MANAGEMENT’S

DISCUSSION

AND ANALYSIS
2 FY 2021 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) 2021 

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. The Department also chose relevant 

web content to provide users with more information 

about the Department’s operations and performance.

To take advantage of the hyperlinks embedded in the 

report, the Department recommends reading it on the 

Internet. To continue to improve the quality and usefulness 

of information provided in the AFR, the Department

encourages the public and other stakeholders to provide 

feedback and suggestions at AFRComments@ed.gov.

This section highlights information on the Department’s 

performance, financial statements, systems and controls, 

compliance with laws and regulations, and actions taken 

or planned to address select challenges.

M I S S I O N A N D 

ORGANIZATIONAL STRUCTURE

This section provides information about the Department’s 

mission, an overview of its history, and its structure. The 

active links include the organization chart and principal 

offices and a link to the full list of Department offices

with a description of selected offices by function.

T H E D E PA R T M E N T ’ S A P P R O AC H 

TO PERFORMANCE

This section provides a summary of the Department’s 

performance goals and results for FY 2021. Since the 

Department has chosen to produce separate financial 

and performance reports, a detailed discussion of 

performance information for FY 2021 will be provided in 

the Department’s FY 2021 Annual Performance Report and 

FY 2023 Annual Performance Plan to be released online 

at the same time as the President’s FY 2023 Budget of the 

United States Government (President’s Budget) in February 

2022. For more information, prior year performance 

reports can be found on the Department’s website. The 

Department also urges readers to seek programmatic data 

as it is reported in the Congressional Budget Justification, 

as well as on the web pages of individual programs. 

Any questions or comments about the Department’s 

performance reporting should be emailed to PIO@ed.gov. 

For more details on performance, please refer to the 

Department’s budget and performance web page at www.

Performance.gov.

FINANCIAL HIGHLIGHTS

This section provides summarized information and analyses 

about the Department’s assets, liabilities, net position, 

sources and uses of funds, program costs, and related trend 

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

information contained in the financial statements and 

related notes and provides an analysis of key financial 

statement changes.

A N A LYS I S O F SYS T E M S , C O N T R O L 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 Generation Federal Student Aid (Next Gen FSA), 

Leveraging Data as a Strategic Asset, and Technology 

Business Management Solutions (TBMS).
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 3

MANAGEMENT’S DISCUSSION AND ANALYSIS

About the Department

Our Mission

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

promote student achievement and preparation for 

global competitiveness by fostering educational 

excellence and ensuring equal access.

Who We Are. In 1867, the federal government recognized 

that furthering education was a national priority and 

created a federal education agency to collect and report 

statistical data. The Department was established as a 

Cabinet-level agency in 1980. Today, the Department 

supports programs in every area and level of education 

from preschool through postdoctoral 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 laws. 

The Department manages and spends financial resources 

on programs designed to support parents, teachers, 

principals, school leadership, institutions, and states in 

the pursuit of instilling knowledge and transferring skills 

to students.
4 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

The Department in Fiscal Year 2021

This chart reflects the coordinating structure of the U.S. Department of Education. A text version of the FY 2021 

coordinating structure of the Department is available.

Note: The colors on this chart are for aesthetics only.

* The Office of the Under Secretary is responsible for the administration of the White House Initiative on Advancing Educational Equity, Excellence, and Economic Opportunity 

through Historically Black Colleges and Universities.

** 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 Advancing Educational Equity, Excellence, and Economic Opportunity for Hispanics; and White House Initiative on Educational Excellence for African Americans.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 5

MANAGEMENT’S DISCUSSION AND ANALYSIS

The Department’s Approach to Performance

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 (APG), 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 2020 and FY 2021 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 will implement a new Strategic Plan for 

FY 2022–26 that will include new strategic goals and strategic objectives. Additionally, new APGs will be implemented for 

FY 2022 and FY 2023. Questions or comments about the Strategic Plan should be emailed to PIO@ed.gov.

FY 2018–22 Strategic Goals and Strategic Objectives

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

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* Improve regulatory processes. 

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.

* Strategic Objective 4.1 was revised due to Executive Order 13992, Revocation of Certain Executive Orders Concerning Federal Regulation
6 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

THE DEPARTMENT’S AGENCY PRIORITY GOALS

The Department identified five APGs for FY 2020–2021. These goals aimed to increase education choices, enhance 

multiple pathways for student success in career and job ready skills, improve the Department’s Federal Student Aid (FSA) 

customer service, improve student privacy protection and cybersecurity at institutions of higher education (IHE), and 

provide regulatory relief and burden reduction to stakeholders. The Department discontinued reporting on the APGs 

with the change of administration in January 2021. GPRA requires agencies to report quarterly updates of progress 

APG 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.

Related Strategic 

Objective

Strategic Objective 1.1: Increase high-quality educational options and empower students and parents to choose an 

education that meets their needs.

APG 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.

Related Strategic 

Objective

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).

Related Strategic 

Objective

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.

APG 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 score*, will increase.

Related Strategic 

Objective

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

APG 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.

Related Strategic 

Objective

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

and in the education community.

APG 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.

Related Strategic 

Objective

Strategic Objective 4.1: Improve regulatory processes.

* 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 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.

** The APG was discontinued due to Executive Order 13992, Revocation of Certain Executive Orders Concerning Federal Regulation
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 7

MANAGEMENT’S DISCUSSION AND ANALYSIS

made towards achieving APGs to a centralized website: 

Performance.gov. These APGs are intended to focus 

efforts toward achieving the priorities of the Administration 

leadership under which they were established. Consistent 

with this intention, when a Presidential election leads 

to a change in Administration, reporting on the APGs 

established by a different Administration to Performance.

gov is discontinued in a transition year (e.g., 2021) for the 

remainder of that APG cycle’s performance period (e.g., FYs 

2020–2021 APG cycle).

Goal 1. Support state and local efforts to 

improve learning outcomes for all P–12 

students in every community.

Strategic Goal 1 focused 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. In FY 2021, $41.8 billion was appropriated to 

the Department in support of Strategic Goal 1.

The Department encourages families to be aware of 

educational opportunities and options 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 2021, the Department continued 

to support greater state and local flexibility in elementary 

and secondary education and encouraged providing school 

choice options to families. The Institute of Education 

Sciences’ (IES)-funded Research on Education Access 

and Choice (REACH) Center continued to study all 

forms of school choice and provide evidence-based 

resources through its What Works Clearinghouse

to inform and improve choice policy design and 

implementation to increase opportunities and outcomes 

for disadvantaged students.

Due to the COVID-19 pandemic, the modes and quality 

of educational instruction varied across the nation. The 

Department provided support and assistance to state 

education agencies (SEA), local educational agencies 

(LEA), families, and other stakeholders in the education 

community through various resources such as grants, 

technical assistance, and outreach activities. Resources 

included three volumes of the Department’s COVID-19 

Handbook, which focused on strategies for safely 

reopening elementary and secondary schools, roadmap 

to reopening safely and meeting all students’ needs, 

and addressing the impact of COVID-19 on higher 

education students, faculty, and staff. The Department 

published websites that shared best practices and lessons 

learned as schools reopened for in-person learning. 

Additionally, the Department provided guidance on 

the use of American Rescue Plan Act of 2021 (ARP) 

funding to include the Summer Learning & Enrichment 

Collaborative which called on states to use ARP funding 

to build effective summer programs to help address the 

lost instructional and extracurricular time students may 

have experienced as a result of the COVID-19 pandemic, 

particularly for underserved communities.

Goal 2. Expand postsecondary educational 

opportunities, improve outcomes to foster 

economic opportunity and promote an 

informed, thoughtful and productive citizenry.

Strategic Goal 2 focused 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 multiple 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 2021, $31.9 billion was appropriated to the 

Department in support of this Strategic Goal 2. The 

Department awarded more than 6,000 discretionary 

grants designed to strengthen the capacity of colleges 

and universities to promote reform, innovation, and 

improvement in postsecondary education; promote and 

expand access to postsecondary education; and increase 

college completion rates for the nation’s students. In 

addition, funding for Strategic Goal 2 also supports the 

Department’s enhancements to FSA customer service. 

The Department continues efforts to help prepare the 

nation’s workforce of tomorrow with the right skills and 

credentials of today. In FY 2021, the Department continued 
8 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

the reTHINK Adult Ed Challenge, which targeted the 

design of 100 or more new preapprenticeship programs 

involving partnerships between adult education providers, 

sponsoring apprenticeship organizations, and employers. The 

selected finalists came from a variety of institutions including 

institutions of higher education, local education associations, 

community or faith-based organizations, and correctional 

facilities. The Department awarded one grand prize and four 

runner-up awards between $100,000 and $250,000 to fund 

model design, scale-up and program implementation. The 

Department also supported the adult education and literacy 

practitioners with online professional development to support 

them in delivering virtual instruction during the pandemic. 

FSA provides more than $120 billion annually to students 

and their families. Enhancing the service provided to 

customers and stakeholders continues to be priority. In 

FY 2021, Aidan®, the StudentAid.gov virtual assistant, 

became available to all StudentAid.gov website visitors. 

FSA will continue to improve the user experience by 

adding new content, developing new capabilities, and 

refining the artificial intelligence model.

In FY 2020, the Department successfully placed more 

than 40 million federal student loan borrowers in 

administrative forbearance status. In FY 2021, FSA has 

ensured that student loan servicers have kept borrowers in 

a suspended repayment status, without accruing interest or 

being subject to adverse credit reporting. The Department 

is preparing to successfully return federal student loan 

borrowers to repayment in February 2022.

Goal 3. Strengthen the quality, accessibility 

and use of education data through better 

management, increased privacy protections 

and transparency.

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 to provide stakeholders in the education 

community with timely and accurate information that 

allows them to make informed decisions. Approximately 

$574 million in discretionary resources was appropriated 

to support Strategic Goal 3 in FY 2021.

In December 2020, the Department completed and 

published its inaugural Data Strategy. The Data 

Governance Board guided the development of four goals—

strengthen agencywide data governance; build human 

capacity to leverage data; advance the strategic use of data; 

and improve data access, transparency, and privacy—

with 19 objectives. This Data Strategy provides a road 

map for the agency to improve education outcomes and 

lead the nation through evidence-based policy and datadriven decisions.

The Department collected information necessary 

to facilitate clear and transparent reporting on the 

implementation of the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act); the Coronavirus 

Response and Relief Supplemental Appropriations Act of 2021 

(CRRSAA); and the American Rescue Plan Act of 2021. 

The Education Stabilization Fund (ESF) Transparency 

Portal was launched, which allows the Department 

to track performance, hold grantees accountable, and 

provide transparency to taxpayers and oversight bodies. 

Additionally, the Department completed its first collection 

of annual performance reports from organizations that 

received CARES Act grants, using capabilities within 

the ESF Public Transparency Portal to enable grantees to 

submit annual performance reports on funding authorized 

through the Higher Education Emergency Relief Fund 

(HEERF), the Elementary and Secondary School 

Emergency Relief (ESSER) funds, and the Governor’s 

Emergency Education Relief (GEER) funds. 

