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

Notes to the Financial Statements for the 

Years Ended September 30, 2021 

and September 30, 2020

NOTE 1. Summary of Significant 

Accounting Policies

REPORTING ENTITY AND PROGRAMS

The U.S. Department of Education (the Department), 

a Cabinet-level agency of the executive branch of the 

U.S. government, was established by Congress under the 

Department of Education Organization Act (Public Law 96-

88), which became effective on May 4, 1980. The mission 

of the Department is to promote student achievement 

and preparation for global competitiveness by fostering 

educational excellence and ensuring equal access. 

The Department is a component of the U.S. government. 

For this reason, some of the assets and liabilities 

reported by the Department may be eliminated for 

governmentwide reporting because they are offset by assets 

and liabilities of another U.S. government entity. These 

financial statements should be read with the realization 

that they are for a component of the U.S. Government. 

The Department is primarily responsible for administering 

federal student loan and grant programs and provides 

technical assistance to loan and grant recipients and 

other state and local partners. The largest portions of the 

Department’s financial activities relate to the execution of 

loan and grant programs discussed below.

Federal Student Loan Programs. The Department 

administers direct loan, loan guarantee, and other student 

aid programs to help students and their families finance the 

cost of postsecondary education. These include the William 

D. Ford Federal Direct Loan (Direct Loan) Program and 

the Federal Family Education Loan (FFEL) Program.

The Direct Loan Program, added to the Higher Education 

Act of 1965 (HEA) in 1993 by the Student Loan Reform 

Act of 1993, authorizes the Department to make loans 

through participating schools to eligible undergraduate 

and graduate students and their parents. The Direct Loan 

Program offers four types of loans: Stafford, Unsubsidized 

Stafford, Parent Loan for Undergraduate Students (PLUS), 

and Consolidation. Evidence of financial need is required 

for an undergraduate student to receive a subsidized 

Stafford loan. The other three loan programs are available 

to borrowers at all income levels. Loans can be used only 

to meet qualified educational expenses. 

The FFEL Program, authorized by the HEA, operates 

through state and private, nonprofit guaranty agencies that 

provided loan guarantees on loans made by private lenders 

to eligible students. The SAFRA Act, which was included 

in the Health Care and Education Reconciliation Act of 

2010, stated that no new FFEL loans would be made 

effective July 1, 2010. FFEL Program receivables include 

defaulted FFEL loans and acquired FFEL loans. Acquired 

FFEL loans include student loan assets acquired using 

temporary authority provided in the Ensuring Continued 

Access to Student Loans Act of 2008 (ECASLA). ECASLA 

gave the Department temporary authority to purchase 

FFEL loans and participation interests in those loans. 

The Department implemented three activities under this 

authority: loan purchase commitments; purchases of loan 

participation interests; and a put, or forward purchase 

commitment, with an asset-backed commercial paper 

(ABCP) Conduit. This authority expired after September 

30, 2010; as a result, loan purchase commitments and 

purchases of loan participation interests concluded. 

However, under the terms of the Put Agreement with 

the conduit, ABCP Conduit activity ceased operations in 

January 2014.

The Department also administers other credit programs 

for higher education. These include the Federal Perkins 

Loan program, the Teacher Education Assistance for 

College and Higher Education (TEACH) Grant program, 

the Health Education Assistance Loan (HEAL) program, 

and facilities loan programs that include the Historically 

Black Colleges and Universities (HBCU) Capital 

Financing program, along with low-interest loans to 

institutions of higher education (IHE) for the building 

and renovating of their facilities. (See Notes 5 and 10)

Grant Programs. The Department has more than 100 

grant programs. The three largest grant programs are Title 

I of the Elementary and Secondary Education Act, federal 

Pell Grant, and the Individuals with Disabilities Education 

Act (IDEA) grants. In addition, the Department offers 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 53

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

other discretionary grants under a variety of authorizing 

legislation awarded using a competitive process, and 

formula grants using formulas determined by Congress 

with no application process. (See Note 10)

COVID-19. Congress passed multiple COVID-19 relief 

bills in fiscal year (FY) 2020 and FY 2021 including the 

following that provided funding for educational purposes: 

the Coronavirus Aid, Relief, and Economic Security Act, of 

2020 (CARES Act), the Coronavirus Response and Relief 

Supplemental Appropriations Act of 2021 (CRRSAA), and 

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

component of the education funding provided by the 

COVID-19 relief appropriations established the Education 

Stabilization Fund, which includes the (1) Elementary 

and Secondary School Emergency Relief Fund, (2) 

Higher Education Emergency Relief Fund, (3) Governor’s 

Emergency Education Relief Fund, and (4) funds for 

outlying areas. The Education Stabilization Fund is being 

distributed to recipients through various grant programs. 

The Department transferred $563 million of the funds to 

the Department of the Interior to be administered by the 

Bureau of Indian Education. (See Notes 3, 10, and 11)

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 indefinite appropriations. (See Notes 5, 

10, and 11) 

Other regulatory flexibilities and incentives provided in 

the COVID-19 legislation include:

• Federal Supplemental Educational Opportunity Grants 

to provide emergency aid to students.

• Work-study payments, which will continue even if 

students can no longer work on-site.

• Pell Grants, financial aid, and loans originated for 

the spring 2020 term, which students who have had 

to leave college campuses will not have to pay back. 

Moreover, none of this aid will count against students’ 

financial aid lifetime limits.

• Waiving satisfactory academic progress requirements 

to help ensure that students do not lose academic 

standing and the ability to receive federal financial 

student aid.

• Tax credits that incentivize employers to help pay for 

student loans.

PROGRAM OFFICES

The Department has three major program offices that 

administer most of its loan and grant programs: 

• Federal Student Aid (FSA) administers financial 

assistance programs for students pursuing 

postsecondary education and makes available federal 

grants, direct loans, and work-study funding to eligible 

undergraduate and graduate students.

• The Office of Elementary and Secondary Education 

(OESE) assists state education agencies (SEA) and local 

educational agencies (LEA) to improve the achievement 

of preschool, elementary, and secondary school students; 

helps ensure equal access to services leading to such 

improvement—particularly children with high needs; 

and provides financial assistance to LEAs whose local 

revenues are affected by federal activities.

• The Office of Special Education and Rehabilitative 

Services (OSERS) supports programs that help provide 

early intervention and special education services to 

children and youth with disabilities. OSERS also 

supports programs for the vocational rehabilitation 

of youth and adults with disabilities, including 

preemployment transition services and other transition 

services designed to assist students with disabilities to 

enter postsecondary education and achieve employment.

Other offices that administer programs and provide 

leadership, technical assistance, and financial support to 

state and LEAs and IHEs for reform, strategic investment, 

and innovation in education include: the Office of 

Career, Technical, and Adult Education (OCTAE); 

Office of Postsecondary Education (OPE); Institute of 

Education Sciences (IES); and Office of English Language 

Acquisition (OELA). In addition, the Office for Civil 

Rights (OCR) works to ensure equal access to education, 

promotes educational excellence throughout the nation, 

and serves student populations facing discrimination 

and the advocates and institutions promoting systemic 

solutions to civil rights issues. (See Note 10)

b A S I S O F AC C O u N T I N G 

AND PRESENTATION

These financial statements were prepared to report the 

financial position, net cost of operations, changes in net 

position, and budgetary resources of the Department, as 

required by the Chief Financial Officers Act of 1990 and 
54 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

the Government Management Reform Act of 1994. The 

financial statements were prepared from the books and 

records of the Department, in accordance with Generally 

Accepted Accounting Principles (GAAP) accepted in the 

United States for federal entities, issued by the Federal 

Accounting Standards Advisory Board (FASAB), and 

the Office of Management and Budget (OMB) Circular 

A-136, Financial Reporting Requirements, as revised. These 

financial statements are different from the financial reports 

prepared by the Department pursuant to OMB directives 

that are used to monitor and control the use of budgetary 

resources. FSA also issues audited stand-alone financial 

statements that are included in their annual report.

The accounting structure of federal agencies is designed to 

reflect both accrual and budgetary accounting transactions. 

Under the accrual method of accounting, revenues are 

recognized when earned and expenses are recognized when 

a liability is incurred, without regard to receipt or payment 

of cash. Budgetary accounting facilitates compliance with 

legal constraints and controls over the use of federal funds.

Intradepartmental transactions and balances have been 

eliminated from the consolidated financial statements. 

Accounting standards require all reporting entities 

to disclose that accounting standards allow certain 

presentations and disclosures to be modified, if needed, to 

prevent the disclosure of classified information.

AC C O u N T I N G FO R F E D E R A L 

C R E D I T P R O G R A M S 

The Department’s accounting for its loan and loan 

guarantee programs is based on the requirements of the 

Federal Credit Reform Act of 1990 (FCRA). The purpose of 

the FCRA is to record the lifetime subsidy cost of direct 

loans and loan guarantees, in present value terms, at the 

time the loan is disbursed (subsidy). Components of subsidy 

costs for loans and guarantees include defaults (net of 

recoveries); contractual payments to third-party, private loan 

collectors who receive a set percentage of amounts collected; 

and, as an offset, origination and other fees collected. 

For direct loans, the difference between interest rates 

incurred by the Department on its borrowings from the 

U.S. Department of Treasury (Treasury) and interest rates 

charged to particular borrowers is also subsidized (or may 

provide an offset to subsidy if the Department’s rate is less). 

Under the FCRA, subsidy cost is estimated using the 

net present value of future cash flows to and from the 

Department. In accordance with the FCRA, credit 

programs either estimate a subsidy cost to the government 

(a “positive” subsidy), breakeven (zero subsidy cost), 

or estimate a negative subsidy cost. Negative subsidy 

occurs when the estimated cost of providing loans to 

borrowers from Treasury borrowing, collection costs, and 

loan forgiveness is less than the value of collections from 

borrowers for interest and fees, in present value terms.

Subsidy cost is an estimate of the present value cost of 

providing direct loans but excludes the administrative 

costs of issuing and servicing the loans. The Department 

estimates subsidy expense using a set of econometric and 

financial models, as well as cash flow models. 

The Department estimates subsidy costs annually for new 

loans disbursed in the current year; updates to the previous 

cost estimates for outstanding loans disbursed in prior 

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

estimates based on new legislation or other government 

actions that change the terms of existing loans (loan 

modifications) that alter the estimated subsidy cost and the 

present value of outstanding loans. Loan modifications can 

also include modification adjustment gains and losses to 

account for the difference between the discount rate used 

to calculate the cost of the modification and the interest 

rate at which the cohort pays or earns interest.

The subsidy costs of direct loan and loan guarantee 

programs are budgeted and tracked by the fiscal year in 

which the loan award is made, or the funds committed. 

Such a grouping of loans or guarantees is referred to as a 

“cohort.” A cohort is a grouping of direct loans obligated 

or loan guarantees committed by a program in the same 

year even if disbursements occur in subsequent years.

