicing for the federally 

managed loan portfolio.

The current Title IV Additional Servicing (TIVAS) and 

Not-for-Profit indefinite-delivery, indefinite-quantity 

contracts may be extended through December 2021 and 

March 2022, respectively. ISS will replace the current 

TIVAS and Not-for-Profit relationship upon award and 

migration of borrowers. In the event of a delay in the ISS 

implementation, the appropriate contractual actions will 

be taken to ensure continued servicing capabilities are 

maintained. FSA is taking a similar approach to all legacy 

contracts that will be impacted by the Next Gen FSA 

vision to ensure as smooth a transition as possible for our 

customers and partners.

L E V ER AGI NG DATA A S A 

STRATEGIC ASSET

The Department is focusing on further leveraging its data 

as a strategic asset, in part in response to requirements 

in the Foundations for Evidence-Based Policymaking 

Act (Evidence Act; P.L. 115-435) and the Federal Data 

Strategy. This section highlights three initiatives intended 

to help the Department realize the power of data in daily 

operations and national policy: (1) the development of an 

ED Data Strategy; (2) priorities for Open Data; and (3) a 

new focus for the Evidence Leadership Group in advising 

the Evaluation Officer and developing the Department’s 

learning agenda.

Data Strategy

The 22020 Action Plan under the Federal Data Strategy 

calls for agencies to “put in place a data strategy or road 

map.” The Agency-wide Data Governance Board (DGB) 

has initiated a process to develop the Department’s Data 

Strategy in order to realize the full potential of data to 

improve education outcomes and to lead the nation in a 

new era of evidence-based policy insights and data driven 

operations. This Department-wide effort will include 

agency-wide discussions about data priorities that will help 

improve data maturity and will focus on the Department’s 

capabilities to leverage data, operationalize and optimize 

data governance, and drive cultural change for the benefit 

of all stakeholders. It will build on strengths, weaknesses, 

and opportunities within the Department to 1) strengthen 

agency-wide data governance, 2) build human capacity to 

leverage data, 3) advance the strategic use of data, and 4) 

improve data access, transparency, and privacy.
FY 2020 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 35

MANAGEMENT’S DISCUSSION AND ANALYSIS

Department’s Final Learning Agenda to be submitted to 

OMB at the end of fiscal year 2021.

In addition to advising the EO on the development of 

the Draft Learning Agenda, the ELG advises Department 

leaders on how to support the capacity of ED staff to 

make better use of data and evidence. GPO, led by the 

ELG co-chair, has spearheaded a range of internal training 

opportunities for Department staff to bolster the use of the 

Secretary’s policy priorities, including the use of evidence 

in program design, and to consider how the Department’s 

grantmaking activities can build evidence for improvement 

in the future. This work, done in close collaboration with 

partners across the Department, will be informed in fiscal 

year 2021 by the recently-completed Interim Capacity 

Assessment, which included a systematic effort to collect 

information about staff members’ capacity to use evidence 

in their day-to-day work.

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 

Technology Business Management Solutions is one of the 

Department’s key initiatives.

Technology Business Management 

Solutions (TBMS) 

The purpose of the TBMS project is to provide greater 

cost transparency into IT spending. The TBMS project 

will allow OCIO to communicate the cost drivers and 

value of IT to senior leadership, improve the efficiency and 

predictability of the formulation of the IT budget, and 

optimize IT costs. 

Beginning in 2017, OMB required agencies to begin 

reporting IT spending in alignment with the TBM 

Framework, including using Cost Pools and IT Towers to 

classify IT spending. The Department intends to leverage 

TBM beyond the minimum OMB reporting requirements 

to encompass the full implementation of the TBM cost 

accounting framework. The Department of Education 

is refining the TBM effort to: 1) provide accurate cost 

analysis and accounting of operations and services to 

improve tracking cost variances; 2) provide ad hoc reports 

to stakeholders on IT spending; and 3) contextualize ED’s 

internal resource costs with real world data to inform 

decisions. Ultimately, the goal is to provide a “bill of IT” 

to form the basis of a show-back model to drive more 

informed decision-making around IT.

The objective is to implement an integrated solution that 

will allow OCIO to:

 Accurately account for and categorize IT spending in 

IT Cost Towers and Pools.

 Evaluate IT spending using a method that helps 

identify redundant IT assets (e.g. systems, applications, 

and licenses).

 Extract cost elements from disparate sources, analyze 

these elements, and report cost stressors and trends 

to stakeholders.

 Prepare accurate pricing through a show-back model to 

client offices for the services provided and consumed 

by each client office.