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 2021, the Department engaged with nearly 1,000 

schools to inform, collaborate, and improve the security of 

student financial and privacy data. This engagement has 

led to improvements in outcomes, reduction of risks, and 

enhanced cybersecurity and student data privacy. FSA’s 

postsecondary cybersecurity team conducted more than 

20 outreach activities, both in response to breach incidents 

and proactively to improve compliance with cybersecurity 

safeguards. Additionally, the Department conducted 

outreach initiatives to more than 500 IHEs in response to 

Microsoft Exchange vulnerability to ensure that IHEs were 

aware of the vulnerability and took appropriate actions to 

remediate or prevent potential exposure.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 9

MANAGEMENT’S DISCUSSION AND ANALYSIS

In FY 2021, the ESF Public Transparency Portal, 

launched in November 2020, was updated throughout 

the year to display awards made to and expenditures 

made by states, districts, and colleges authorized through 

the CARES Act, CRRSAA, and the ARP. The portal 

is used for key data collections associated with the 

ESF—specifically, the HEERF, GEER, ESSER, and 

equivalent Outlying Area funds. The Public Transparency 

Portal allows the Department to track performance, 

hold grantees accountable, and provide transparency to 

taxpayers and oversight bodies.

Goal 4. Reform the effectiveness, efficiency 

and accountability of the Department.

Strategic Goal 4 focuses in general on protecting taxpayers 

from fraud, waste, and abuse. This involves improving 

internal decision-making and operations to provide 

better delivery of services to stakeholders. In FY 2021, 

$624 million was appropriated to support Goal 4. 

Strategic Goal 4 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 2021, 

the Department established the Office of Enterprise 

Data Analytics and Risk Management, which formally 

integrates ERM and operational internal controls 

activities and aims to provide leadership with actionable 

insights powered by data analytics. The office supports a 

culture of continuous process improvement in which data 

and awareness of enterprise risk are used to objectively 

inform strategic and operational decisions and optimize 

the Department’s performance. 

Strategic Goal 4 also includes the responsibility to ensure 

the Department’s workforce is properly trained and 

accountable. In FY 2021, the Department established the 

Department-wide National Engagement Strategy (NES), 

focusing on four key engagement areas: Leaders Lead, 

Collaborative Management, Merit Systems Principles, and 

Training and Development. Implementation of the NES 

will formalize and streamline ideas and feedback as well as 

assist in sharing best practices across the Department. 
10 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

Financial Highlights

financial statements and notes are prepared in accordance 

with accounting principles generally accepted in the 

United States for federal agencies issued by the Federal 

Accounting Standards Advisory Board and the format 

and content specified by Office of Management and 

Budget (OMB) Circular No. A-136, Financial Reporting 

Requirements. 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 20 consecutive years, the Department has 

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 Statement Lines 

with Significant Changes

Amount Total Changes Changes Due to COVID-19

 FY 2021 FY 2020 Amount Percentage Amount Percentage

Balance Sheets

Fund Balance with Treasury $ 351.9 $ 136.0 $ 215.9 158.8% $ 202.4 148.8%

Loan Receivables, Net - Direct Loan Program 1,104.9 1,100.5 4.4 0.4% (49.5) -4.5%

Loan Receivables, Net - Federal Family Education 

Loan (FFEL) Program 58.2 67.4 (9.2) -13.6% (3.0) -4.5%

Debt Associated with Loans - Direct 

Loan Program 1,142.2 1,160.1 (17.9) -1.5% (49.5) -4.3%

Debt Associated with Loans - FFEL Program 78.3 89.0 (10.7) -12.0% (3.0) -3.4%

Loan Guarantee Liabilities 7.5 1.1 6.4 581.8% 0.6 54.5%

Accrued Grant Liability 7.6 1.9 5.7 300.0% 3.9 205.3%

Statements of Net Cost

Improve Learning Outcomes for All P-12 Students 60.9 40.0 20.9 52.3% 21.0 52.5%

Expand Postsecondary Opportunities, Improve 

Outcomes to Foster Economic Opportunities, and 

Promote Productive Citizenry

 178.8 149.4 29.4 19.7% 85.2 57.0%

Statements of Budgetary Resources

Unobligated Balance from Prior Year Budget 

Authority (Net) 41.4 26.9 14.5 53.9% 0.7 4.8%

Appropriations (Discretionary and Mandatory) 476.8 245.0 231.8 94.6% 235.0 95.9%

New Obligations and Upward Adjustments (Total) 627.5 430.8 196.7 45.7% 217.2 50.4%

Unobligated Balance, End of Year (Total) 62.1 42.6 19.5 45.8% 17.8 41.8%

Outlays, Net 267.1 218.0 49.1 22.5% 37.5 17.2%

Distributed Offsetting Receipts (6.6) (13.6) 7.0 -51.5% - 0.0%

Table 1.

Key Financial Statement Changes

(Dollars in Billions)
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 11

MANAGEMENT’S DISCUSSION AND ANALYSIS

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

financial statements and notes for FY 2021 are on pages 

48–93 and the Independent Auditors’ Report begins on 

page 98.

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 

F I N A N C I A L S TAT E M E N T I M PAC T S O F C OV I D -19 AC T I V I T I E S 

Most of the significant changes to the Department’s 

financial statements resulted from the impacts due to 

coronavirus disease 2019 (COVID-19) activities. Congress 

passed multiple COVID-19 relief bills in FY 2020 and 

FY 2021, including the following that provided a total 

of $282.5 billion of direct appropriation funding for 

educational purposes:

• Coronavirus Aid, Relief, and Economic Security Act of 

2020 (CARES Act) $31.0 billion

• Coronavirus Response and Relief Supplemental 

Appropriations Act of 2021 (CRRSAA) $82.0 billion

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

These appropriations funded a variety of programs 

administered primarily through grant programs. The 

largest component of the education funding provided 

by the COVID-19 relief appropriations established the 

Education Stabilization Fund which included (1) the 

Elementary and Secondary School Emergency Relief 

Fund, (2) the Higher Education Emergency Relief Fund, 

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

(4) funds for outlying areas. 

The COVID-19 relief legislation and administrative 

actions also provided support for student loan borrowers 

primarily by suspending nearly all federal loan payments 

until January 31, 2022, interest free. The Department 

also stopped all federal wage garnishments and collection 

actions for borrowers with federally held loans in default. 

Funding for the student loan repayment deferrals was 

provided through FY 2020 and FY 2021 indefinite 

appropriations totaling $98.4 billion. 

Cost impacts of the student loan pause on interest 

and collections were recorded as loan modifications in 

FY 2020 ($41.9 billion) and FY 2021 ($53.1 billion). 

These COVID-19 loan modifications are a component 

of subsidy expense, which reduced the overall loan 

receivable balances for the Direct Loan and Federal Family 

Education Loan (FFEL) programs by $88.0 billion and 

$6.9 billion respectively over the past two years. Detailed 

explanations of the FY 2021 COVID-19 Direct Loan 

Program loan modifications are provided in the Analysis of 

Direct Loan Program Subsidy Expense section beginning 

on page 19 and in Note 5 of the financial statements 

beginning on page 62.

The direct and indirect funding stemming from the 

combined FY 2020 and FY 2021 COVID-19 relief 

legislation and administrative actions is summarized in 

Figure 1. Obligated and unobligated COVID-19 funds 

remaining to be disbursed as of the end September 30, 

2021, totaled $222.0 billion. Most of the undisbursed funds 

are for the Elementary and Secondary School Emergency 

Relief (ESSER) Fund. While states may have made 

subawards for all of their ESSER funding, subawardees may 

still be in the process of completing their obligations and 

requesting reimbursement from the states who will then in 

turn drawdown the remaining undisbursed funds.

In addition to COVID-19 relief, the Department 

provided targeted relief to thousands of borrowers 

by canceling $11.5 billion of loans using authorities 

previously provided by Congress. The targeted 

beneficiaries include those qualifying for total and 

permanent disability discharge, those who were 

defrauded by failed for-profit schools, soldiers 

deployed to war zones, and other public servants 

previously denied eligibility for forgiveness under the 

Public Service Loan Forgiveness (PSLF) program. 

Additional changes to the PSLF program that will 

increase loan forgiveness are coming in FY 2022— 

see page 91.

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.
12 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

Elementary and Secondary School Emergency Relief 

(ESSER) Fund—Funds 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, and 

grants for the specific needs of homeless children and 

youth to address the challenges of COVID-19.

Higher Education Emergency Relief Fund (HEERF) 

—Funds provided for institutions of higher education 

(IHEs) to address needs directly related to COVID-19, 

including transitioning courses to distance education and 

granting aid to students for educational costs such as food, 

housing, course materials, health care, and child care. 

Figure 1.

COVID-19 Funding Flow

(Dollars in Billions)

Governor’s Emergency Education Relief (GEER) 

Fund—Grants provided to state governors to ensure 

education continues for students of all ages impacted by 

the COVID-19 national emergency. 

Outlying Areas, Bureau of Indian Education (BIE), 

and Discretionary Grants—Funds provided for outlying 

areas and discretionary grants to states with the highest 

COVID-19 burdens.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 13

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 $1,519.3 billion as of 

September 30, 2021. As shown in Figure 2, most assets 

relate to loans receivables, $1,165.1 billion, which 

comprised 76.6 percent of all assets. Direct loans comprise 

the largest share of these receivables. Analysis of the net 

change in Direct Loan Program receivable balances begins 

on page 14. All other assets totaled $354.2 billion, most 

of which was Fund Balance with Treasury which increased 

by $215.9 billion, mostly as a result of an increase in 

undisbursed COVID-19 funds as of September 30, 2021.

The Department’s liabilities totaled $1,246.2 billion 

as of September 30, 2021. As shown in Figure 3, most 

of the Department’s liabilities are also associated with 

loan programs, primarily amounts borrowed from the 

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

student loans. Debt associated with direct loans totaled 

$1,142.2 billion as of September 30, 2021. Analysis of 

debt associated with the Direct Loan Program begins on 

page 16.

Figure 2.

Assets by Type

Figure 3.

Liabilities by Type
14 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

A N A LYS I S O F D I R EC T LO A N P R O G R A M 

R EC E I VA B L E S , N E T 

Figure 4 shows the changes in the Direct Loan Program 

receivable components over the past five years. The principal 

amount has continued to grow as the Direct Loan Program 

has originated all new federal loans since July 2010, when 

originations of new FFEL loans ended. Prior to COVID-19, 

the rate of increase in principal has slowed in recent years 

as enrollment has stagnated and sometimes declined. Also, 

accrued interest amounts had been increasing as more 

Direct Loans were moving into active repayment statuses 

and the rate of enrollment in income-driven repayment 

plans that allow for payments to be lower than interest 

accrual had increased. 

The rate of increase in principal has slowed in recent years 

as the Direct Loan program has disbursed fewer than $95 

billion in new loans each year since FY 2016 as a result of 

stagnant and in some cases declining enrollment. 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. The student loan repayment 

deferrals implemented in response to COVID-19 caused 

the rate of increase in principal to rise in FY 2021.