To account for the change in the net present value of the 

loan portfolio over time, the subsidy cost is amortized 

each year. Amortization accounts for the differences in 

interest rates, accruals, and cash flows over the life of a 

cohort, ensuring that cost is reflected in subsidy estimates 

and re-estimates. Amortization of subsidy is calculated as 

the difference between interest received from borrowers 

and Treasury (on uninvested funds) and interest paid to 

Treasury on borrowings. 

The FCRA establishes the use of financing, program, 

and Treasury General Fund receipt accounts for loan 

guarantees committed and direct loans obligated after 

September 30, 1991. 

• Financing accounts borrow funds from Treasury, 

make direct loan disbursements, collect fees from 

lenders and borrowers, pay claims on guaranteed 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 55

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

loans, collect principal and interest from borrowers, 

earn interest from Treasury on any uninvested funds, 

and transfer excess subsidy to Treasury General Fund 

receipt accounts. Financing accounts are presented 

separately in the combined statements of budgetary 

resources (SBR) as nonbudgetary credit reform 

accounts to allow for a clear distinction from all other 

budgetary accounts. This facilitates reconciliation of 

the SBR to the Budget of the United States Government

(President’s Budget).

• Program accounts receive and obligate appropriations 

to cover the positive subsidy cost of a direct loan 

or loan guarantee when the loan is approved and 

disburses the subsidy cost to the financing account 

when the loan is issued. Program accounts also receive 

appropriations for administrative expenses.

• Treasury General Fund receipt accounts receive 

amounts paid from financing accounts when there 

are negative subsidies for new loan disbursements or 

downward re-estimates of the subsidy cost of existing 

loans. (See Notes 12 and 13) 

The Department records an obligation each year for direct 

loan awards to be made in a fiscal year based on estimates 

of schools’ receipt of aid applications. The Department 

advances funds to schools based on these estimates. 

Promissory notes are signed when schools reach individual 

agreements with borrowers and the schools subsequently 

report each disbursement of advanced funds to the 

Department. A new promissory note is usually not required 

for students in the second or later year of study. Half of all 

loan awards are issued in the fourth quarter of the fiscal 

year. Loans awarded are typically disbursed in multiple 

installments over an academic period. As a result, loans 

may be disbursed over multiple fiscal years. Loan awards 

may not be fully disbursed due to students leaving or 

transferring to other schools. The Department’s obligation 

estimate may also not reflect the actual amount of awards 

made. Based on historical averages, the Department expects 

approximately 8.9 percent of the amount obligated for new 

loan awards will not be disbursed.

When a loan is placed in deferment or forbearance, loan 

repayment is temporarily suspended with the length of 

postponement different for each borrower. Interest accrues 

while a loan is in deferment or forbearance. Loans are 

canceled if a person dies, meets disability requirements, 

or occasionally through the bankruptcy courts. Loans are 

also canceled through the Public Service Loan Forgiveness 

(PSLF) program, which forgives the remaining balance 

on a direct loan after 120 qualifying monthly payments 

are made. These payments must be made under a 

qualifying repayment plan while working full-time for a 

qualifying employer. In addition, the Department offers 

the Pay As You Earn (PAYE) program. This student loan 

repayment program is designed to help borrowers who 

struggle to make their normal student loan payments. 

The plan allows payments to be limited to 10 percent of 

discretionary income if qualifications are met. Under the 

PAYE program, if all requirements are met, forgiveness of 

the remaining balance of a student loan is possible after 20 

years of payments.

buDGETARY RESOuRCES

Budgetary resources are amounts available to enter into 

new obligations and to liquidate them. The Department’s 

budgetary resources include unobligated balances of 

resources from prior years and new resources, which 

include appropriations, authority to borrow from Treasury, 

and spending authority from collections.

Borrowing authority is an indefinite budgetary resource 

authorized under the FCRA. This resource, when realized, 

finances the unsubsidized portion of the Direct Loan, 

FFEL, and other loan programs. In addition, borrowing 

authority is requested to cover the cost of the initial loan 

disbursement as well as any related negative subsidy to be 

transferred to Treasury General Fund receipt accounts. 

Treasury prescribes the terms and conditions of borrowing 

authority and lends to the financing account amounts as 

appropriate. Amounts borrowed, but not yet disbursed, are 

included in uninvested funds and earn interest. Treasury 

uses the same weighted average interest rates for both 

the interest charged on borrowed funds and the interest 

earned on uninvested funds. Treasury sets a different 

fixed interest rate to be used for each loan cohort once 

the loans are substantially disbursed. The Department 

may carry forward borrowing authority to future fiscal 

years if cohorts are disbursing loans. All borrowings from 

Treasury are effective on October 1 of the current fiscal 

year, regardless of when the Department borrowed the 

funds, except for amounts borrowed to make annual 

interest payments.

Authority to borrow from Treasury provides most of 

the funding for disbursements made under the Direct 

Loan, FFEL, and other loan programs. Subsidy and 

administrative costs of the programs are funded by 

appropriations. Borrowings are repaid using collections 

from borrowers, fees, and interest on uninvested funds.
56 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Unobligated balances represent the cumulative amount 

of budgetary resources that are not obligated and that 

remain available for obligation under law, unless otherwise 

restricted. Resources expiring at the end of the fiscal 

year remain available for five years, but only for upward 

adjustments of prior-year obligations, after which they 

are canceled and may not be used. Resources that have 

not expired at year-end are available for new obligations, 

as well as upward adjustments of prior-year obligations. 

Funds are appropriated on an annual, multiyear, or 

no-year basis. Appropriated funds expire on the last 

day of availability and are no longer available for new 

obligations. Amounts in expired funds are unavailable 

for new obligations but may be used to adjust previously 

established obligations.

Permanent Indefinite Budget Authority. The Direct 

Loan, FFEL, and other loan programs have permanent 

indefinite budget authority through legislation to fund 

subsequent increases to the estimated future costs of the 

loan programs. Parts B, Federal Family Education Loan 

Program, and D, Federal Direct Student Loan, of the 

HEA pertain to the existence, purpose, and availability of 

permanent indefinite budget authority for these programs.

Reauthorization of Legislation. Funds for most 

Department programs are authorized, by statute, to be 

appropriated for a specified number of years, with an 

automatic one-year extension available under Section 422 

of the General Education Provisions Act. Congress may 

continue to appropriate funds after the expiration of the 

statutory authorization period, effectively reauthorizing 

the program through the appropriations process. The 

current President’s Budget presumes all programs continue 

in accordance with congressional budgeting rules. 

(See Note 12)

ENTITY AND NON-ENTITY ASSETS

Assets are classified as either entity or non-entity assets. 

Entity assets are those that the Department has authority 

to use for its operations. Non-entity assets are those 

held by the Department but not available for use in its 

operations. Non-entity assets are offset by liabilities to 

third parties and have no impact on net position. The 

Department combines its entity and non-entity assets on 

the balance sheets and discloses its non-entity assets in the 

notes. (See Note 2)

FuND bALANCE WITh TREASuRY

Fund Balance with Treasury includes amounts available to 

pay current liabilities and finance authorized purchases, 

as well as funds restricted until future appropriations 

are received. Treasury processes cash receipts and cash 

disbursements for the Department. The Department’s 

records are reconciled with Treasury’s records. (See Note 3)

ACCOuNTS RECEIVAbLE

Accounts receivable are amounts due to the Department 

from the public and other federal agencies. Receivables 

from the public result from overpayments to recipients 

of grants and other financial assistance programs, as well 

as disputed costs resulting from audits of educational 

assistance programs. Amounts due from federal agencies 

result from reimbursable agreements entered into by 

the Department with other agencies to provide various 

goods and services. Accounts receivable are reduced to net 

realizable value by an allowance for uncollectible amounts. 

The estimate of an allowance for loss on uncollectible 

accounts is based on the Department’s experience in the 

collection of receivables and an analysis of the outstanding 

balances. (See Note 4)

CASh AND OThER MONETARY ASSETS

Cash and other monetary assets are the federal 

government’s interest in the program assets held by state 

and nonprofit FFEL Program guaranty agencies (guaranty 

agencies’ federal funds). Section 422A of the HEA required 

FFEL guaranty agencies to establish federal student loan 

reserve funds. Guaranty agencies’ federal funds include 

initial federal start-up funds, receipts of federal reinsurance 

payments, insurance premiums, guaranty agency share 

of collections on defaulted loans, investment income, 

administrative cost allowances, and other assets.

The balance of guaranty agencies’ federal funds represents 

consolidated reserve balances of the 20 guaranty agencies 

based on the guaranty agency financial reports that each 

agency submits annually to the Department. Although the 

Department and the guaranty agencies operate on different 

fiscal years, all guaranty agencies are subject to an annual 

audit. A year-end valuation adjustment is made to adjust the 

Department’s balances to comply with federal accounting 

principles and disclose funds held outside of Treasury.

Guaranty agencies’ federal funds are classified as 

non-entity assets with the public and are offset by 

a corresponding liability due to Treasury on the 

Department’s balance sheets. The funds are held by 

the guaranty agencies but can only be used for certain 

specific purposes listed in the Department’s regulations. 

The guaranty agencies’ federal funds are the property 

of the United States and are reflected in the President’s 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 57

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

Budget. Payments made to the Department from guaranty 

agencies’ federal funds through a statutory recall or agency 

closures represent capital transfers and are returned to 

Treasury’s General Fund. (See Note 2)

LO A N R EC E I VA b L E S , N E T A N D LO A N 

G u A R A N T E E L I A b I L I T I E S 

The financial statements reflect the Department’s estimate 

of the long-term subsidy cost of direct and guaranteed 

loans in accordance with the FCRA. Loans and interest 

receivable are valued at their gross amounts less an 

allowance for the present value of amounts not expected 

to be recovered, and thus having to be subsidized—called 

an “allowance for subsidy.” The difference between the 

gross amount and the allowance for subsidy is the present 

value of the cash flows to, and from, the Department that 

are expected from receivables over their projected lives. 

Similarly, liabilities for loan guarantees are valued at the 

present value of the cash outflows from the Department 

less the present value of related inflows. The estimated 

present value of net long-term cash outflows of the 

Department for subsidized costs is net of recoveries, 

interest supplements, and offsetting fees.

The loan guarantee liabilities presents the net present 

value of all future cash flows from currently insured FFEL 

loans, including claim payments, interest assistance, 

allowance payments, and recoveries from assigned loans. 

Guaranteed loans that default are initially turned over to 

guaranty agencies for collection. Defaulted FFEL loans are 

accounted for as assets and reported at their net present 

value, similar to direct loans, although they are legally 

not direct student loans. Credit program receivables, net 

includes defaulted FFEL loans owned by the Department 

and held by the Department or guaranty agencies. In most 

cases, after approximately four years, defaulted guaranteed 

loans not in repayment are turned over by the guaranty 

agencies to the Department for collection.

FFEL Program receivables include purchased loans and 

other interests acquired under an expired program. The 

cash flows related to these receivables include collections 

on purchased loans and other activities, including transfers 

of re-estimated subsidy. The cash flows of these authorities 

also include inflows and outflows associated with the 

underlying or purchased loans and other related activities, 

including any positive or negative subsidy transfers. 

Capitalization of interest occurs as a result of various 

initiatives, such as loan consolidations. As a result, interest 

receivable is reduced, and loan principal is increased. 

(See Note 5)

P R O P E R T Y A N D E Q u I P M E N T, N E T 

AND LEASES

The Department has very limited acquisition costs 

associated with buildings, furniture, and equipment as 

all Department and contractor staff are housed in leased 

buildings. The Department does not own real property 

for the use of its staff. The Department leases office space 

from the General Services Administration (GSA). The 

lease contracts with GSA for privately and publicly owned 

buildings are operating leases.

The Department also leases information technology and 

telecommunications equipment, as part of a contractorowned, contractor-operated services contract. Lease 

payments associated with this equipment have been 

determined to be operating leases and, as such, are 

expensed as incurred. The noncancellable lease term is one 

year, with the Department holding the right to extend the 

lease term by exercising additional one-year options. (See 

Notes 4 and 14)

LIAbILITIES

• Liabilities represent actual and estimated amounts to 

be paid as a result of transactions or events that have 

already occurred.

• Liabilities are classified as covered by budgetary 

resources if budgetary resources are available to pay 

them. Credit program liabilities funded by permanent 

indefinite appropriations are also considered covered by 

budgetary resources. 

• Liabilities are classified as not covered by budgetary 

resources when congressional action is needed before 

they can be paid. Although future appropriations to 

fund these liabilities are likely, it is not certain that 

appropriations will be enacted to fund these liabilities. 

• Liabilities not requiring appropriated budgetary 

resources include those related to deposit funds, 

Subsidy Due to Treasury General Fund for Future 

Liquidating Account Collections (pre-1992 loan 

guarantee programs), and Federal Perkins Loan 

program balances due to be repaid to the Treasury 

General Fund. (See Note 6) 

DEbT ASSOCIATED WITh LOANS

The Department borrows from Treasury to provide 

funding for the Direct Loan, FFEL, and other credit 

programs for higher education. The liability to Treasury 

from borrowings represents unpaid principal at year-
58 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

end. The Department repays the principal based on 

available fund balances. Interest rates are based on the 

corresponding rate for 10-year Treasury securities and are 

set for those borrowings supporting each cohort of loans 

once the loans for that cohort are substantially disbursed. 

Interest is paid to Treasury on September 30. In addition, 

the Federal Financing Bank (FFB) holds bonds issued 

by a designated bonding authority, on behalf of the 

Department, for the HBCU Capital Financing program. 

The debt for other credit programs for higher education 

includes the liability for full payment of principal and 

accrued interest for the FFB-financed HBCU Capital 

Financing program. (See Note 7) 

SubSIDY DuE TO TREASuRY

The Department must transfer to the Treasury General 

Fund all excess funding resulting from downward reestimates of credit program loans that are subject to FCRA 

requirements. This excess funding is included in the 

liability for subsidy due to Treasury and will be transferred 

to Treasury in the succeeding fiscal year upon receipt 

of authority from OMB. Subsidy due to Treasury also 

includes future liquidating account collections (estimated 

collections in excess of estimated outlays) for the 

Department’s pre-1992 FFEL and HEAL loans that, when 

collected, will also be transferred to the Treasury General 

Fund. (See Note 8)

ACCOuNTS PAYAbLE

Accounts payable include amounts owed by the 

Department for goods and services received from other 

entities, as well as payments not yet processed. Accounts 

payable to the public primarily consists of in-process grant 

and loan disbursements, including an accrued liability for 

schools that have disbursed loans before requesting funds. 

(See Note 9)

ACCRuED GRANT LIAbILITY

Some grant recipients incur allowable expenditures as 

of the end of an accounting period but have not been 

reimbursed by the Department. The Department accrues 

a liability for these allowable expenditures. The amount 

is estimated using statistical sampling of unliquidated 

balances. (See Note 9)

P E R S O N N E L C O M P E N S AT I O N A N D OT h E R 

EMPLOYEE bENEFITS

Annual, Sick, and Other Leave. The liability for annual 

leave, compensatory time off, and other vested leave is 

accrued when earned and reduced when taken. Each year, 

the accrued annual leave account balance is adjusted to 

reflect current pay rates. Sick leave and other types of 

nonvested leave are expensed as taken. Annual leave earned 

but not taken, within established limits, is funded from 

future financing sources. (See Notes 6 and 9)

Retirement Plans and Other Retirement Benefits.

Employees participate in either the Civil Service 

Retirement System (CSRS), a defined benefit plan, or the 

Federal Employees Retirement System (FERS), a defined 

benefit and contribution plan. For CSRS employees, the 

Department contributes a fixed percentage of pay.

FERS consists of Social Security, a basic annuity plan, 

and the Thrift Savings Plan. The Department and the 

employee contribute to Social Security and the basic 

annuity plan at rates prescribed by law. In addition, the 

Department is required to contribute to the Thrift Savings 

Plan a minimum of 1 percent per year of the basic pay 

of employees covered by this system, match voluntary 

employee contributions up to 3 percent of the employee’s 

basic pay, and match one-half of contributions between 

3 percent and 5 percent of the employee’s basic pay. For 

FERS employees, the Department also contributes the 

employer’s share of Medicare.

Federal Employees’ Compensation Act. The Federal 

Employees’ Compensation Act (FECA) (Pub. L. 103-

3) provides income and medical cost protection to 

covered federal civilian employees injured on the job, to 

employees who have incurred work-related occupational 

diseases, and to beneficiaries of employees whose deaths 

are attributable to job-related injuries or occupational 

diseases. The FECA program is administered by the 

U.S. Department of Labor (DOL), which pays valid 

claims and subsequently seeks reimbursement from the 

Department for these paid claims.

The FECA liability consists of two elements. The first 

element, accrued FECA liability, is based on claims paid 

by DOL but not yet reimbursed by the Department. 

The Department reimburses DOL for claims as funds 

are appropriated for this purpose. In general, there is a 

two- to three-year period between payment by DOL and 

reimbursement to DOL by the Department. As a result, 

the Department recognizes an intragovernmental liability, 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 59

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

not covered by budgetary resources, for the claims paid by 

DOL that will be reimbursed by the Department.

The second element, actuarial FECA liability, is the 

estimated liability for future benefit payments and is 

recorded as a liability with the public, not covered by 

budgetary resources. The actuarial FECA liability includes 

the expected liability for death, disability, medical, and 

miscellaneous costs for approved compensation cases. 

DOL determines the actuarial FECA liability annually, as 

of September 30, using an actuarial method that considers 

historical benefit payment patterns, wage inflation 

factors, medical inflation factors, and other variables. 

The projected annual benefit payments are discounted to 

present value. (See Notes 6 and 9)

IMPuTED COSTS

Services are received from other federal entities at no cost 

or at a cost less than the full cost to the Department. 

Consistent with accounting standards, certain costs of 

the providing entity that are not fully reimbursed by 

the Department are recognized as imputed cost in the 

Statements of Net Cost and are offset by imputed revenue 

in the Statements of Changes in Net Position. Such 

imputed costs and revenues relate to employee benefits. 

However, unreimbursed costs of services other than 

those related to employee benefits are not included in the 

Department’s financial statements.

NET COST

As required by the GPRA Modernization Act of 2010, the 

Department’s programs have been aligned with the goals 

presented in the Department’s Strategic Plan. 

Net cost consists of gross costs less earned revenue. Major 

components of the Department’s net costs include credit 

program subsidy expense, credit program interest revenue 

and expense, and grant expenses. (See Note 10)

Credit Program Subsidy Expense. Subsidy expense is 

an estimate of the present value cost of providing loans, 

excluding the administrative costs of issuing and servicing 

the loans. To estimate subsidy expense, the Department 

must project lifetime cash flows associated with loans 

disbursed in a specific fiscal year (i.e., the loan cohort). 

The Department projects these lifetime cash flows 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; updates the previous cost estimates for outstanding 

loans disbursed in prior years (subsidy re-estimates); and 

updates previous cost estimates based on changes to terms 

of existing loans (loan modifications). Loan modifications 

include actions resulting from new legislation or from 

the exercise of administrative discretion under existing 

law, which directly or indirectly alters the estimated 

subsidy cost of outstanding direct loans (or direct loan 

obligations). The change in book value of direct loans 

resulting from a modification and the cost of modification 

will normally differ due to the use of different discount 

rates or the use of different measurement methods. Any 

difference between the change in book value and the cost 

of modification is recognized as a modification adjustment 

transfer gain or a modification adjustment transfer loss. 

(See Notes 5 and 10) 

Credit Program Interest Revenue and Expense. The 

Department recognizes interest revenue from the public 

when interest is accrued on Direct Loan Program loans, 

defaulted and acquired FFEL loans, and outstanding 

principal for other loan programs. Interest due from 

borrowers is accrued at least monthly and is satisfied upon 

collection or capitalization into the loan principal. Federal 

interest revenue is recognized on the unused fund balances 

with Treasury in the financing accounts.

Federal interest expense is recognized monthly on the 

outstanding borrowing from Treasury (debt) used to 

finance direct loan and loan guarantee programs. Accrued 

interest to Treasury is paid on September 30. The interest 

rate for federal interest expense is the same as the rate used 

for federal interest revenue.

Interest expense equals interest revenue plus administrative 

fees accrued for all credit programs due to subsidy 

amortization. Subsidy amortization is required by the 

FCRA and accounts for the difference between interest 

expense and revenue cash flows. For direct loans, the 

allowance for subsidy is adjusted with the offset to interest 

revenue. For guaranteed loans, the liability for loan 

guarantees is adjusted with the offset to interest expense. 

(See Note 10)

NET POSITION

Net position consists of unexpended appropriations 

and cumulative results of operations. Unexpended 

appropriations include undelivered orders and unobligated 

balances, except for amounts in financing accounts, 

liquidating accounts, and trust funds. Cumulative 

results of operations represent the net difference since 

inception between (1) expenses and (2) revenues and 

financing sources.
60 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

ALLOCATION TRANSFERS

The Department is a party to allocation transfers with 

other federal agencies as both a transferring (parent) entity 

and a receiving (child) entity. Allocation transfers are 

legal delegations by one entity of its authority to obligate 

budget authority and outlay funds to another entity. A 

separate fund account (allocation account) is created in 

the Treasury as a subset of the parent fund account for 

tracking and reporting purposes. All allocation transfers 

of balances are credited to this account, and subsequent 

obligations and outlays incurred by the child entity are 

charged to this allocation account as they execute the 

delegated activity on behalf of the parent entity. All 

financial activity related to this allocation transfer (e.g., 

budget authority, obligations, outlays) is reported in 

the financial statements of the parent entity from which 

the underlying legislative authority, appropriations, and 

budget apportionments are derived.