In accordance with the Federal Credit Reform Act of 1990, 

the Department’s financial statements report the value of 

direct loans (credit program receivables) at the net present 

value of their future cash flows, discounted at a fixed rate 

established based on Treasury securities. The difference 

between the recorded principal and interest balance and the 

net present value of the loans is referred to as the “allowance 

for subsidy,” which can be positive or negative.

A negative allowance for subsidy balance means that the 

present value of funds expected to be recovered is less than 

the principal outstanding. The increase in the negative 

allowance since FY 2017 is due primarily to higher subsidy 

costs, the main causes being high participation in incomedriven repayment (IDR) plans and the COVID-19 deferrals 

of student loan repayments (see discussion in the Analysis of 

Direct Loan Program Subsidy Expense section on page 19).

 

Figure 4.

Components of Direct Loan Receivables, Net

(Dollars in Billions)

Direct Loan 

Component 

(Dollars in 

Billions)

Fiscal Year

2017 2018 2019 2020 2021

Principal $ 998.8 $ 1,083.7 $ 1,164.9 $ 1,224.8 $ 1,292.2

Rate of Increase 

in Principal 10.6% 8.5% 7.5% 5.1% 5.5%

Accrued Interest $ 59.5 $ 72.0 $ 83.3 $ 92.1 $ 86.5

Allowance for 

Subsidy $ (16.8) $ (40.7) $ (124.4) $ (216.4) $ (273.9)

Total No. of 

Direct Loan 

Borrowers (in 

Millions)

33.0 34.2 35.1 35.9 37.0 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 15

MANAGEMENT’S DISCUSSION AND ANALYSIS

Loan Status

Fiscal Year

FY 

2017

FY 

2018

FY 

2019

FY 

2020**

FY 

2021**

Total No. of 

Direct Loan 

Borrowers (in 

Millions)

33.0 34.2 35.1 35.9 37.0

Total Dollar 

Amount of 

Direct Loans 

Outstanding

1,058.4 1,155.7 1,248.1 1,316.9 1,378.7

Current 

Repayment1 467.8 531.2 594.7 14.2 16.2

% Current 

Repayment 44.2% 46.0% 47.6% 1.1% 1.2%

In School, 

Grace Period, 

and Education 

Deferments

291.7 295.5 294.8 282.8 271.9

% In School, 

Grace Period, 

and Education 

Deferments

27.6% 25.6% 23.6% 21.5% 19.7%

Forbearance 

and 

Noneducation 

Deferments

122.5 121.5 133.2 887.5 967.8

% Forbearance 

and 

Noneducation 

Deferments

11.6% 10.5% 10.7% 67.4% 70.2%

Delinquent (Past 

Due 31-360 

Days)

79.7 92.5 90.8 0.5 0.0

% Delinquent 

(Past Due 31-

360 Days)

7.5% 8.0% 7.3% 0.0% 0.0%

Default/

Bankruptcy/

Other*

96.7 115.0 134.6 131.9 122.8

% Default/

Bankruptcy/

Other*

9.1% 10.0% 10.8% 10.0% 8.9%

1 Loans in Current Repayment status include loans that are being repaid on-time. 

However, these on-time loans can include loans for which the amount of interest 

accruing is higher than payments that are being made, which can occur in the 

case of loans on income-driven repayment plans.

*Adjusted to eliminate differences between NSLDS and FSA Total Reported DL 

Portfolio (principal and Interest)

**Student loan payment pause in effect from March 2020.

Table 2.

Payment Status of Direct Loan Principal and 

Interest Balance

(Dollars in Billions)

Table 2 shows the payment status of the direct loan 

principal and interest balances outstanding over the past 

five years. The Current Repayment category consists of 

loans that are being paid back on time, including the 

current portion of loans being repaid pursuant to IDR 

plans. Loans in the Delinquent category are past due 

anywhere from 31 to 360 days. Default/Bankruptcy/Other 

includes loans that are more than 360 days delinquent 

(default status), loans in a nondefaulted bankruptcy status, 

and loans in disability status.

While technical default is 271 days delinquent, default is 

defined as 361 days delinquent for reporting purposes. 

The balances reported for Current Repayment and 

Delinquent in FY 2020 and FY 2021 are significantly 

lower than prior years, primarily due to the COVID-19 

student loan repayment deferrals that placed loans in 

forbearance and subsequently cured delinquencies. As a 

result of the COVID-19 student loan repayment deferrals, 

the FY 2020 and FY 2021 delinquent balances are zero.

While the COVID-19 student loan repayment deferrals 

suspended payments for federally owned student loans, 

some borrowers elected to continue to make student 

loan payments. In addition to improving borrowers’ 

overall financial health, factors that may have influenced 

borrowers to continue making payments on their student 

loans during forbearance include the following: 

• Borrower flexibility to make payments or suspend 

payments as their financial circumstances permitted 

without notification to the loan servicer.

• Potential earlier loan payoff.

• Lower total cost of a loan over time to the borrower 

due to the zero percent interest rate. (Before the pause, 

an average of two-thirds of each dollar paid went to 

principal. During the pause, this quickly increased to 

above 90 percent, and now an average of 95 percent of 

each dollar goes toward principal).
16 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Figure 5.

Direct Loan Program Cumulative Financing Activity

(Dollars in Billions)

• Potentially improving the borrower’s credit rating by 

reducing the student debt balance. The relative strength 

of FSA borrower payment activity has been driven, in 

part, by efforts of borrowers to improve their credit 

stance to purchase homes during much of 2020 and 

2021. During the pandemic, the U.S. Department 

of Housing and Urban Development and Federal 

Housing Authority implemented nontemporary policy 

changes to improve the underwriting stance of federal 

student loan borrowers.

• Potentially improved overall borrower financial health 

and reduced financial stress by reducing student debt.

A N A LYS I S O F D E B T A S S O C I AT E D W I T H 

LO A N S , D I R EC T LO A N P R O G R A M 

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 17 of this report.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 17

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

 

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

Fiscal Year 2017 2018 2019 2020 2021

Net Borrowing $ 67.3 $ 89.1 $ 41.5 $ (32.0) $ (17.9)

Borrowing from Treasury 160.5 155.3 137.6 116.9 120.0 

Debt Repayments to Treasury (93.2) (66.2) (96.1) (148.9) (137.9)

Interest Expense to Treasury (31.3) (32.3) (33.8) (34.7) (33.0)

Interest Earned from Treasury 4.3 3.9 4.1 4.8 4.2 

Cumulative Taxpayer Cost / (Savings) 16.8 40.7 124.4 216.4 273.9 

Current Subsidy Expense (Revenue) 5.3 4.4 61.5 100.9 93.9 

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

Fiscal Year 2017 2018 2019 2020 2021

Loan Disbursements $ 142.5 $ 134.1 $ 130.7 $ 117.4 $ 104.8 

Stafford Subsidized 23.4 20.3 20.0 19.1 18.3 

Stafford Unsubsidized 51.4 49.0 48.1 46.1 44.1 

PLUS 18.7 23.1 22.7 21.7 20.8 

Consolidation1 49.0 41.6 39.8 30.4 21.5 

Loan Collections2 82.0 84.9 91.3 69.9 37.2 

Principal 62.6 63.5 67.0 55.3 33.3 

Interest 17.6 19.5 22.4 12.9 2.3 

Fees 1.9 1.9 1.9 1.7 1.6

* Numbers may not add 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
18 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

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. 

 

Figure 8.

Primary Components of Gross Costs and Earned Revenue

(Dollars in Billions)

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. As 

shown in Table 1 and discussed in more detail below, 

significant increases in the Department’s net costs for 

FY 2021 were primarily due to loan modifications 

(subsidy expense) and grant expenses related to 

COVID-19 activities. 

G R O S S C O S T S A N D E A R N E D R E V E N U E 

BY T Y P E 

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).

• Grant expenses (see Figure 10).

 

Figure 7.

Gross Costs & Earned Revenue

(Dollars in Billions)
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 19

MANAGEMENT’S DISCUSSION AND ANALYSIS

A N A LYS I S O F D I R EC T LO A N P R O G R A M 

S U B S I DY E X P E N S E 

The Department’s gross costs can fluctuate significantly 

each year as a result of changes in estimated subsidy 

expenses—primarily subsidy expenses for direct loans. The 

primary components of subsidy expenses include year-end 

subsidy re-estimates and loan modifications. 

Subsidy expenses are estimates of the present value cost 

of providing direct loans but excludes the administrative 

costs of issuing and servicing the loans. The Department 

estimates subsidy expenses using a set of econometric and 

financial models as well as cash flow models. 

The Department estimates subsidy expenses annually for 

new loans disbursed in the current year and updates the 

previous cost estimates for outstanding loans disbursed in 

prior years based on various updated assumptions (subsidy 

re-estimates). The Department also updates subsidy 

expenses due to changes to terms of existing loans (subsidy 

modifications). Figure 9 shows these three components of 

the Direct Loan Program subsidy expense for the past five 

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

interest rates on Treasury debt, default rates, fees and other 

costs, and assumptions concerning borrowers’ selection of 

repayment plans impact the estimated cost calculation and 

determine whether the individual components and overall 

subsidy expense is positive or negative.

The Direct Loan Program subsidy expense for new loans 

disbursed in the current year was negative from FY 2017 

through FY 2019 primarily because lending interest 

rates charged were greater than the historically low rates 

at which the Department borrowed from Treasury. In 

practical terms, a negative subsidy occurs when the 

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

sufficient to cover the interest on Treasury borrowings and 

the costs of borrower default. Subsidy expense for new 

loans disbursed in FY 2020 and FY 2021 was positive 

due to rising enrollment in IDR plans and a reduction 

in projected future income of borrowers in IDR plans, 

both of which contribute to a higher expected cost to 

the government for issuing student loans by reducing 

the amount that many borrowers will repay over the life 

of their loans and/or creating a student loan forgiveness 

benefit for amounts remaining after 20 or 25 years, 

particularly common among high-debt borrowers.

The components of the Direct Loan Program subsidy 

re-estimates and loan modification costs are summarized 

below. More detail about these components can be found in 

the notes to the financial statements beginning on page 64.

Figure 9.

Direct Loan Program Subsidy

(Dollars in Billions)

2017 2018 2019 2020 2021

Subsidy Expense for 

New Loans Disbursed in 

the Current Year $ (2.6) $ (3.1) $ (3.0) $ 5.1 $ 1.6 

Subsidy Re-estimates 7.9 7.4 64.5 56.1 24.0 

Loan Modifications - 0.1 - 39.7 68.3 

Total Subsidy $ 5.3 $ 4.4 $ 61.5 $ 100.9 $ 93.9 

Subsidy Re-estimate Components 2021 2020

Income Driven Repayment (IDR) 

Model Changes $ 22.4 $ 35.5 

Prior Year's Cohort Assumption Changes 15.5 4.8 

Interest on the Re-Estimate 5.0 5.9 

Default (6.4) 1.8 

Repayment Plan Selection 0.7 6.5 

Discount Rates (11.5) - 

Death, Disability, and Bankruptcy (DDB) 3.2 - 

Deferment And Forbearance (4.8) - 

Collections 1.5 - 

Interactive Effects (1.6) 1.5 

Other Assumptions - 0.1 

Total Direct Loan Program Subsidy 

Re-estimates $ 24.0 $ 56.1 

Loan Modification Components 2021 2020

Student Loan Repayment Deferrals $ 49.5 $ 38.6 

Total and Permanent Disability 18.7 1.1 

Faith-Based Final Rule 0.1 - 

Total Direct Loan Program 

Loan Modifications $ 68.3 $ 39.7 
20 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

GRANT EXPENSES

As shown in Figure 10, overall grant expenses increased 

primarily because of COVID-19 grants. More detail 

concerning COVID-19 grants can be found in Note 11 of 

the financial statements beginning on page 81. In addition 

to COVID-19 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. The program 

also provides funds to states to support educational 

services to children of migratory farmworkers and 

fishers and to neglected or delinquent children and 

youth in state-run institutions, attending community 

day programs, and in correctional facilities.