The Department is a party to allocation transfers as a 

parent entity to the Department of the Interior and 

receives allocation transfers as a child entity from the 

Department of Health and Human Services. 

TAXES

The Department is a federal entity and is not subject to 

federal, state, or local taxes. Therefore, no provision for 

income taxes is recorded.

uSE OF ESTIMATES

Department management is required to make certain 

estimates while preparing consolidated financial statements 

in conformity with GAAP. These estimates are reflected 

in the assets, liabilities, net cost, and net position of the 

financial statements and may differ from actual results. 

The Department’s estimates are based on management’s 

best knowledge of current events, best available data, 

economic assumptions, historical experiences, and other 

assumptions that are believed to be reasonable under 

the circumstances. Significant estimates reported on the 

financial statements include: allocation of Department 

administrative overhead costs; allowance for subsidy and 

subsidy expense for direct, defaulted guaranteed, and 

acquired loans; the liability for loan guarantees; and grant 

liability and advance accruals. (See Notes 4, 5, 9, and 10)

The Department’s estimates for credit programs are 

calculated using a series of assumption models that are 

updated using a statistically valid sample of National 

Student Loan Data System (NSLDS®

) data, data from the 

Debt Management and Collection System, and economic 

assumptions provided by OMB. Actual results may 

differ from those assumptions and estimates. Differences 

between actual results and these estimates may occur in 

the valuation of credit program receivables and liabilities 

for loan guarantees under guidelines in the FCRA. The 

Department recognizes the sensitivity of credit reform 

modeling. Slight changes in modeling methodology or 

data used to derive assumptions can produce largely varied 

results. The Department therefore continually reviews 

its model factors and statistical modeling techniques to 

reflect the most accurate credit program costs possible in 

its annual financial statements. The Department updates 

its assumption models in accordance with its model 

update plan, which takes into consideration statutory or 

new program requirements, major changes to the model 

structure or methodology, and data updates. This level of 

granularity in the modeling methodology is essential to 

the financial reporting and budgeting processes so that 

the Department can forecast the costs of various program 

options when making policy decisions. (See Note 5)

R EC L A S S I F I C AT I O N S 

The following reclassifications were made to the prior-year 

financial statements and notes to conform to the current 

year presentation. These changes had no effect on total 

assets, liabilities and net position, net cost of operations, or 

budgetary resources. 

• The format of the balance sheet was changed to reflect 

more detail for certain line items, as required for all 

significant reporting entities by OMB Circular A-136. 

This change will allow readers to see how the amounts 

shown on the balance sheet are reflected on the 

Governmentwide Balance Sheet and thereby support 

the preparation and audit of the Financial Report of 

the United States Government. The presentation of the 

FY 2020 balance sheet was modified to be consistent 

with the 2021 presentation. Balance sheet notes 

affected by the new balance sheet format were also 

reclassified. (See Notes 2, 4, 5, and 9)

• Note 13, Reconciliation of Net Cost to Net Outlays, 

was reclassified to conform to FY 2021 Treasury 

guidance for the presentation of this reconciliation. 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 61

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

NOTE 2. Non-Entity Assets

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

Non-Entity Assets

Fund balance with Treasury $ 285 $ - $ 233 $ - 

Loans Receivable, Net - 693 - 633 

Cash and Other Monetary Assets - 1,913 - 1,943 

Other Assets

Accounts Receivable, Net - 66 - 42 

Total Non-Entity Assets 285 2,672 233 2,618 

Entity Assets 351,697 1,164,629 135,906 1,170,629 

Total Assets $ 351,982 $ 1,167,301 $ 136,139 $ 1,173,247 

The Department’s FY 2021 assets are predominantly entity assets (99.8 percent), leaving a small portion of assets remaining 

as non-entity assets. Non-entity intragovernmental assets primarily consist of balances in deposit and clearing accounts. 

Non-entity assets with the public primarily consist of guaranty agency reserves (71.6 percent), reported as cash and other 

monetary assets, and Federal Perkins Loan program loan receivables (25.9 percent), reported as loan receivables, net. Federal 

Perkins Loan program receivables are a non-entity asset because the assets are held by the Department but are not available 

for use by the Department. The corresponding liabilities for non-entity assets are reflected in various accounts, including 

intragovernmental accounts payable, Guaranty Agencies’ Federal Funds Due to Treasury, and other liabilities (see Note 9).

NOTE 3. Fund balance with Treasury 

(Dollars in Millions)

2021 2020

COVID-19 

Funds

All Other 

Funds Total COVID-19 

Funds

All Other 

Funds Total

unobligated balance

Available $ 18,515 $ 17,300 $ 35,815 $ 672 $ 15,774 $ 16,446 

unavailable - 24,382 24,382 - 24,236 24,236 

Obligated balance, Not Disbursed 203,460 130,330 333,790 18,944 124,403 143,347 

Authority Temporarily Precluded from Obligation - (396) (396) - - - 

borrowing Authority Not Yet Converted to Fund 

balance with Treasury (Note 12) - (41,978) (41,978) - (48,230) (48,230)

Other - 255 255 - 216 216 

Total Fund Balance with Treasury $ 221,975 $ 129,893 $ 351,868 $ 19,616 $ 116,399 $ 136,015 

Available unobligated balances represent amounts that are apportioned for obligation in the current fiscal year. Unavailable 

unobligated balances represent amounts that are not apportioned for obligation during the current fiscal year and expired 

appropriations no longer available to incur new obligations. Total unavailable unobligated balance ($24.4 billion) differs 

from unapportioned and expired amounts on the SBR ($26.3 billion) due to the Guaranty Agencies’ Federal Funds 

($1.9 billion).

In FY 2021 and FY 2020, $354 million and $305 million, respectively, of unused funds from canceled appropriations were 

returned to Treasury. Such balances are excluded from the amount reported as Fund Balance with Treasury in accordance 

with Treasury guidelines (see Note 12).
62 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

NOTE 4. Other Assets 

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

Accounts Receivable, Net $ 9 $ 284 $ 3 $ 234 

Advances to Others and Prepayments 104 34 120 32 

Property and Equipment, Net - 6 - 6 

Other 1 - 1 1 

Total Other Assets $ 114 $ 324 $ 124 $ 273 

Included in the accounts receivable with the public are amounts owed because of criminal restitution orders that are to be 

collected by the Department of Justice on behalf of the Department of Education. Amounts collected for these criminal 

restitutions are generally returned to the Treasury General Fund. Gross receivables and the allowance for uncollectible 

amounts as of September 30, 2021, related to criminal restitutions totaled $120 million and $109 million, respectively.

Changes in property and equipment balances were as follows:

Property and Equipment 

(Dollars in Millions)

 Acquisition Value Accumulated 

Depreciation Net

2021

balance beginning of the Year $ 167 $ (161) $ 6 

Capitalized Acquisitions 1 - 1 

Depreciation Expense - (1) (1)

Balance At End of Year $ 168 $ (162) $ 6 

2020

balance beginning of the Year $ 169 $ (161) $ 8 

Dispositions (2) 1 (1)

Depreciation Expense - (1) (1)

Balance At End of Year $ 167 $ (161) $ 6 

NOTE 5. Loan Receivables, Net and Loan Guarantee Liabilities 

Loans Receivables

(Dollars in Millions)

Principal Accrued Interest Allowance for Subsidy Net

2021

Direct Loan Program $ 1,292,214 $ 86,501 $ (273,864) $ 1,104,851 

FFEL Program 82,009 23,902 (47,665) 58,246 

Other Credit Programs for higher Education 2,060 294 (387) 1,967 

Total Loans Receivable $ 1,376,283 $ 110,697 $ (321,916) $ 1,165,064 

2020

Direct Loan Program $ 1,224,816 $ 92,132 $ (216,404) $ 1,100,544 

FFEL Program 84,765 24,110 (41,495) 67,380 

Other Credit Programs for higher Education 3,364 373 (630) 3,107 

Total Loans Receivable $ 1,312,945 $ 116,615 $ (258,529) $ 1,171,031 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 63

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

The federal student loan programs provide students and their families with the funds to help meet postsecondary education 

costs. Funding for these programs is provided through permanent indefinite budget authority. The emergency relief 

measures provided by Congress and the administration in response to the COVID-19 pandemic were recorded as loan 

modifications and are described in each of the programs below. Per OMB guidance, loan modifications were calculated 

using the President’s Budget formulation discount rates. The net loans receivable is not necessarily representative of the 

proceeds that might be expected if these loans were sold on the open market.

What follows is additional analysis of the activity, costs, and adjustments for each of the loan programs

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

The federal government makes loans directly to students and parents through participating IHEs under the Direct Loan 

Program. Direct loans are originated and serviced through contracts with private vendors.

Direct Loan Program loan receivables include defaulted and nondefaulted loans owned by the Department. Of the 

$1,378.7 billion in gross loan receivables, as of September 30, 2021, $91.5 billion (6.6 percent) in loan principal was in 

default and had been transferred to the Department’s defaulted loan servicer, compared to $100.3 billion (7.6 percent) as of 

September 30, 2020.

Direct Loan Program Loan Disbursements by Loan Type

(Dollars in Millions)

2021 2020

Stafford $ 18,325 $ 19,126 

unsubsidized Stafford 44,146 46,077 

PLuS 20,824 21,735 

Consolidation 21,508 30,427 

Total Disbursements $ 104,803 $ 117,365 

The allocation of disbursements for the first three loan types is estimated based on historical trend information.

Student and parent borrowers may prepay existing loans without penalty through a new consolidation loan. Under the FCRA 

and requirements provided by OMB regulations, the retirement of direct loans being consolidated is considered a collection 

of principal and interest. This receipt is offset by the disbursement related to the newly created consolidation loan. Underlying 

direct or guaranteed loans, performing or nonperforming, are paid off in their original cohort; new consolidation loans are 

originated in the cohort in which the new consolidation loan was obligated. Consolidation activity is taken into consideration 

in establishing subsidy rates for defaults and other cash flows. The cost of new consolidations is included in subsidy expense 

for the current-year cohort; the effect of prepayments on existing loans could contribute to re-estimates of prior cohort subsidy 

costs. The net receivables include estimates of future prepayments of existing loans through consolidations; they do not reflect 

subsidy costs associated with anticipated future consolidation loans.

Direct loan consolidations were $21.5 billion during FY 2021 and $30.4 billion during FY 2020. The effect of the early payoff 

of the existing loans—those being consolidated—is recognized in the future projected cash flows associated with that cohort.
64 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Direct Loan Program Interest Expense and Revenues (See Note 10)

(Dollars in Millions)

2021 2020

Interest Expense on Treasury borrowing $ 32,957 $ 34,705 

Total Interest Expense $ 32,957 $ 34,705 

Interest Revenue From the Public (459) 28,161 

Interest Revenue on uninvested Funds 4,230 4,786 

Administrative Fees 32 163 

Amortization of Subsidy 29,154 1,595 

Total Revenues $ 32,957 $ 34,705 

Direct Loan Program Subsidy Expense 

(Dollars in Millions)

2021 2020

Subsidy Expense for Direct Loans Disbursed in the Current Year

Interest Rate Differential $ 19,844 $ 19,022 

Defaults, Net of Recoveries 606 1,925 

Fees (1,603) (1,676)

Other (17,259) (14,131)

Total Subsidy Expense for Direct Loans Disbursed in the Current Year 1,588 5,140 

Modifications and Re-Estimates

Loan Modifications

Modification Adjustment Transfer Gain (2,716) (265)

Modification Adjustment Transfer Loss 182 347 

Loan Modifications 70,812 39,576 

Total Loan Modifications 68,278 39,658 

Net upward Subsidy Re-Estimates

Interest Rate Re-estimates (6,221) (967)

Technical and Default Re-estimates 30,246 57,077 

Total Net Upward Subsidy Re-estimates 24,025 56,110 

Total Modifications and Re-estimates 92,303 95,768 

Direct Loan Subsidy Expense $ 93,891 $ 100,908 

Subsidy Expense for Direct Loans Disbursed in the Current Year. The two major components of the total subsidy expense 

for direct loans disbursed in the current year (subsidy transfers) are Interest Rate Differential and Other components. 

Interest Rate Differential is attributable to the difference between the borrowers’ interest payments due to the Department 

and the Department’s estimated cost to finance the direct loan on a present value basis. The Other components of subsidy 

transfers primarily consists of contract collection costs, program review collections, fees, and loan forgiveness.

Loan Modifications. Loan modifications for the Direct Loan Program for FY 2021 included the following:

• Loan Deferral Extension. In FY 2021 the outgoing administration extended the student loan repayment deferrals 

through January 31, 2021. Subsequently, the current administration extended the student loan repayment deferrals 

through January 31, 2022. The extended relief for borrowers resulted in an upward modification cost of $52.0 billion. 

There was a net positive $2.5 billion modification adjustment transfer associated with these modifications, bringing the 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 65

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

total FY 2021 modification cost for the student loan 

repayment deferrals to $49.5 billion.

• Total and Permanent Disability. The Department 

recorded an upward modification for costs associated 

with the regulatory action to clarify that borrowers 

determined to be eligible for a total and permanent 

disability discharge based on data that the Secretary 

obtains from the Department of Veterans Affairs (VA) 

or the Social Security Administration (SSA) are not 

required to submit an application to have their federal 

student loans discharged. These discharges resulted in 

an upward modification cost of $18.7 billion.

• Faith-Based Final Rule. The Department recorded an 

upward modification to reflect the cost of updated 

program regulations that permit borrowers who work 

for employers that engage in religious instruction, 

worship services, or proselytizing to qualify for PSLF 

so long as they meet the applicable standards. These 

updated regulations resulted in an upward modification 

cost of $0.1 billion.

Net Upward Subsidy Re-Estimates for All Prior-Year 

Loan Cohorts. The Direct Loan Program subsidy 

re-estimate increased subsidy expense in FY 2021 by 

$24.0 billion. Re-estimated costs only include cohorts that 

are 90 percent disbursed (i.e., cohort years 1994–2020). 

The re-estimate reflects the assumption updates and other 

changes described below. 

In addition to the major assumption updates described 

below, the re-estimate reflects several other assumption 

updates, including loan volume, disbursement, and enter 

repayment rates. 

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

Department updated the data and made a technical 

change to extend the window for a DDB event to 

occur from 15 to 30 years. Those claims were included 

in the estimates of DDB rates previously, but the 

extended timeframe allows for a more realistic sense of 

their timing. The combined effect of these updates led 

to a new upward re-estimate of $3.2 billion.

• Income-Driven Repayment (IDR) Model Changes. 

The Department completed a standard IDR data 

update to reflect the immediate prior cycle for interest 

rates, defaults, prepayments, contract collection costs, 

and DDB. The DDB update includes adjustments 

for the Total Permanent Disability (TPD) regulation 

that resulted in increased disability rates related to the 

expanded opt-out process with SSA to match borrowers 

within the IDR model. In addition, actual data on 

borrower incomes was analyzed using the NSLDS data. 

The number of actual incomes for 2019 was very low 

due to impacts from the COVID-19 pandemic, which 

led to stable income calibration results compared to last 

year’s level of 35 percent. Payments in FY 2020 were 

adjusted to account for voluntary payments made by 

students during the payment pause as seen in the FSA 

data. The combined effect of these updates led to a net 

upward re-estimate of $22.4 billion.

• Deferment and Forbearance. The Department updated 

actual deferment and forbearance rates for FY 2020 

and calibrated FY 2021 and FY 2022 rates using data 

from FSA on borrower payments made during the 

period of repayment deferral. The combined effect of 

these changes led to a net downward re-estimate of 

$4.8 billion. 

• Collections. The Department updated the data and 

calibrated FY 2021 collection rates to reflect the 

extension of the repayment deferral. The combined 

effect of these changes led to a net upward re-estimate 

of $1.5 billion.

• Default. In addition to the adjustments for the 

extension of the student loan repayment deferrals, 

the Department updated the data and incorporated 

actual unemployment rates from the Bureau of Labor 

Statistics and projected unemployment rates from 

OMB. The combined effect of these changes led to a 

net downward re-estimate of $6.4 billion.

• Repayment Plan Selection. The Department 

incorporated new repayment plan data that showed a 

continuing increase in IDR plan usage. This update led 

to an upward re-estimate of $0.7 billion.

• 2020 Cohort Assumption Changes. The technical 

re-estimate cannot reflect the impacts of certain 

assumption changes applicable to the current year 

loan cohort until the following fiscal year per OMB 

guidance. The current year’s re-estimate includes a 

net upward adjustment of $15.5 billion for these 

current-year assumption changes attributable to the 

FY 2020 cohort.

• Discount Rates. FCRA requires that for discounting 

cash flows, financing accounting borrowing and 

financing account interest earnings be identical and 

based on the Treasury rates in effect during the period 
66 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

of loan disbursement. Adjustments to the FY 2019 

and FY 2020 cohort discount rates were calculated. 

The combined effect of these adjustments led to a new 

downward re-estimate of $11.1 billion.

• Interest on the Re-Estimate. Interest on re-estimates 

is the amount of interest that would have been earned 

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

the re-estimated subsidy had been included as part of 

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

resulted in a net upward re-estimate of $5.0 billion.

• Interactive Effects. The re-estimate includes a net 

downward re-estimate of $1.6 billion attributed to 

the interactive effects of the assumption changes 

described above. Each assumption described above is 

run independently. The interactive effect is a result of 

combining all assumptions together to calculate the 

final re-estimate.

Direct Loan Subsidy Rates—Cohort 2021

Interest 

 Differential Defaults Fees Other Total

Stafford 24.70% 0.92% -1.06% -17.16% 7.40%

unsubsidized Stafford 23.78% 0.48% -1.06% -25.03% -1.83%

PLuS 12.20% 0.37% -4.23% -24.27% -15.93%

Consolidation 14.67% -1.19% 0.00% 4.45% 17.93%

Weighted Average Total 19.48% 0.08% -1.33% -15.90% 2.33%

*The Other component reflects costs associated with loan cancelations and the interactive effects of payment plans on the components of subsidy.

The subsidy rates disclosed pertain only to the current year’s cohorts. These rates cannot be applied to the direct loans 

disbursed during the current reporting year to yield the subsidy expense. The subsidy expense for new loans reported in the 

current year could result from disbursements of loans from both current year cohorts and prior-year cohorts. The subsidy 

expense reported in the current year also includes modifications and re-estimates. 

The subsidy costs of the Department’s student loan programs, especially the Direct Loan Program, are highly sensitive 

to changes in actual and forecasted interest rates. The formulas for determining program interest rates are established by 

statute; the existing loan portfolio has a mixture of borrower and lender rate formulas. Interest rate projections are based on 

probabilistic interest rate scenario inputs developed and provided by OMB.

Direct Loan Program Reconciliation of Allowance for Subsidy 

(Dollars in Millions)

2021 2020

Beginning Balance of Allowance for Subsidy $ 216,404 $ 124,438 

Total Subsidy Expense for Direct Loans Disbursed in the Current Year 1,588 5,140 

Adjustments

Loan Modifications 68,278 39,658 

Fees Received 1,562 1,609 

Loans Written Off (8,354) (7,833)

Subsidy Allowance Amortization (29,154) (1,595)

Other Activities (485) (1,123)

Ending Balance of Allowance for Subsidy Before Re-Estimates 249,839 160,294 

Net upward Subsidy Re-Estimates 24,025 56,110 

Ending Balance of Allowance for Subsidy $ 273,864 $ 216,404 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 67

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

The estimation process used to determine the amount of positive or negative subsidy expense each fiscal year, and 

subsequently the cumulative taxpayer cost of the program (allowance for subsidy), is subject to various external risk factors 

that often show strong interdependence with one another. These risks include uncertainty about changes in the general 

economy, changes in the legislative and regulatory environment, and changing trends in borrower performance related to 

contractual cash flows within the loan programs.

Due to the complexity of the Direct Loan Program, there is inherent projection risk in the process used for estimating longterm program costs. As stated, some uncertainty stems from potential changes in student loan legislation and regulations 

because these changes may fundamentally alter the cost structure of the program. Operational and policy shifts may also 

affect program costs by causing significant changes in borrower repayment timing. Actual performance may deviate from 

estimated performance, which is not unexpected given the long-term nature of these loans (cash flows may be estimated 

up to 40 years), and the multitude of projection paths and possible outcomes. The high percentage of borrowers in IDR 

plans has made projection of borrower incomes a key input for the estimation process. This uncertainty is directly tied to 

the macroeconomic climate and is another inherent program element that displays the interrelated risks facing the Direct 

Loan Program. 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.

Loans written off result from borrowers having died, becoming disabled, or having a loan approved for discharge in 

bankruptcy. The interest rate re-estimate reflects the cost of finalizing the Treasury borrowing rate to be used for borrowings 

received to fund the disbursed portion of the loan awards obligated. 

FEDER AL FAMILY EDuCATION LOAN PROGR AM

FFEL was established in FY 1965 and is a guaranteed loan program. As a result of the SAFRA Act, no new FFEL loans have 

been made since July 1, 2010. Federal guarantees on FFEL Program loans and commitments remain in effect for loans 

made before July 1, 2010, unless they were sold to the Department through an ECASLA authority (acquired FFEL loans), 

consolidated into a direct loan, or otherwise satisfied, discharged, or canceled.