• Special Education—Primarily consists of Individuals 

with Disabilities Education Act grants that provide 

funds by formula to states to assist them in providing 

a free appropriate public education in the least 

restrictive environment for children with disabilities 

ages 3 through 21 and assists states in providing early 

intervention services for infants and toddlers from 

birth through age 2 and their families. Also provides 

discretionary grants to IHEs and other nonprofit 

organizations to support research, demonstrations, 

technical assistance and dissemination, technology, 

personnel development and parent-training, and 

information centers.

In addition to student loans and grants, the Department 

offers other discretionary grants under a variety of 

authorizing legislation, with approximately 90 percent of 

nonstudent aid funds awarded by formula and 10 percent 

through competitive processes.

 

Figure 10.

Grant Expenses by Program Areas

(Dollars in Billions)

COVID-19 Grant Expenses

(Dollars in Millions)

COVID-19 Grants FY 2021 FY 2020

Education Stabilization Fund:

Elementary and Secondary School 

Emergency Relief Fund

$ 20,036 $ 1,552 

Higher Education Emergency 

Relief Fund

 31,407 9,135 

Governor’s Emergency Education 

Relief Fund

 1,341 536 

Outlying Areas & Discretionary Grants 130 21 

Total Education Stabilization Fund 52,914 11,244 

Other COVID-19 Grants 66 15 

Total COVID-19 Grants $ 52,980 $ 11,259 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 21

MANAGEMENT’S DISCUSSION AND ANALYSIS

 

Figure 11.

Components of Budgetary Resources 

(Dollars in Billions)

S TAT E M E N T S O F C H A N G E 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.

STATEMENTS OF BUDGETARY RESOURCES

The combined statements of budgetary resources present 

information on how budgetary resources were made 

available and their status at the end of the fiscal year. 

Information in the statements is based on budgetary 

transactions as prescribed by OMB and Treasury.

Figure 11 shows the components of the Department’s 

budgetary resources, which totaled $689.6 billion 

for FY 2021, increasing from $473.4 billion, or 

45.7 percent from the prior year. This increase was 

primarily due to increases in appropriations received 

totaling $231.8 billion, of which $235.0 billion was 

for increases in direct and indirect appropriations for 

COVID-19 activity.

Other significant changes to the Department’s combined 

statements of budgetary resources include the following:

• Unobligated Balances from Prior Year Budget 

Authority (Net) increased by $14.6 billion, or 

54.4 percent. Of this increase, $0.7 billion was due 

to COVID-19-funded balances and the remaining 

increase was due primarily to an increase in Direct 

Loan Program unapportioned authority from FY 2019 

to FY 2020 and repayment of Direct Loan Program 

debt in FY 2021 for prior year balances.

• New Obligations and Upward Adjustments (Total) 

increased by $196.7 billion, or 45.7 percent due 

primarily to an increase of $203.0 billion for grant 

obligations funded by the COVID-19 appropriations 

and an increase of $14.0 billion in obligations 

associated with loan modifications for COVID-19 

student loan deferrals.

• Unobligated Balance, End of Year increased 

$19.3 billion or 45.3 percent. Of this increase, 

$17.8 billion was due to COVID-19-funded balances.
22 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

Table 3.

Outlays, Distributed Offsetting Receipts, and 

Disbursements, Net

(Dollars in Billions)

FY 2021 FY 2020

Outlays, Net

Credit Programs $ 141.7 $ 129.8 

Grants 122.4 85.5 

Contractual Services 2.3 2.0 

Personnel Compensation and Benefits 0.7 0.7 

Total Outlays, Net $ 267.1 $ 218.0 

Distributed Offsetting Receipts

Subsidies (5.6) (12.3)

Repayment of Perkins Loans and 

Capital Contributions (0.9) (1.3)

Other (0.1) - 

Total Distributed Offsetting Receipts $ (6.6) $ (13.6)

Disbursements, Net

Direct Loan Program

Gross Disbursements $ 143.8 $ 158.2 

Offsetting Collections (171.5) (188.1)

Total Direct Loan Program 

Disbursements, Net (27.7) (29.9)

FFEL Program

Gross Disbursements 8.3 17.5 

Offsetting Collections (19.2) (30.6)

Total FFEL Program Disbursements, Net (10.9) (13.1)

Other Loan Programs

Gross Disbursements 0.7 0.5 

Offsetting Collections (2.0) (0.4)

Total Other Loan Program 

Disbursements, Net (1.3) 0.1 

Total Disbursements, Net $ (39.9) $ (42.9)

The combined statements of budgetary resources also 

present the Department’s summary disbursement and 

collection amounts shown in Table 3.

Outlays, Net is comprised of gross outlays and offsetting 

collections in the Department’s budgetary funds. Outlays, 

net increased $49.1 billion (22.5 percent) due primarily to 

an increase of $37.5 billion in COVID-19 grant outlays. 

Distributed Offsetting Receipts primarily represents 

amounts paid from the Direct Loan Program and 

FFEL Program financing accounts to Treasury General 

Fund receipt accounts for downward current fiscal year 

executed subsidy re-estimates and negative subsidies. Of 

the $7.0 billion decrease in FY 2021 versus FY 2020, 

$6.3 billion was attributed to the FFEL Program. 

Disbursements, Net is comprised of gross outlays and 

offsetting collections in the Department’s credit program 

nonbudgetary financing funds.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 23

MANAGEMENT’S DISCUSSION AND ANALYSIS

Analysis of Systems, Controls, 

and Legal Compliance

MANAGEMENT ASSURANCES

The Secretary of the Department of Education’s Fiscal Year 2021 Statement of Assurance provided below is the final report 

produced by the Department’s annual assurance process.

STATEMENT OF ASSURANCE 

FISCAL YEAR 2021

November 19, 2021

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 (DQP) in 

accordance with Appendix A of OMB Circular A-123.

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

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

controls: operations, reporting, or compliance with applicable laws and regulations. The 

Department considers the applicable internal controls to be working effectively. 

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, 2021.

Miguel A. Cardona, Ed.D.
24 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

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 2021 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
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 25

MANAGEMENT’S DISCUSSION AND ANALYSIS

gram performance and inform management decisions. The 

establishment of a DQP 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, 

operational, and information technology (IT) controls.

• Providing technical assistance to principal offices to 

help them understand and monitor key controls.

• Refining the DQP to improve reporting controls and 

data quality.

• Implementing a risk-based control testing strategy.

• Developing corrective action plans when internal 

control deficiencies are found and tracking progress 

against those plans.

In FY 2021, the Department tested a proportionate number 

of key financial controls for both grant and non-grant 

areas based on qualitative risk assessments and rotational 

test plans. 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, such as verifying immaterial 

differences, obtaining electronic signatures, and updating 

policies and procedures.

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 compliance process oversight and 

more informed monitoring of internal controls and 

risk management by all offices and governance bodies, 

including the Department’s Senior Management Council. 

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; 

internal controls are in place and working as intended; 

and 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 2021, the Department and FSA did not self-identify 

any material weaknesses related to the effectiveness and 

efficiency of its operations. However, an area of noncompliance with laws and regulations is 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 the OIG. The Department, its 

grantees, and its subrecipients must have effective controls 

to ensure that reported data are accurate and complete. 

The Department relies on program data to evaluate pro-
26 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

EDCAPS is composed of four main integrated 

components: 

• 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 40,970 external users, mostly users of the 

G5. In FY 2021, the Department conducted an annual risk 

assessment of EDCAPS and tested 104 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 2021: 

• 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 external systems:

• Department Systems:

 Oracle Enterprise Performance Management 

Cloud Planning (formerly Hyperion).

 Frontier.

A N A LYS I S O F F I N A N C I A L 

MANAGEMENT SYSTEMS

The 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 FFMIA, and 

OMB Circular A-130, Managing Federal Information 

as a Strategic Resource, provide specific guidance to 

agency managers when assessing conformance to 

FFMIA requirements. 

The Department’s vision for its financial management 

systems is to provide objective financial information to 

stakeholders to support data-driven decision-making, 

promote sound financial management, and enhance 

financial reporting and compliance activities. The 

Department’s core financial applications are integrated 

under common management control as part of the 

Education Central Automated Processing System 

(EDCAPS). EDCAPS is a suite of financial applications 

(subsystems), including commercial 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).
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 27

MANAGEMENT’S DISCUSSION AND ANALYSIS

accompanying materials, and to determine whether the 

agency has met six compliance requirements. 

In its annual improper payment compliance audit for 

FY 2020, the OIG concluded that the Department 

was not compliant with PIIA because it did not meet 

two of the six compliance requirements, as described 

in Finding 1. Specifically, the Department did not 

demonstrate improvement in reducing improper payments 

in the William D. Ford Federal Direct Loan (Direct 

Loan) Program. In addition, the Department reported 

improper payment rates that exceed 10 percent for the 

Temporary Emergency Impact Aid for Displaced Students 

(Emergency Impact Aid) and Immediate Aid to Restart 

School Operations (Restart) programs. 

This determination of noncompliance with PIIA does 

not represent a material weakness in the Department’s 

internal controls. 

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 notification of a legally enforceable nontax debt 

that is over 120 days delinquent to the Department of the 

Treasury for purposes of administrative offset. 

Due to unique program requirements of the Higher 

Education Act of 1965 (HEA), in 2015 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 the 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 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 acceptance of a defaulted debt). As of September 

30, 2021, FSA’s current business process requires loans to 

 G5 Grants

 CPSS Contracts Purchasing Support

• External Systems:

 Treasury systems (Invoice Processing Platform (IPP) 

invoices/receipts/obligation data, IPP invoice status; 

payment files, debt referrals, CRS invoices, warrants, 

treasury confirmations, CIR collections and admin 

return, collections/payments).

 Department of Interior systems (Payroll). 

 E2 Travel System.

The Department’s financial management systems are 

designed to support effective internal control and 

produce accurate, reliable, and timely financial data 

and information. Based on self-assessments, systemlevel 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:

Payment Integrity Information Act of 2019 (PIIA)

The Payment Integrity Information Act of 2019 (PIIA), 

Pub. L. 116-117, 134 Stat. 113, was enacted into law 

on March 2, 2020. The primary purpose of the PIIA 

is to reorganize and revise several existing improper 

payments statutes1

, which establish requirements for 

federal agencies to cut down on improper payments made 

by the federal government. PIIA requires federal agencies 

to report improper payments annually for programs that 

are deemed susceptible to significant improper payments. 

PIIA also requires each agency’s OIG to review the 

agency’s improper payment reporting in its AFR and 

1 Improper Payments Information Act of 2002 (IPIA), Pub.L. 107-300, 116 Stat. 

2350, as amended by the Improper Payments Elimination and Recovery Act of 

2010 (IPERA), Pub. L. 111-204, 124 Stat. 2224, and the Improper Payments 

Elimination and Recovery Improvement Act of 2012 (IPERIA), Pub. L. 112-248, 

126 Stat. 2390.
28 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

• Office of the Chief Information Officer (OCIO) 

refined and used the Department’s cybersecurity risk 

tolerance and appetite, which integrates with the 

Department’s overall enterprise risk management 

(ERM) program. Key performance indicators (KPI) 

and key risk indicators (KRI) have been established to 

support tracking and reporting progress made towards 

the Department’s OCIO ERM target profile. OCIO 

continues membership and participation in ERM 

Working Groups and mini working groups (ERMWG) 

to continue to mature integration of Cyber Risk 

Management with ERM:

 ERM maturity model metric refinement.

 ERM digital tools risk reporting and analysis.

 ERM training for leaders and staff.

 ERM knowledge management.

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 its 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. In FY 2021, the Department 

continued to mature its risk management processes through 

enhancements made to the CSF Risk Scorecard. These 

enhancements have improved the accuracy and timeliness 

of the Department’s risk reporting and continuous 

monitoring. System stakeholders are now provided daily 

visibility of their system’s risk and data quality. Additional 

views were established to augment and consolidate risk 

reporting to allow the Department’s authorizing officials 

to quickly identify which systems require attention and 

prioritization of authorization and risk reduction activities. 

These enhancements are targeted to result in a reduced 

number of past due Plan of Actions and Milestones 

(POA&M) and data quality issues. With near-real time 

risk scoring and reporting in place, executive and system 

level stakeholders can effectively prioritize and manage the 

Department’s cybersecurity risk daily.

OCIO disseminated monthly State of IT principal 

office-level reports for continued outreach to executive 

stakeholders to take the appropriate actions as necessary 

be transferred to the default loan servicer after 360 days 

of delinquency. FSA refers debt to TOP after exhausting 

due process with each borrower, which extends beyond 

the delinquency period in the DATA Act. Further, due to 

the number of entities and systems involved in handling 

student loan debts and the decentralized nature of such 

processes, FSA is not yet capable of meeting an accelerated 

time line. Accelerating the timeline requires substantial 

changes to servicing legacy systems. Rather than making 

changes to these legacy systems, FSA plans to build 

new TOP referral requirements into the NextGen FSA 

servicing platform. FSA has developed a long-term project 

plan to incorporate the referral requirements into servicer 

contracts and guaranty agency agreements to initiate the 

required system programming changes. This determination 

that the Department does not have a process in place to 

enable the referral of FSA owned Title IV debts on the 

271st day of delinquency and referral of relevant FFEL 

claims and delinquent Perkins Loan debt on the 121st day 

of delinquency does not represent a material weakness in 

the Department’s internal controls.

While the Department continues to work on an 

accelerated process to refer debt to Treasury, the 

Coronavirus Aid, Relief, and Economic Security Act (CARES 

Act) affords administrative forbearance for eligible loans. 

Beginning in March 2020 and continuing throughout 

FY 2021, the CARES Act suspended involuntary 

collection through TOP. This suspension of involuntary 

collections will continue to apply at least through 

January 31, 2022. Pursuant to the CARES Act and related 

authorities, no loans were required to be transferred to 

Treasury during FY 2021. Accordingly, the Department 

was and is compliant with DCIA as amended by the 

DATA Act.

Federal Information Security Modernization 

Act of 2014

The Federal Information Security Modernization Act of 

2014 (FISMA 2014) requires federal agencies to develop, 

document, and implement an agencywide program to 

provide security for the information and information 

systems that support the operations and assets of the 

agency and to ensure the confidentiality, integrity, and 

availability of system-related information.

The Department’s and FSA’s information security 

programs completed numerous significant activities 

in FY 2021 to improve cybersecurity capabilities and 

functions, some of which include:
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 29

MANAGEMENT’S DISCUSSION AND ANALYSIS

DLP solution identified and blocked 9,562 emails 

which prevented potential sensitive personally 

identifiable information security incidents. 

• Through enhanced reporting of email and web security 

posture, the Department was able to maintain U.S. 

Department of Homeland Security (DHS) Binding 

Operational Directive (BOD) 18-01 compliance of 

100 percent for email security and 97 percent for 

Hypertext Transfer Protocol Secure (HTTPS) tracking. 

Additionally, there were no overdue critical or high 

vulnerabilities in FY 2021 for the Department’s public 

facing assets reported in accordance with DHS BOD 

19-02 Cyber Hygiene.

• 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.

• OCIO continued conducting quarterly Departmentlevel, system-tailored Incident Response and Contingency 

Plan testing tabletop exercises virtually, which focused on 

contingency planning in the event of a cyber incident. 

As of September 2021, 98 percent of the Department’s 

FISMA 2014-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.

• 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 in a position related to 

cybersecurity. In July 2021, the Department spoke to 

students from SFS about the Department’s internship 

and upcoming employment opportunities 

• OCIO established a roadmap for migrating 

the Department’s policies and security control 

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

specific to their organization offered through cybersecurity 

data visualizations.

OCIO established initial operating capabilities for the 

Department’s cybersecurity data lake and continued 

to enhance configuration for ingestion of Continuous 

Diagnostics and Mitigation and continuous monitoring 

data. Currently, 10 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 datadriven decisions.

• To mitigate operational impacts of the COVID-19 

pandemic, OCIO delivered Personal Identity 

Verification Alternative Solution (PIV-A) as an 

alternative multifactor 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 virtual private network 

(VPN) capacity supporting the workforce during the 

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 using a 

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 capability for nongovernmentfurnished equipment within the Department’s new 

IT environment that is superior to capabilities that 

existed before 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 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 2021, the Department’s 
30 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

Department immediately disconnected impacted 

exchange servers from the Department’s network and 

notified CISA on March 5, 2021. All impacted assets 

were updated to the latest version required by CISA by 

March 9, 2021.

• The Department, including the FSA Zero Trust 

strategic implementation plan, addresses current 

issues with access, including unauthorized, and 

siloed single-point solutions for data protection. This 

initiative establishes an architectural plan; a solution 

design; an accompanying process; and implements 

a secure framework to address access, verification, 

and integration issues across all information systems 

hosted at multiple independent data centers and 

within numerous cloud service providers. The 

Department and FSA will leverage Zero Trust concepts 

to move to a data-centric access and protection 

model versus the traditional network-based perimeter 

protection concepts. The submitted plan outlines the 

development, modernization, and enhancement of 

the program:

 Establish and fully implement a Zero Trust Program 

that includes strategy, architecture, design, and an 

implementation road map.

 Develop Zero Trust workbooks and standards 

to support adaptation of Zero Trust for 

the Department.

 Establish a catalog of Zero Trust services 

and capabilities.

 Adopt Zero Trust across cloud-computing 

environments in accordance with the developed 

road map.

 Establish a Zero Trust-specific section in the 

cybersecurity training program.

 Adopt multifactor authentication and encryption 

for data at rest and in transit, to the maximum 

extent consistent with federal records laws and other 

applicable laws.

• To mitigate impacts of the COVID-19 pandemic 

on remote stakeholders, the Department identified, 

analyzed, and implemented a cloud-based solution 

to provide rapid expansion of the Department’s VPN 

capacity to support extensive teleworking capabilities. 

As a result of these efforts, the Department was able 

improve the availability and continuity of operations 

implementation from National Institute of Standards 

and Technology SP 800-53, Security and Privacy Controls 

for Information Systems and Organizations, Revision 4 to 

Revision 5. This road map will allow the Department 

to better understand, plan, and prepare as it begins to 

update key security controls in accordance with the new 

Revision 5 guidance. The Department also participated 

in a cross-agency working group with GSA, HHS, and 

other agencies to collaborate on the development and 

standardization of organizational parameters for the 

NIST 800-53 Revision 5 security controls. 

• OCIO has implemented an ACS Directive, OCIO: 

3-114, Cybersecurity Awareness Simulated Phishing 

Exercise Behavioral Based Escalations, which establishes 

the Department standards for acceptable behaviors in 

response to an authorized simulated phishing exercise 

as well as behavioral-based escalations for federal 

employees and contractors based upon identification 

of a pattern of unacceptable behaviors (e.g., repeatrisk email users) that puts the network and data at 

risk. This directive also documents actions required to 

reduce Departmental risk from end users who exhibit 

unacceptable behaviors in response to one or more 

exercise(s). In support of this new directive, OCIO 

established enhanced reporting and retraining support 

for privileged users and repeat risk users. All privileged 

users who had unacceptable behavior as a result of the 

first exercise conducted, were required to and have 

completed the necessary training courses.

• OCIO supported all required actions from DHS 

Emergency Directive 21-01, Mitigate SolarWinds 

Orion Code Compromise. The Department immediately 

disconnected/powered down SolarWinds Orion 

products, versions 2019.4 through 2020.2.1 HF1, from 

the Department network and notified the Cybersecurity 

and Infrastructure Security Agency (CISA) on December 

14, 2020, as required. The Department continues 

to analyze forensic images of system memory and/or 

host operating systems for all impacted assets. OCIO 

completed a forensics analysis and an independent, 

external, third-party, certified forensics examiner 

determined no threat actor was present in the system 

and no malicious activity has taken place. Additionally, 

OCIO also provided both the Senate and U.S. House of 

Representatives formal responses to inquiries regarding 

this emergency directive.

• OCIO supported all required actions from DHS 

Emergency Directive 21-02, Mitigate Microsoft 

Exchange On-Premises Product Vulnerabilities. The 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 31

MANAGEMENT’S DISCUSSION AND ANALYSIS

March 1, 2021, in accordance with DHS BOD 20-01. 

The Department’s VDP provides an open channel and 

legal safe harbor for the discoverer of vulnerabilities 

to report them to the Department. Version 2.0 of the 

VDP, released June 1, 2021, expanded the scope of the 

policy to include all internet-accessible, public-facing 

systems or services of the Department, more than a 

year ahead of schedule.

• Leveraging lessons learned with the Department 

of Energy, the Department formally established an 

Information Communications Technology (ICT) 

Supply Chain Risk Management (SCRM) program 

and released a strategic road map designed to provide 

a vision and action plan for the planning, preparation, 

implementation, and execution of the Department’s 

ICT SCRM program. Following this road map and 

plan will allow the Department to move from a pointin-time compliance model to a near real-time detection, 

analysis, and correction model, resulting in improved 

ICT SCRM and more accurate and frequent assessments 

of ICT SCRM security control effectiveness. The 

Department’s ICT SCRM program ensures that the 

Department and its contractors are assessing, protecting, 

and measuring risks involved with their selection of 

suppliers and not accepting unnecessary risks.