FFEL Guaranteed Loans Outstanding

(Dollars in Billions)

2021

Outstanding Principal of Guaranteed Loans, Face Value $ 116.9 

Amount of Outstanding Principal Guaranteed $ 116.9 

As of September 30, 2021, the total principal value of guaranteed loans outstanding and the amount of that principal which 

is guaranteed is approximately $116.9 billion. Additionally, the FFEL Program guarantees outstanding interest balances. 

As of September 30, 2021, the interest balances outstanding for guaranteed loans held by lenders was approximately 

$4.4 billion. The Department’s total FFEL Program guarantees (principal and interest) are approximately $121.3 billion 

as of September 30, 2021. Of the total guaranteed amount, the Department would expect to pay a smaller amount to 

the guaranty agencies. The guarantee rates range from 75 to 100 percent of the principal and interest balance depending 

on the type of claim, when the loan was made, and the guaranty agency’s claim experience. For purposes of disclosing the 

Department’s total risk exposure for FFEL guarantees, the highest reimbursement rate of 100 percent is assumed.
68 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Defaulted and acquired FFEL loans are accounted for as assets as shown in the following table.

FFEL Program Loan Receivables 

(Dollars in Millions)

Principal Accrued Interest

Allowance 

for Subsidy 

(Present Value)

Net

2021

DEFAULTED FFEL GUARANTEED LOANS

FFEL GSL Program (Pre-1992) $ 3,638 $ 5,739 $ (8,418) $ 959 

FFEL GSL Program (Post-1991) 32,612 9,302 (26,735) 15,179 

Total Defaulted FFEL Guaranteed Loans 36,250 15,041 (35,153) 16,138 

ACQUIRED FFEL LOANS

Loan Purchase Commitment 15,238 2,716 (4,822) 13,132 

Loan Participation Purchase 29,178 5,776 (7,316) 27,638 

AbCP Conduit 1,343 369 (374) 1,338 

Total Acquired FFEL Loans 45,759 8,861 (12,512) 42,108 

FFEL Program Loan Receivables $ 82,009 $ 23,902 $ (47,665) $ 58,246 

2020

DEFAULTED FFEL GUARANTEED LOANS

FFEL GSL Program (Pre-1992) $ 3,627 $ 5,809 $ (8,249) $ 1,187 

FFEL GSL Program (Post-1991) 33,057 9,121 (22,286) 19,892 

Total Defaulted FFEL Guaranteed Loans 36,684 14,930 (30,535) 21,079 

ACQUIRED FFEL LOANS

Loan Purchase Commitment 16,009 2,797 (4,102) 14,704 

Loan Participation Purchase 30,683 6,005 (6,424) 30,264 

AbCP Conduit 1,389 378 (434) 1,333 

Total Acquired FFEL Loans 48,081 9,180 (10,960) 46,301 

FFEL Program Loan Receivables $ 84,765 $ 24,110 $ (41,495) $ 67,380 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 69

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

FFEL Program Subsidy Expense 

(Dollars in Millions)

2021 2020

Loan Modification Costs

FFEL Guaranteed Loan Program

Net Modification Adjustment Transfer (Gain)/Loss $ (302) $ (9)

Loan Modifications 3,164 835 

Total FFEL Guaranteed Loan Program Loan Modifications 2,862 826 

Loan Purchase Commitment

Net Modification Adjustment Transfer (Gain)/Loss - (7)

Loan Modifications 1,069 958 

Total Loan Purchase Commitment Loan Modifications 1,069 951 

Loan Participation Purchase

Net Modification Adjustment Transfer (Gain)/Loss - (10)

Loan Modifications 1,879 1,658 

Total Loan Participation Purchase Loan Modifications 1,879 1,648 

Total Loan Modification Costs 5,810 3,425 

Upward/(Downward) Subsidy Re-Estimates

FFEL Loan Guarantee Program 7,226 (3,451)

Loan Purchase Commitment 208 802 

Loan Participation Purchase 397 1,376 

Total FFEL Program Subsidy Re-Estimates 7,831 (1,273)

FFEL Program Subsidy Expense $ 13,641 $ 2,152 

Loan Modifications. Loan modifications for the FFEL Loan Program for FY 2021 included the following:

• Loan Deferral Extension. In FY 2021 the outgoing administration extended the student loan repayment deferrals 

through January 31, 2021. Subsequently, the current administration extended the student loan repayment deferrals 

through January 31, 2022. The extended relief for borrowers resulted in an upward modification cost of $3.9 billion.

There was a net positive $0.3 billion modification adjustment transfer associated with these modifications, bringing the 

total FY 2021 modification cost for the student loan repayment deferrals to $3.6 billion.

• Total and Permanent Disability. The Department recorded an upward modification for costs associated with the 

regulatory action to clarify that borrowers determined to be eligible for a total and permanent disability discharge based 

on data that the Secretary obtains from the VA or the SSA are not required to submit an application to have their federal 

student loans discharged. These discharges resulted in an upward modification cost of $2.2 billion.

Net Downward Subsidy Re-Estimates. The FFEL subsidy re-estimate increased subsidy expense in FY 2021 by $7.8 billion. 

The net upward re-estimates in these programs were due primarily to updated collection and default rates.
70 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Reconciliation of Liabilities for Loan Guarantees 

(Dollars in Millions)

2021 2020

Beginning Balance of Post-1991 FFEL Loan Guarantee Liability $ 884 $ 5,205 

Adjustments

Loan Modifications 2,862 826 

Interest Supplements Paid (348) (757)

Loan Modifications (2,613) (4,285)

Fees Received 1,014 1,215 

Interest on Accumulation on the Liability balance (863) (1,064)

Other Activities (910) 3,195 

Net Downward Subsidy Re-Estimates 7,226 (3,451)

Ending Balance of Post-1991 FFEL Loan Guarantee Liability 7,252 884 

Pre-1992 FFEL Liquidating Account Liability for Loan Guarantees - 1 

FFEL Liabilities for Loan Guarantees 7,252 885 

hEAL Liabilities for Loan Guarantees 244 238 

Total Liabilities for Loan Guarantees $ 7,496 $ 1,123 

Other activity includes negative special allowance collections, collections on defaulted FFEL loans, guaranty agency 

expenses, and loan cancellations due to death, disability, or bankruptcy.

Allowance for Subsidy Reconciliation for Acquired FFEL Loans 

(Dollars in Millions)

Loan Purchase 

Commitment

Loan Participation 

Purchase ABCP Conduit Total

2021

Beginning Balance of Allowance for Subsidy $ 4,102 $ 6,424 $ 434 $ 10,960 

Adjustments

Loan Modifications 1,069 1,879 - 2,948 

Subsidy Allowance Amortization (424) (952) (42) (1,418)

Loans Written Off (136) (424) (16) (576)

Other Activities 3 (8) (2) (7)

Ending Balance of Allowance for Subsidy 

Before Re-estimates 4,614 6,919 374 11,907 

Net upward Subsidy Re-Estimates 208 397 - 605 

Ending Balance of Allowance for Subsidy $ 4,822 $ 7,316 $ 374 $12,512 

2020

Beginning Balance of Allowance for Subsidy $ 2,531 $ 3,843 $ 455 $ 6,829 

Adjustments

Loan Modifications 951 1,648 - 2,599 

Subsidy Allowance Amortization 3 (89) - (86)

Loans Written Off (140) (271) (16) (427)

Other Activities (45) (83) (5) (133)

Ending Balance of Allowance for Subsidy 

Before Re-estimates 3,300 5,048 434 8,782 

Net upward Subsidy Re-Estimates 802 1,376 - 2,178 

Ending Balance of Allowance for Subsidy $ 4,102 $ 6,424 $ 434 $ 10,960 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 71

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

OThER CREDIT PROGRAMS FOR hIGhER EDuCATION

Loans Receivables, Other Credit Programs for Higher Education 

(Dollars in Millions)

Principal Accrued Interest Allowance for Subsidy 

(Present Value) Net

2021

Federal Perkins Loans $ 708 $ 197 $ (212) $ 693 

TEACh Program Loans 783 70 (256) 597 

hEAL Program Loans 388 26 (1) 413 

Facilities Loan Programs 181 1 82 264 

Total $ 2,060 $ 294 $ (387) $ 1,967 

2020

Federal Perkins Loans $ 615 $ 202 $ (184) $ 633 

TEACh Program Loans 764 88 (182) 670 

hEAL Program Loans 396 29 (38) 387 

Facilities Loan Programs 1,589 54 (226) 1,417 

Total $ 3,364 $ 373 $ (630) $ 3,107 

Federal Perkins Loan Program. Loans made through 

the Federal Perkins Loan program were low-interest 

federal student loans for undergraduate and graduate 

students with exceptional financial needs. Schools made 

these Perkins loans to their students and are responsible 

for servicing the loans throughout the repayment term. 

Borrowers who undertake certain public, military, or 

teaching service employment are eligible to have all or part 

of their loans canceled. 

The Perkins Loan program was a revolving loan program 

where the loan repayments collected from former students 

were used to make new loans to current students. The 

Department provided most of the capital used by schools 

to make these loans to eligible students. Participating 

schools provided the remaining program funding. In 

some statutorily defined cases, funds were provided by the 

Department to reimburse schools for loan cancellations. 

The above schedule includes only Perkins loans that were 

assigned to the Department when schools discontinued 

their participation in the program. For these assigned 

Perkins loans, collections of principal, interest, and fees, 

net of amounts paid to cover contract collection costs 

totaled $79 million and $38 million for FY 2021 and 

FY 2020, respectively.

The Federal Perkins Loan Program Extension Act of 2015

(Extension Act) eliminated the authorization for schools to 

make new Perkins loan disbursements as of September 30, 

2017, and ended all Perkins loan disbursements by 

June 30, 2018. Before the authority for new Perkins loans 

ended, collections made by the schools would go back into 

each school’s Perkins fund to be used to make more loans. 

Schools are required to return to the Department the 

federal share of any excess beyond what is needed (excess 

liquid capital). 

Schools are not required to liquidate and close out their 

programs now that no new Perkins loans are being made. 

Schools continue to take in collections and are required 

to return the federal share of the capital that is collected 

to the Department on an annual basis. Schools returned 

$850 million and $1,279 million to the Department in 

FY 2021 and FY 2020, respectively, for the federal share 

of collected cash. 

Schools will continue to service outstanding Perkins 

loans to recover the money they contributed to their 

Perkins funds for as long as it is feasible to do so or until 

the eventual wind-down of their portfolios. Schools that 

liquidate and close out their programs must transfer any 

outstanding portfolio to the Department and liquidate any 

final cash. Most recent data from the 2021–22 reporting 

year shows a $3.3 billion outstanding principal balance on 

Perkins loans held by schools, and the Department’s equity 

interest on this portfolio is $2.8 billion.