• The Oracle Enclave has been created for integrating all 

Oracle license usage into one cluster for cost avoidance. 

An approximate $7 million in savings is estimated 

for the Department over three years, beginning in 

2022. Currently, the Department is using this enclave 

for several systems, including EDCAPS, EDFacts, 

and PIVOT-I. 

• OCIO, via the Information Technology Program 

Services Division, recently activated the Technology 

Business Management Solutions (TMBS) to provide 

cost transparency through a single, integrated view 

of IT costs by service, office, line item, and project. 

TBMS will empower Department leaders with 

information to improve financial performance.

• During FY 2021, OCIO successfully completed a 

major infrastructure upgrade in the Department’s 

disaster recovery environment in Raleigh, NC. 

Enterprise improvements included an increase to 

overall infrastructure performance, dependability, 

capacity, and security. This upgrade provides the 

Department with a significant increase to the network 

bandwidth from 10GB to 40GB, increased cloud 

computing resources (the number of hosts increased 

for its networks. The Department also provided 

targeted outreach to proactively address threats to 

teleworking employees (e.g., warning them of increased 

phishing attempts and other cybercriminal scams that 

target largely at-home workers). As a result of this 

increased outreach, the Department has benefitted 

from an improved average reporting rate (+7 percent) 

for its phishing exercises across its user base in FY 2021 

from FY 2020. 

• The Department issued an amendment to Acquisition 

Alert (AA) 2020-01, Education Acquisition Regulation 

(EDAR) Class Deviation: Cyber and Personnel Security 

Requirements for Contractors. This amendment 

implements deviated EDAR clauses to accurately 

reflect the Department’s updated cybersecurity and 

privacy requirements. Below are the requirements 

added/updated: 

 DHS Binding Operation Directives.

 Continuous Monitoring / Ongoing Security 

Assessment & Authorization.

 Identity, Credential, and Access Management and 

Personal Identify Verification (PIV) Systems.

 National Institute of Standards and Technology 

(NIST) Zero Trust Architecture/Zero 

Trust Network. 

 Department Cyber Data Lake.

 Office of Management and Budget (OMB) Trusted 

Internet Connections 3.0.

 National Defense Authorization Act Section 889 

Compliance. 

• The Department’s cybersecurity risk exposure has 

been directly reduced due to the amendment to this 

alert that allows the Department to enforce all the 

newly updated cybersecurity requirements articulated 

in the revised cybersecurity clause (which became 

effective September 28, 2020) with the amendment to 

Acquisition Alert 2020-01. The OCIO Information 

Assurance Services Division reviews all new IT 

contracts as a part of the ERM review process ensuring 

the updated clause inclusion before contract award.

• To allow the research community and others to alert 

the Department about vulnerabilities in its systems 

through a clearly established program, the Department 

Vulnerability Disclosure Policy (VDP) was published on 
32 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

 The Central Information Technology (CIT)-focused 

dashboard improves financial transparency and 

accountability for OCIO’s leadership, division 

branch chiefs and program/project managers by 

increasing visibility into quantitative and qualitative 

key metrics. The key metrics reported include 

annual allocations, allotments, year-to-datespending for both CIT and non-CIT budget line 

items, as well as late Acquisition Plan (AP) actions. 

Division chiefs and programs can visually and 

quickly identify areas that require their attention, 

such as projects still having the most remaining 

funding, late AP actions, and AP actions due in 

30/60/90 days. Divisions are then held accountable 

for executing their plans accordingly.

 The non-CIT dashboard focuses on pay and nonpay 

budgets and has been essential in driving critical 

decisions throughout the year, including pay and 

training availability for OCIO’s employees. 

 While the OCIO Financial Executive Dashboard 

was primarily developed with the executive 

leadership audience in mind, it has served a 

multifaceted purpose as the basis for numerous 

tactical actions at the next level of leadership in both 

CIT and non-CIT.

• OCIO launched standard operating procedures for the 

proper alignment and retention of records inventories. 

These procedures enable principal offices to strengthen 

the protection of controlled unclassified information.

• In FY 2021, the Department’s High Value Asset (HVA) 

program, in partnership with FSA, was presented 

as a “Best in Government” for its engagement with 

the DHS assessment team. DHS senior leadership 

noted how the Department and its components 

were outstanding in their planning, coordination, 

execution, and timeliness of its Risk and Vulnerability 

Assessments. Highlights of the program expressed 

how the Department worked with DHS to ensure a 

seamless process was executed for HVA assessment. 

This was presented at the federal CISO Council 

HVA Subcommittee as the gold standard for 

HVA engagement.

by 30 percent, RAM by 100 percent, and cores by 

25 percent) resulting in overall improved performance, 

resolution of several existing vulnerabilities and 

POA&Ms that enhance the security posture of the 

Raleigh datacenter.

• OCIO implemented a Human Capital, Financial and 

Resource Management tool, comprised of a suite of 

dashboards, that provides an on-demand, interactive, 

and consolidated view of critical management 

areas. The tool is designed with a primary focus on 

providing executive-level status views of human capital 

management, financial management, budgetary 

execution and procurement to OCIO’s senior 

leadership and leaders at the division and branch levels. 

The critical data points that leaders need to make 

informed business decisions are updated throughout 

the day to ensure that OCIO is proactively able to 

meets its strategic objectives and goals. These unique 

dashboards are discussed below:

 The Human Resources Hiring Dashboard provides 

leadership with an up-to-the-minute aggregate 

or divisional snapshot view reflecting the status 

of current hiring actions. It lists the number of 

positions that have received agency approval to be 

encumbered, the number of positions presently 

encumbered, hiring actions that are not yet 

complete, and the number of new hires that have 

begun their employment with OCIO during 

the current fiscal year. In addition, updates are 

incorporated to identify the stage of each hiring 

action within the recruitment process. The Office 

of Human Resources has created a service-level 

agreement (SLA) identifying the number of days for 

each phase of the recruitment process in alignment 

with the OPM’s 80-day hiring model. Those time 

lines are listed within the dashboard along with 

averaged quarterly variances that have occurred. 

In addition, current actions where SLAs have been 

missed are labeled as such, and viewers are able to 

specifically see the exact SLAs that have deviated 

from the prescribed time lines. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 33

MANAGEMENT’S DISCUSSION AND ANALYSIS

• In FY 2021, the Department’s Cybersecurity and 

Awareness Program Manager was awarded the 2021 

Federal Information Security Educators Cybersecurity 

Awareness and Training Innovator Award. The 

Department Cybersecurity and Awareness Program 

Manager oversees the Department’s Phishing Program, 

Cybersecurity and Privacy Awareness Training, 

Role-Based Training, Workforce Development, and 

Continuous Outreach Activities.

• The Department developed and implemented a new 

FISMA 2014 reporting dashboard through Microsoft 

Power BI. The new dashboard allows leadership to 

visualize all data collected across the Department in 

support of its quarterly reporting requirements to 

DHS and OMB. The dashboard provides the ability 

to proactively identify discrepancies or potential risks 

as a result of data captured and presented to both 

leadership and FISMA 2014 metric owners for action. 

The first quarter submission provided favorable Risk 

Management Assessment results across all FISMA 2014 

security domains. 
34 FY 2021 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 agencywide efforts to maximize the 

Department’s value to students and taxpayers through 

achievement of strategic goals and objectives. The 

Department’s ERM program strategically focuses on the 

complete spectrum of the organization’s significant risks 

and the combined impact of those risks as an interrelated 

portfolio rather than simply addressing risks within silos. 

This coordinated approach leverages data and analytical 

solutions to identify, measure, and assess challenges related 

to mission delivery and resource management. Through 

ERM, the Department seeks to embed a systematic and 

deliberate view of risk into key management practices, 

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:

• Creating a risk-aware culture that includes transparent 

discussions of risks.

• Implementing an ERM framework and capability 

that leverages existing risk management activities and 

governance bodies.

• Managing risks in a more coordinated and 

strategic manner.

The Office of Enterprise Data Analytics and Risk 

Management (OEDARM), within the Office of Finance 

and Operations (OFO), leads the agency’s overall ERM 

strategy and formally aligns ERM and internal controls 

processes. OEDARM leadership established a formal 

ERM Working Group (ERMWG) in FY 2020 with 

senior representation across the agency to further solidify 

the Department’s ERM governance structure. Since 

its formation, the ERMWG has been instrumental in 

conducting coordinated risk assessments and further 

incorporating the risks highlighted or exacerbated by the 

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

planning. In addition to the representation of offices in 

the working group, OEDARM leverages partnerships with 

agency leaders (e.g., the Senior Management Council, the 

Senior Executive Cadre, political leadership) to identify, 

measure, and assess challenges related to mission delivery, 

policy development, and operations to develop coordinated, 

actionable response plans.

OEDARM leadership actively sought to enhance strategic 

partnerships with ERM colleagues across the government 

as well as with Department’s own OIG. Initiatives in FY 

2021 included: identifying metrics to inform the maturity 

of the Department’s risk program; creation of a Knowledge 

Management Action Plan to develop a streamlined 

process of defining, structuring, retaining. and sharing the 

knowledge of Department employees; and the creation of 

digital tools for collecting, analyzing, and reporting risk 

data to promote transparency and accountability across 

the Department. OEDARM additionally established an 

informal, yet crucial, conversation series to bring awareness 

to various risk topics at the Department and to provide an 

open forum for discussion of risk in a safe, comfortable, 

setting. OEDARM’s newly launched ERM internalfacing website contains useful tools, resources, and data 

to better educate and promote healthy risk culture for the 

entire Department.

OEDARM will continue the above and additional 

strategic efforts during FY 2022 to foster 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. Throughout FY 2022, 

the Department plans to further integrate ERM with 

key management processes—leveraging objective data 

analytics, key performance indicators and key risk 

indicators and considerations inform budget formulation, 

strategic planning, and performance management. In light 

of the current COVID-19 pandemic, the Department has 

intentionally shifted to an even more comprehensive and 

collaborative approach to risk management—to embed 

consideration of externally driven risks related to national 

health emergencies, natural disasters, potential terrorist 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 35

MANAGEMENT’S DISCUSSION AND ANALYSIS

threats, and other significant crises that could adversely 

impact continuity of operations and mission delivery.

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:

• More than 70 percent of the direct loan portfolio is in

administrative forbearance—the suspended payment

status provided to students through the extension of

the student loan repayment deferrals.

• As of June 2021, nearly 8.3 million direct loan

recipients were enrolled in IDR plans, representing a

1 percent increase from June 2020 and an 8 percent

increase from June 2019. Overall, more than

47 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

January 31, 2022.

1 https://cew.georgetown.edu/cew-reports/collegepayoff2021/

• Work to improve customer service and student aid

systems and processes by implementing FSA’s Next

Gen FSA, see page 39.

• Continue to support the development of additional

tools, such as the College Scorecard and College

Financing Plan, to increase transparency around

higher education costs and outcomes that may help

students and families make informed decisions before

college enrollment.