The amounts collected by the Department annually for 

defaulted Perkins loans and for the return of the federal 

share of schools’ Perkins capital contributions are returned 

to the Treasury General Fund. (see Note 12)
72 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

TEACH Grant Program. The Department awards 

annual grants of up to $4,000 to eligible undergraduate 

and graduate students who agree to serve as full-time 

mathematics, science, foreign language, bilingual 

education, special education, or reading teachers at 

high-need schools for four years within eight years of 

graduation. The maximum lifetime grant for students 

is $16,000 for undergraduate programs and $8,000 for 

graduate programs. For students failing to fulfill the 

service requirement, the grants are converted to direct 

unsubsidized Stafford Loans. In FY 2021 the outgoing 

administration extended the student loan repayment 

deferrals through January 31, 2021. Subsequently, 

the current administration extended the student loan 

repayment deferrals through January 31, 2022. The 

extended relief for borrowers resulted in an upward 

modification cost of $21 million. The Department also 

recorded an upward modification to reflect the cost of 

updated program regulations to improve the certification 

process and reduce grant to loan conversions. These 

updated regulations resulted in an upward modification of 

$25 million. There was a positive $1 million modification 

adjustment transfer associated with this modification, 

bringing the total cost of this modification to $24 million.

TEACH Subsidy Rates—Cohort 2021

Interest Differential Defaults Fees Other Total

Subsidy Rates 76.33% -0.04% 0.00% -44.57% 31.72%

*The Other component reflects costs associated with loan cancelations and the interactive effects of payment plans on the components of subsidy.

HEAL Program. The Department assumed responsibility 

in FY 2014 for the HEAL program and the authority to 

administer, service, collect, and enforce the program. The 

HEAL program is structured as required by the FCRA. 

A liquidating account is used to record all cash flows 

to and from the government resulting from guaranteed 

HEAL loans committed before 1992. All loan activity for 

1992 and beyond is recorded in corresponding financing 

accounts. In FY 2021 the outgoing administration 

extended the student loan repayment deferrals 

through January 31, 2021. Subsequently, the current 

administration extended the student loan repayment 

deferrals through January 31, 2022. The extended relief 

for borrowers resulted in an upward modification cost of 

$1 million.

Facilities Loan Programs. The Department also 

administers the HBCU Capital Financing program. 

Since 1992, this program has given HBCUs access to 

financing for the repair, renovation, and in exceptional 

circumstances, the construction or acquisition of facilities, 

equipment, and infrastructure through federally insured 

bonds. The Department has authorized a designated 

bonding authority to make loans to eligible institutions, 

charge interest, and collect principal and interest 

payments. In compliance with HEA, as amended, the 

bonding authority maintains an escrow account to pay the 

principal and interest on bonds for loans in default. 

The FAFSA Simplification Act provided debt relief for most 

outstanding HBCU Capital Financing program loans as 

of December 27, 2020. This resulted in an upward loan 

modification cost of $1.6 billion.

The total amount of support for HBCU programs, along 

with any accrued interest and unpaid servicing fees, will 

be capitalized to principal and be reamortized through the 

original maturity date of June 1, 2037. The Department 

has approximately $372 million in outstanding borrowing 

from the FFB to support loans made to HBCU 

institutions and $547 million obligated to support near 

term lending as of September 30, 2021.

The Department administers the College Housing and 

Academic Facilities Loan program, the College Housing 

Loan program, and the Higher Education Facilities Loan 

program. From 1952 to 1993, these programs provided 

low-interest financing to IHEs for the construction, 

reconstruction, and renovation of housing, academic, and 

other educational facilities.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 73

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

NOTE 6. Liabilities Not Covered by budgetary Resources 

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

Liabilities Not Covered By Budgetary Resources

unfunded Leave $ - $ 52 $ - $ 47 

FECA Liabilities 2 14 2 13 

Total Liabilities Not Covered By 

Budgetary Resources 2 66 2 60 

Liabilities Not Requiring Budgetary Resources

Subsidy Due to Treasury General Fund 1,209 - 1,451 - 

Federal Perkins Loan Program 682 - 619 - 

Miscellaneous Receipt, Deposit Funds and 

Clearing Accounts 38 289 36 239 

Custodial Liabilities 4 - 2 - 

Total Liabilities Not Requiring Budgetary Resources 1,933 289 2,108 239 

Total Liabilities Covered by budgetary Resources 1,223,776 20,122 1,255,187 6,859 

Total Liabilities $ 1,225,711 $ 20,477 $ 1,257,297 $ 7,158 

NOTE 7. Debt Associated with Loans

(Dollars in Millions)

Beginning 

Balance Borrowing Repayments Accrued Interest Ending Balance

2021

Debt to the Bureau of Public Debt

Direct Loan Program $ 1,160,099 $ 119,950 $ (137,854) $ - $ 1,142,195 

FFEL Program 88,986 1,630 (12,362) - 78,254 

Other Credit Programs for higher Education 784 308 (156) - 936 

Total Debt to the Bureau of Public Debt 1,249,869 121,888 (150,372) - 1,221,385 

Debt to the Federal Financing Bank

Other Credit Programs for higher Education 1,518 192 (1,551) 1 160 

Total Debt Associated with Loans $ 1,251,387 $ 122,080 $ (151,923) $ 1 $ 1,221,545 

2020

Debt to the Bureau of Public Debt

Direct Loan Program $ 1,192,138 $ 116,883 $ (148,922) $ - $ 1,160,099 

FFEL Program 94,671 10,997 (16,682) - 88,986 

Other Credit Programs for higher Education 702 154 (72) - 784 

Total Debt to the Bureau of Public Debt 1,287,511 128,034 (165,676) - 1,249,869 

Debt to the Federal Financing Bank

Other Credit Programs for higher Education 1,482 165 (142) 13 1,518 

Total Debt Associated with Loans $ 1,288,993 $ 128,199 $ (165,818) $ 13 $ 1,251,387 

The Department borrows from Treasury’s Bureau of the Public Debt and the FFB to fund the disbursement of new 

loans and the payment of credit program outlays and related costs. During FY 2021, debt decreased 2.4 percent from 

$1,251.4 billion in the prior year to $1,221.5 billion. The Department makes periodic principal payments after considering 

the cash position and liability for future outflows in each cohort of loans, as mandated by the FCRA.
74 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Approximately 93.5 percent of the Department’s debt, as of September 30, 2021, is attributable to the Direct Loan 

Program. Most the net borrowing activity (borrowing less repayments) for the year was designated for funding new direct 

loan disbursements.

During FY 2021, TEACH net borrowing of $73 million was used for the advance of new grants and repayments of 

principal made to Treasury. In FY 2021, debt in HBCU decreased by $1,134 million, or 73 percent. This total represents 

the aggregate of new bonds administered and repayments made on previously issued bonds.

NOTE 8. Subsidy Due to Treasury 

(Dollars in Millions)

2021 2020

Credit Program Downward Subsidy Re-estimates

Direct Loan Program $ 303 $ 1,773 

FFEL Program 1 74 

Total Credit Program Downward Subsidy Re-estimates 304 1,847 

Future Liquidating Account Collections

FFEL Program 1,209 1,436 

Other Credit Programs for higher Education - 15 

Total Future Liquidating Account Collections 1,209 1,451 

Total Subsidy Due to Treasury General Fund $ 1,513 $ 3,298 

NOTE 9. Other Liabilities

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

Federal Perkins Loan Program $ 682 $ - $ 619 $ - 

Miscellaneous Receipt, Deposit Funds and 

Clearing Accounts 38 289 36 239 

Liability for Advances and Prepayments 3 - 2 - 

Accrued Funded Payroll and Leave - 26 - 23 

Accrued unfunded Annual Leave - 52 - 47 

Employer Contributions and Payroll Taxes Payable 10 1 8 1 

FECA Liabilities 2 14 2 13 

Custodial Liabilities 4 - 2 - 

Total Other Liabilities $ 739 $ 382 $ 669 $ 323 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 75

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

NOTE 10. Net Cost of Operations

As required by the GPRA Modernization Act of 2010, the Department’s programs have been aligned with the goals presented 

in the Department’s Strategic Plan as shown below. Goals 3 and 4 in the Strategic Plan are considered crosscutting goals, and 

therefore costs and revenues associated with these activities are included in the net cost programs associated with Goals 1 

and 2. Programs associated with COVID-19 activities are administered by multiple program offices but are summarized 

separately. (See also Note 11)

Program Offices Strategic Goal Net Cost Program

Net Cost Statement Program Alignment with Strategic Plan

OESE

OSERS

Other:

OCTAE

IES

OELA

OCR

Goal 1: Support state and local efforts to improve learning outcomes for all P-12 students in 

every community.

Improve learning 

outcomes for all 

P–12 students

FSA

OSERS

Other:

OCTAE

IES

OPE

OCR

Goal 2: Expand postsecondary education opportunities, improve outcomes to foster economic 

opportunity and promote an informed, thoughtful, and productive citizenry.

Expand 

postsecondary 

opportunities, improve 

outcomes to foster 

economic opportunity, 

and promote 

productive citizenry

All Offices Goal 3: Strengthen the quality, accessibility, and use of education data through better 

management, increased privacy protections, and transparency.