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. 

Estimation of Federal credit programs involves inherent 

risk. The Department utilizes the best data available with 

modeling techniques that have been examined over time by 

several outside entities. Management has confidence over 

the estimates by using several different tools to analyze cost 

estimates. Re-estimates on the loan portfolio are performed 

twice a year ensuring that the most up to date data and 

models are used. The four types of inherent risk, described 

below, that make estimating lifetime program costs a 

difficult task.

Legislative, Regulatory, and Policy Risk

There are inherent risks to estimating future lifetime 

disbursements and collections for a cohort stemming 

from legislative, regulatory, or administrative actions. 

For instance, the cost structure of the Direct Loan 

Program may be significantly altered if policies around 

loan forgiveness are expanded. In addition, the effects on 

financial modeling and estimation associated with recent 

legislative, regulatory, and policy action is difficult to 

interpret given the lack of actual trend data availability. 

Some examples of current risks include the following:

Extension of Student Loan Payment Relief During the 

COVID-19 Pandemic: The emergency relief measures 

in the Direct Loan Program, including suspending loan 

payments, halting collections on defaulted loans, and 

setting interest rates to 0 percent have been extended 

through January 31, 2022. These actions have insulated 
36 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

federal student loan performance from economic 

disruption caused by the COVID-19 pandemic, while at 

the same time reducing the amount of loan repayments 

being remitted to the Department. As the pandemic is 

ongoing, there is uncertainty regarding cost estimates as 

future actions to support borrowers during the return to 

repayment in 2022 could affect those received payments. 

Income-Driven Repayment Plans: Without 

consideration of impacts from the pandemic, IDR plans 

tend to be more costly to the government than nonIDR plans. For the 2021 loan cohort, it is estimated that 

the government will recover 44 percent less for loans in 

IDR plans as compared to loans in standard plans. It is 

important to be careful in making such comparisons, 

however, as the underlying characteristics of borrowers 

(and the corresponding behavioral dynamics driving 

selection of plans) also impact the overall cost of loans 

under each plan. Also, having more repayment plan 

options complicates repayment plan selection, since 

the tradeoff decisions when selecting the plans vary by 

borrower and may not always be entirely clear. In general, 

however, the proliferation of IDR plans has made IDR 

terms more generous and made the plans available to a 

greater number of borrowers; these plans are traditionally 

more costly to the government. Selected comparisons 

between projected originations and borrower repayments 

under the different IDR plans are available on the 

Department’s website. Future commitment to promote 

these programs, and potential increased participation in 

these plans, are areas of uncertainty. Future legislative and/

or regulatory activity could also affect the underlying cost 

of IDR plans.

Public Service Loan Forgiveness: Enacted in 2007, the 

Public Service Loan Forgiveness (PSLF) program allows 

a direct loan borrower to have the balance of their direct 

loans forgiven after having made 120 qualifying monthly 

payments under a qualifying repayment plan, while 

working full time for a qualifying public service employer 

(such as government or certain types of nonprofit 

organizations). In general, forgiveness provided via PSLF 

raises the cost of the Direct Loan Program; however, 

there is still uncertainty as to how many borrowers will 

take advantage of the program. Much of this uncertainty 

arises because borrowers are not required to apply for 

the program or provide any supporting documentation 

on their employment until after having made the 120 

qualifying monthly payments, and data on actual PSLF 

forgiveness remains 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. The Consolidated 

Appropriations Act, FY 2018, and the Department of 

Education Appropriations Act, FY 2019, each provided 

$350 million toward Temporary Expanded Public Service 

Loan Forgiveness (TEPSLF) for borrowers who met 

eligibility for public service employment but were not 

enrolled in a qualified repayment plan. The Consolidated 

Appropriations Act, FY 2020, and the Consolidated 

Appropriations Act, FY 2021 each provided $50 million 

for TEPSLF. As of September 30, 2021, the total number 

of borrowers who received forgiveness from PSLF and 

TEPSLF exceeded 16,000. The value of this forgiveness 

totaled nearly $1.26 billion. Despite the relatively modest 

numbers of approved applications to date, the number 

of borrowers who have certified their employment in a 

public service organization continues to increase steadily. 

As of September 30, 2021, the number of borrowers with 

certified employment totaled nearly 1.33 million. The 

low number of approved PSLF applications in relation 

to employment certifications may be partially due to 

the complicated nature of the program, in particular the 

determination of what constitutes a qualifying payment. 

In addition, many borrowers who file employment 

certification forms early in their careers may also move 

into private sector employment before completing the 10 

years of qualifying payments and thus may (a) never apply 

for forgiveness or (b) apply for forgiveness much later after 

returning to public service work.

On October 5, 2021, the Department announced 

a temporary change to the PSLF program to allow 

previously ineligible loans to be immediately eligible for 

forgiveness, or additional progress toward forgiveness, 

with no further action on their part. The changes include 

a limited PSLF waiver that allows all payments by student 

borrowers to count toward PSLF, regardless of loan 

program or payment plan and review of denied PSLF 

applications for errors, giving borrowers the ability to 

have their PSLF determinations reconsidered. Borrowers 

who have not previously certified employment will also 

be able to apply for the waiver. Two permanent changes 

to military borrowers working toward PSLF were also 

implemented. Any future congressional or regulatory 

action that may affect eligibility for PSLF continues to be 

an area of uncertainty. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 37

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 2021 include how long students will 

remain in school; what repayment plan will be chosen; 

whether the loan will be consolidated; whether the borrower will die prior to completing repayment, become 

disabled, bankrupt, or have another claim for discharge or 

forgiveness (closed school loan discharge, borrower defense 

to repayment, etc.); whether the loan will go into deferment or forbearance; whether the loan will go into default 

and, if so, what collections will be received on the defaulted loan; and, if the loan is in an IDR plan, what the borrower’s employment (public sector or not) and income and 

family size will be over the next 25 years. These projections 

are generally made based on historical data about borrower 

characteristics and behavior, which are more difficult to 

estimate during times of unprecedented uncertainty facing 

students and borrowers in repayment plans today. Lastly, 

the direct loan portfolio has grown from approximately 

$356 billion in FY 2011 to nearly $1.3 trillion as of the 

end of FY 2021. 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 2021, the COVID-19 pandemic continued to cause 

widespread disruption to the American economy. The 

emergency relief measures provided by Congress and the 

President resulted in flexibilities for federal student loan 

borrowers, continuing to prevent spikes in delinquency 

and default rates. Involuntary loan collections from wage 

garnishment, tax refund reductions, and reductions of 

federal benefits such as Social Security are also suspended. 

However, the ultimate impact of the pandemic on longterm 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:

Interest Rates: Direct Loan Program cost estimates are 

very sensitive to changes in interest rates. Under the 

current program terms, the fixed borrower rates for 

direct loans are established in advance of the upcoming 

school year, while the Treasury fixed interest rate on the 

Department’s borrowings to fund those loans is not set 

until after those awards are fully disbursed, which can 

be as much as 18 months later. Unexpected changes in 

interest rates during this time can significantly impact 

Direct Loan Program cost.

Unemployment: Unemployment rates have been shown 

to affect both student loan volume and student loan 

repayment decisions and behavior. During periods of 

economic downturn, displaced workers have tended to 

pursue higher education opportunities in high numbers 

to strengthen their credentials, change career paths, or 

improve future employment opportunities. While the 

COVID-19 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 prepandemic. 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, limited to cohorts 2016–20, resulted in 

a projected increase in the re-estimate of $2.4 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 because of the pandemic. 

Data is not available for the FY 2021 financial statements, 

and the ultimate cost may not be known for some time. 

The estimates are sensitive to slight changes in model 
38 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

assumptions. The Department continues to manage risks in 

this area by building its knowledge about its borrower base 

and remaining informed of labor market statistics.

Operational Risk

Unforeseen issues in administering and servicing student 

loans may impact the cost estimates. For example, in 

December 2019, the President signed the Fostering 

Undergraduate Talent by Unlocking Resources for Education 

Act (FUTURE Act), which amends Section 6103 of the 

Internal Revenue Code to allow the IRS to share taxpayer 

data directly with the Department. Once implemented, this 

will make it easier for borrowers to stay enrolled in an IDR 

plan by allowing automated data sharing between federal 

agencies and eliminating the need for borrowers to annually 

recertify their income. A time line for implementation of 

the FUTURE Act is uncertain, which can make predicting 

the impact on student loan cost estimates a challenge. 

Similarly, the Department is working to implement 

the FAFSA Simplification Act, which makes significant 

changes to the need analysis formula that will also 

introduce operational challenges. The Department invests 

significant resources to ensure continuous improvements 

in cybersecurity defenses based on current and emerging 

threats. Despite this investment, security threats to 

operations are ongoing and incidents may happen without 

warning, potentially disrupting student loan administration 

and ultimately borrower cash flows, which can be impacted 

by the timing of when collections or disbursements are 

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

unpredictable disruptions in the administrative status quo 

may impact student loan cost estimates.

On September 30, 2021, the Department was awarded 

$20 million from the Technology Modernization Fund 

board. The Department will use the money to implement 

a Zero Trust architecture to improve the protections of 

student data it manages. By improving and modernizing 

cybersecurity technologies the Department will provide 

more secure and less burdensome user experiences both for 

employees and the public. 

Another potentially unforeseen issue that may impact cost 

estimates is when federal loan servicers or private collection 

agencies exit the student loan servicing program, as several 

have over the last year. The Department remains committed 

to ensuring that borrowers receive high-quality service that 

helps them access the benefits granted by law.

NEXT GEN FSA

About FSA

As the nation’s largest provider of financial aid for 

education beyond high school, FSA delivers more than 

$112 billion in aid each year to students and their families. 

Through programs authorized under the Higher Education 

Act of 1965, as amended, FSA provides grants, loans, 

and work-study funds for college 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. It is critical that 

the Department provides an environment that provides 

customers with the services and experiences that they 

expect and the outcomes that they deserve. The Next Gen 

FSA initiative is enabling FSA to realize this vision by 

modernizing the way connections are made with customers 

and streamlining the 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 

FSA partners at postsecondary institutions.

Legacy Environment

In the current federal financial aid process, students 

and families must navigate 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 

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 the Department’s vendors. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 39

MANAGEMENT’S DISCUSSION AND ANALYSIS

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 customers understand the aid they have 

received, their remaining eligibility, and how they can 

manage loan repayment in a way that meets their goals. 

Some of these Digital and Customer Care (DCC) 

tools include the Federal Student Aid Estimator, Loan 

Simulator, and Public Service Loan Forgiveness Help Tool. 

In FY 2022 Next Gen DCC will continue to create and 

enhance tools and products for customers on StudentAid.

gov and the myStudentAid mobile app. For example, in 

FY 2022, FSA plans to launch Medallia, a new customer 

feedback tool, while also making improvements to 

other tools, like the PSLF Help Tool and the Incomedriven repayment plan application—which will allow 

for borrowers to move more quickly through the process 

when they cannot match with the IRS for providing 

income information. While not as eye-catching, FSA 

is working on technical integrations and cybersecurity 

updates that will be less visible to customers, but are 

significant improvements nonetheless. DCC’s integration 

with the new NSLDS will allow the Department to be 

more flexible in what data is shown to customers, and 

multifactor authentication will keep bad actors from 

breaching the site. 

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 early FY 2022, FSA will launch the Business Process 

Operations (BPO) initiative. BPO is the personnel 

component of the Next Gen FSA’s vision. BPO vendors 

will provide customers and partners across all FSA 

programs and operations with support via contact centers 

and manual processing. Contact center work includes, but 

is not limited to, providing general assistance to students, 

parents, and borrowers as they navigate processes to 

learn about, apply for, receive, and repay federal student 

aid. BPO’s will manage key back-office activities that 

encompass the full lifecycle of federal student financing 

in a manner consistent with leading financial services 

providers and other industry leaders recognized for highquality customer service. While managing customer and 

partner relations, FSA’s BPO’s will:

• Deliver an efficient and effective customer and 

partner experience.

• Improve customer outcomes. 

• Ensure compliance with consumer 

protections standards.

• Establish greater operational flexibility. 

• Reduce operational complexity. 

Next Gen remains deeply committed to improving 

the FSA experience for partners. In March 2021, FSA 

launched the FSA Partner Connect website, fsapartners.

ed.gov. Before the launch, FSA’s partners used several 

different systems to access tools and resources to support 

students during their educational journey. This new 

interface consolidates the tools that partners use regularly 

onto a single digital platform that streamlines operational 

information by award year, provides notifications related 

to a partner’s specific school activities, tracks scheduled 

system outages, and more. FSA Partner Connect also 

reduces the administrative burden on financial aid 

professionals at more than 5,600 postsecondary schools 

around the globe, allowing them more time to serve 

students. In FY 2022, FSA will continue to develop 

and enhance the tools and systems used by partners and 

financial aid professionals.

The contracts that bring onboard these new tools, systems, 

and platforms 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 enterprise wide data analytics platform will drive 

improved data and governance standards.

Solicitation and Procurement Process

FSA is strategically planning its future solicitation strategy, 

with the priority being to ensure that its customers and 

partners have stable, reliable, and accountable solutions 

that meet their needs.

As the Next Gen vision evolves, FSA will ensure that the 

appropriate contractual actions will be taken to maintain 

or improve servicing capabilities. FSA aims to modernize 
40 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

all back-end systems and infrastructure to pave the 

way for improved loan processing and management of 

customer accounts.

As FSA develops long-term plans for federal loan 

servicing, the goal will be to improve accountability, 

enhance service for at-risk borrowers, and establish 

performance benchmarks.

LEVERAGING DATA AS A STRATEGIC ASSET

The Department continues to focus on leveraging its data 

as a strategic asset by further implementing requirements 

in the Foundations for Evidence-Based Policymaking Act 

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

Strategy. Throughout the COVID-19 pandemic, 

the Department continued its efforts to strengthen 

data governance while overseeing the unprecedented 

investment in students and schools. This section highlights 

five areas guiding the Department towards realizing the 

power of data in daily operations and national policy: (1) 

the ED Data Strategy; (2) Open Data; (3) the Education 

Stabilization Fund Transparency Portal; (4) Data Quality; 

and (5) the ED Learning Agenda.

The Department’s Data Strategy

The FY 2020 Action Plan for the Federal Data Strategy 

called for agencies to “put in place a data strategy or 

road map,” and in December 2020, the Department 

subsequently completed and published its inaugural 

Data Strategy. The Department’s Data Governance 

Board (DGB) guided the development of four goals—to 

strengthen agencywide data governance; build human 

capacity to leverage data; advance the strategic use of data; 

and to improve data access, transparency, and privacy. The 

Department’s Data Strategy provides a road map for the 

agency to improve education outcomes and lead the nation 

through evidence-based policy and data-driven decisions. 

The Office of the Chief Data Officer led agencywide 

working groups composed of representatives of each 

principal office to develop objectives and action plans for 

implementation throughout FY 2021 and FY 2022. Key 

Data Strategy implementation efforts include integrating 

existing data governance initiatives into agencywide efforts, 

the implementation of agencywide data governance policies 

for program office data life cycle and data management 

functions, launching an agencywide data literacy program, 

and establishing data quality guidelines.

Open Data

The Evidence Act requires agencies to make data “open by 

default,” and 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 while prioritizing 

a broader public use of data paid for by its citizens. The 

Department’s Open Data Platform (ODP) (https://data.

ed.gov/)was publicly launched December 2020, with an 

initial population of public data profiles. A central repository 

for data assets, ODP is a fully featured, robust, and highly 

scalable data repository that maintains all data assets in a 

fully searchable catalog. As required by the Evidence Act 

and guided by Data Strategy Goal 4, the Department will 

build towards a comprehensive data inventory by expanding 

on the ODP; increasing its catalogued data assets for both 

externally available open data and internal sources subject 

to open data priorities, reviewing all data assets for release, 

and expanding the number of Department open data assets 

listed in in the Federal Data Catalog. The ODP improves 

the Department’s ability to grow and operationalize its 

comprehensive data inventory while progressing on open 

data requirements. The Department is at the forefront of 

federal agencies in realizing the requirements of the Open, 

Public, Electronic and Necessary Government Data Act (OPEN 

Government Data Act) (Title II of the Evidence Act) and the 

ODP is yet another way the Department is seeking to make 

data open by default.

Education Stabilization Fund Public 

Transparency Portal

The ESF Transparency Portal, located at covid-reliefdata.ed.gov, is the Department’s website dedicated 

to collecting and disseminating data and information 

about the ESF programs managed by the Department 

and authorized through the Coronavirus Aid, Relief, and 

Economic Security Act (CARES Act), Coronavirus Response 

and Relief Supplemental Appropriations Act (CRRSAA), 

and the American Rescue Plan Act of 2021 (ARP). The 

ESF Portal empowers decision-makers, parents, students, 

teachers, education leaders, and taxpayers with information 

about ESF programs and discloses how states, districts, and 

institutions of higher education (IHE) spent COVID-19 

relief funds. The funding data is from public data sources 

and reflects data collected by the Department and data 

released or shared by other federal agencies, including the 

General Services Administration, and the Department of 

the Treasury. The Portal enables state and IHE grantees to 

submit annual performance reports on funding authorized 

through the HEERF, ESSER, and GEER funds, providing 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 41

MANAGEMENT’S DISCUSSION AND ANALYSIS

the public and decision-makers fuller insight into the 

expenditures and usage of ESF program funds. The Portal 

currently displays the CARES Act Annual Performance 

Report 2020 data by grantee and includes downloadable 

data files for decision-makers and the public detailing 

how ESF funds were spent on allowable activities such as 

distance-learning, ensuring student health and safety, and 

emergency aid to college students. An exemplar of open, 

transparent data, the Portal is responsive to the mandate in 

the OPEN Government Data Act (Title II of the Evidence 

Act) to make public data open and accessible.  

Data Quality

The Department’s program offices have historically had 

varying levels of data quality control among its datasets. 

The Evidence Act calls for agencies to make greater use of 

administrative and program data, but there are limitations 

on enforcing remission of complete and accurate data 

from grantees. Current control processes address data 

quality only at the point when data are submitted, and, 

commencing initially in FY 2020, the Department identified 

a multipronged approach to address root causes and 

improve data quality. The ED Data Strategy Objective 1.5 

calls for the Department to “Implement a cohesive data 

quality approach for the agency, leveraging best practices, 

technical assistance, and controls.” Efforts include ensuring 

grantees are aware of their data responsibilities under the 

conditions of their grants and of the credible consequences 

for noncompliance, ranging from additional informal 

monitoring through termination of the grant. It also includes 

provisions to improve the varying capacity of grantees in 

reporting data and varying capacity among Department staff 

in reviewing grantee-reported data. When fully deployed, 

this is expected to take the form of technical assistance to 

grantees, additional resources for the Department for data 

quality review, and expanded use of technological solutions 

to automate and reduce for manual reporting and review.

In late FY 2020, exigent circumstances, volume of new 

grant funds, and other challenging environmental factors 

led the Department to immediately deploy a variation 

of this strategy for key data collections associated with 

the ESF—specifically, the HEERF, GEER, ESSER, and 

equivalent Outlying Area funds. The Department executed 

a contract to develop a data collection portal, implement a 

data management solution to support internal and external 

reporting, and launch a public transparency website. 

In addition to early communications to grantees about 

expectations for data quality, several components of the data 

collection process include explicit data quality components. 

This includes auto-population of known data values in 

the collection instrument; help desk services for grantees 

submitting performance data; a data management platform 

that imposes business rules to improve data quality; and 

established phases for opening, closing, and reopening the 

tool for grantees to submit data quality corrections. 

Throughout FY 2021, the Department continued to 

work on developing data quality controls for each stage of 

the data lifecycle, including mechanisms for evaluating, 

preventing, and remediating data irregularities to assure 

higher quality data for the agency to use in meeting its 

mission and strategic objectives. Future efforts coordinated 

through the ED Data Strategy include the development 

of a data quality playbook to clarify data quality roles 

and responsibilities and build staff capacity to understand 

and address quality issues. The playbook will address how 

to help grantees assess and improve data quality before 

submission, propose meaningful incentives for data 

submitters, strengthen communication strategies, and 

propose ways to reduce the burden on both Department 

staff and grantees.

The Department’s Learning Agenda 

The Department’s FY 2022–FY 2026 Learning Agenda 

will be published in February 2022, in conjunction 

with the release of the FY 2023 President’s Budget. The 

Learning Agenda is aligned to the Department’s Strategic 

Plan, reflecting the secretary’s goals and objectives for 

the Department over the next four years. The Learning 

Agenda is complemented by an Annual Evaluation Plan. 

The Annual Evaluation Plan includes a listing of the 

Department’s most significant evaluation activities in a 

given fiscal year. All Evidence Act deliverables are located at 

https://www.ed.gov/data.

The Learning Agenda was developed in consultation with the 

Department’s Evidence Leadership Group (ELG). The ELG 

is co-chaired by the Department’s evaluation officer (EO) and 

the director of the Department’s Grants Policy Office (GPO) 

and includes members from the Department’s primary 

grantmaking 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 public, was also used to inform the Department’s 

Learning Agenda. 
42 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS

In addition to advising the EO on the development of the 

Learning Agenda, the ELG advises Department leaders on 

how to support the capacity of Department staff to make 

better use of data and evidence. GPO, led by the ELG cochair, continues to spearhead 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.

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 (TMBS) is 

one of the Department’s key initiatives.

Technology Business Management Solutions 

The purpose of the TBMS project is to provide greater cost 

transparency into IT spending. The TBMS allows OCIO 

to communicate the cost drivers for, and the 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 TBMS 

framework, including using cost pools and IT towers 

to classify IT spending. The Department has started to 

leverage TBMS beyond the minimum OMB reporting 

requirements to encompass the full implementation of 

the TBMS cost accounting framework. The Department 

of Education is refining the TBMS 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 the Department’s internal resource costs with 

real-world data to inform decisions. 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 

cost pools and IT towers.

• 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.