Crosscutting Goal

All Offices Goal 4: Reform the effectiveness, efficiency, and accountability of the Department. Crosscutting Goal
76 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Gross Costs and Earned Revenue by Program 

(Dollars in Millions)

2021

FSA OESE OSERS COVID-19 Other Total

IMPROVE LEARNING OUTCOMES FOR ALL P-12 STUDENTS

Gross Cost

Grants $ - $ 24,328 $ 12,685 $ 20,965 $ 2,173 $ 60,151 

Other - 68 - 30 764 862 

Earned Revenue - - - - (118) (118)

Net Program Costs - 24,396 12,685 20,995 2,819 60,895 

EXPAND POSTSECONDARY OPPORTUNITIES, IMPROVE OUTCOMES TO FOSTER ECONOMIC OPPORTUNITY, AND PROMOTE 

PRODUCTIVE CITIZENRY

Direct Loan Program

Gross Cost

Credit Program Interest Expense 32,957 - - - - 32,957 

Subsidy Expense 44,426 - - 52,181 - 96,607 

Administrative Expenses 1,516 - - 8 - 1,524 

Earned Revenue

Subsidy Expense (9) - - (2,707) - (2,716)

Interest & Administrative Fees (3,803) - - - - (3,803)

Subsidy Amortization (29,154) - - - - (29,154)

Net Cost of Direct Loan Program 45,933 - - 49,482 - 95,415 

FFEL Program

Gross Cost

Credit Program Interest Expense 3,538 - - - - 3,538 

Subsidy Expense 9,994 - - 4,006 - 14,000 

Subsidy Amortization (Guaranteed Loans) (863) - - - - (863)

Guaranty Agencies 79 - - - - 79 

Administrative Expenses 144 - - - - 144 

Earned Revenue

Subsidy Expense - - - (359) - (359)

Interest & Administrative Fees (1,257) - - - - (1,257)

Subsidy Amortization (Acquired FFEL Loans) (1,418) - - - - (1,418)

Guaranty Agencies (61) - - - - (61)

Net Cost of FFEL Program 10,156 - - 3,647 - 13,803 

Other Credit Programs for higher Education

Gross Cost

Credit Program Interest Expense 22 - - - 105 127 

Subsidy Expense 104 - - 22 1,393 1,519 

Administrative Expenses 1 - - - 26 27 

Earned Revenue

Subsidy Expense (1) - - - - (1)

Interest & Administrative Fees (4) - - - (49) (53)

Subsidy Amortization (18) - - - (56) (74)

Other (932) - - - - (932)

Net Cost of Other Credit Programs for 

Higher Education (828) - - 22 1,419 613 

Non-Credit Programs

Gross Cost

Grants 29,117 24 3,721 32,015 3,707 68,584 

Other 130 - 3 3 274 410 

Earned Revenue (1) - - - (14) (15)

Net Cost of Non-Credit Programs 29,246 24 3,724 32,018 3,967 68,979 

Net Program Costs 84,507 24 3,724 85,169 5,386 178,810 

Total Program Gross Costs 121,165 24,420 16,409 109,230 8,442 279,666 

Total Program Earned Revenue (36,658) - - (3,066) (237) (39,961)

Net Cost $ 84,507 $ 24,420 $ 16,409 $ 106,164 $ 8,205 $ 239,705 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 77

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

Gross Costs and Earned Revenue by Program 

(Dollars in Millions)

2020

FSA OESE OSERS COVID-19 Other Total

IMPROVE LEARNING OUTCOMES FOR ALL P-12 STUDENTS

Gross Cost

Grants $ - $ 22,544 $ 12,801 $ 1,839 $ 2,145 $ 39,329 

Other - 67 - - 749 816 

Earned Revenue - - - - (129) (129)

Net Program Costs - 22,611 12,801 1,839 2,765 40,016 

EXPAND POSTSECONDARY OPPORTUNITIES, IMPROVE OUTCOMES TO FOSTER ECONOMIC OPPORTUNITY, AND PROMOTE 

PRODUCTIVE CITIZENRY

Direct Loan Program

Gross Cost

Credit Program Interest Expense 34,705 - - - - 34,705 

Subsidy Expense 62,348 - - 38,825 - 101,173 

Administrative Expenses 1,425 - - - - 1,425 

Earned Revenue

Subsidy Expense (2) - - (263) - (265)

Interest & Administrative Fees (33,110) - - - - (33,110)

Subsidy Amortization (1,595) - - - - (1,595)

Net Cost of Direct Loan Program 63,771 - - 38,562 - 102,333 

FFEL Program

Gross Cost

Credit Program Interest Expense 4,021 - - - - 4,021 

Subsidy Expense (1,145) - - 3,325 - 2,180 

Subsidy Amortization (Guaranteed Loans) (1,064) - - - - (1,064)

Guaranty Agencies 126 - - - - 126 

Administrative Expenses 156 - - - - 156 

Earned Revenue

Subsidy Expense (1) - - (27) - (28)

Interest & Administrative Fees (2,871) - - - - (2,871)

Subsidy Amortization (Acquired FFEL Loans) (86) - - - - (86)

Guaranty Agencies (123) - - - - (123)

Net Cost of FFEL Program (987) - - 3,298 - 2,311 

Other Credit Programs for higher Education

Gross Cost

Credit Program Interest Expense 23 - - - 59 82 

Subsidy Expense 9 - - 51 - 60 

Administrative Expenses 2 - - - - 2 

Earned Revenue

Subsidy Expense - - - (2) - (2)

Interest & Administrative Fees (26) - - - (52) (78)

Subsidy Amortization 1 - - - (5) (4)

Other (1,281) - - - (3) (1,284)

Net Cost of Other Credit Programs for 

Higher Education (1,272) - - 49 (1) (1,224)

Non-Credit Programs

Gross Cost

Grants 28,113 25 3,494 9,420 4,304 45,356 

Other 348 - 3 10 270 631 

Earned Revenue - - - - (5) (5)

Net Cost of Non-Credit Programs 28,461 25 3,497 9,430 4,569 45,982 

Net Program Costs 89,973 25 3,497 51,339 4,568 149,402 

Total Program Gross Costs 129,067 22,636 16,298 53,470 7,527 228,998 

Total Program Earned Revenue (39,094) - - (292) (194) (39,580)

Net Cost $ 89,973 $ 22,636 $ 16,298 $ 53,178 $ 7,333 $ 189,418 
78 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Credit Program Interest Expense and Revenues 

(Dollars in Millions)

Gross Interest 

Expense

Subsidy 

Amortization Net Interest 

Expense

Gross Interest and Administrative 

Fee Revenue

Subsidy 

Amortization

Net Revenue

Intragovernmental With the 

Public Intragovernmental With the 

Public

With the 

Public

2021

Direct Loan Program $ 32,957 $ - $ 32,957 $ 4,230 $ (427) $ 29,154 $ 32,957 

FFEL Program 3,538 (863) 2,675 1,326 (69) 1,418 2,675 

Other Credit Programs 

for higher Education 127 - 127 28 25 74 127 

Total $ 36,622 $ (863) $ 35,759 $ 5,584 $ (471) $ 30,646 $ 35,759 

2020

Direct Loan Program $ 34,705 $ - $ 34,705 $ 4,786 $ 28,324 $ 1,595 $ 34,705 

FFEL Program 4,021 (1,064) 2,957 1,435 1,436 86 2,957 

Other Credit Programs 

for higher Education 82 - 82 14 64 4 82 

Total $ 38,808 $ (1,064) $ 37,744 $ 6,235 $ 29,824 $ 1,685 $ 37,744 

Interest expense equals interest revenue plus administrative fees accrued for all credit programs due to subsidy amortization. 

Subsidy amortization is required by the FCRA and accounts for the difference between interest expense and revenue cash 

flows. For direct loans, the allowance for subsidy is adjusted with the offset to interest revenue. For guaranteed loans, the 

liability for loan guarantees is adjusted with the offset to interest expense.

Due to the COVID-19 relief actions to suspend nearly all required federal student loans payments and set borrower 

interest rates to zero percent until January 31, 2022, no new interest revenues were recognized in FY 2021. However, 

interest adjustment and reapplication activity is included in the current year’s interest with the public in the schedule 

above. Adjustments and reapplications cause loan activity during the period between the original effective date and the new 

processing date to be reversed and reposted. As a result, interest accrued in a prior year is reversed and typically reposted. 

The amount of interest reposted can be different than the original amount depending on the purpose of the adjustment and 

whether the adjustment or reapplication caused an increase or decrease to the principal balance as of the original effective 

date. These adjustments and reapplications resulted in net negative FY 2021 interest revenues for the Direct Loan Program 

and the FFEL Program.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 79

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

Grant Expenses by Appropriation

(Dollars in Millions)

2021 2020

IMPROVE LEARNING OUTCOMES FOR ALL P-12 STUDENTS 

COVID-19 $ 20,965 $ 1,839 

Education for the Disadvantaged 16,171 15,750 

Special Education - IDEA Grants 12,685 12,801 

School Improvement Programs 6,069 4,755 

Impact Aid 1,484 1,466 

Innovation and Improvement 928 907 

English Language Acquisition 667 676 

Career, Technical, and Adult Education 425 383 

hurricane Education Recovery 271 253 

Institute of Education Sciences 152 179 

Other 334 320 

Subtotal $ 60,151 $ 39,329 

EXPAND POSTSECONDARY OPPORTUNITIES, IMPROVE OUTCOMES TO FOSTER ECONOMIC OPPORTUNITY, AND PROMOTE 

PRODUCTIVE CITIZENRY

COVID-19 $ 32,015 $ 9,420 

Student Financial Assistance

Pell Grants 26,852 25,882 

Federal Work-Study Program 1,145 1,203 

Federal Supplemental Educational Opportunity Grants 1,120 1,028 

Rehabilitation Services 3,347 3,133 

higher Education 1,977 2,738 

Career, Technical, and Adult Education 1,440 1,284 

Special Education - IDEA Grants 122 118 

hurricane Education Recovery 24 25 

Institute of Education Sciences 35 42 

Other 507 483 

Subtotal 68,584 45,356 

Total Grant Costs $ 128,735 $ 84,685 

The Department has more than 100 grant programs. Descriptions of COVID-19 grant programs are provided in Note 11. 

Descriptions of non-COVID-19 major grant program areas are as follows: 

Student Financial Assistance

• Pell Grant—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.

• Federal Work-Study Program—Provides funds by formula to enable eligible institutions to offer employment to 

students based on financial needs. The program is available to full-time or part-time students and encourages community 

service work. The work is often related to the student’s course of study. This program is administered by the schools 

that participate in the Federal Work-Study program. Hourly earnings under this program must be at least the federal 

minimum wage. Federal funding, in most cases, pays 75 percent of a student’s hourly wage, with the remaining 

25 percent paid by the employer.

• Federal Supplemental Educational Opportunity Grant—Provides funds by formula to enable eligible institutions to 

offer grants to students based on need. Federal grants distributed under this program are administered directly by the 

financial aid office at each participating school.
80 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Education for the Disadvantaged—Primarily consists 

of grants that provide financial assistance through SEAs to 

LEAs and public schools with high numbers or percentages 

of poor children to help ensure that all children meet 

challenging state academic content and student academic 

achievement standards. Also provides funds to states to 

support educational services to children of migratory 

farmworkers and fishers, and to neglected or delinquent 

children and youth in state-run institutions, attending 

community day programs, and correctional facilities.

Special Education—Consists primarily of IDEA Grants 

that provide funds by formula to states to assist them in 

providing a free appropriate public education in the least 

restrictive environment for children with disabilities ages 3 

through 21 and assists states in providing early intervention 

services for infants and toddlers 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. 

School Improvement Programs—Provides funds to SEAs 

to make competitive subgrants to LEAs that demonstrate 

the greatest need for the funds and the strongest 

commitment to use the funds to provide adequate resources 

to substantially raise the achievement of students in their 

lowest-performing schools.

Rehabilitation Services—Provides funds to states and 

other agencies to support vocational rehabilitation and 

other services to individuals with disabilities to maximize 

their employment, independence, and integration into the 

community and the competitive labor market.

Higher Education—Includes Institutional Service 

grants designed to improve academic quality, institutional 

management and fiscal stability, and strengthen physical 

plants and endowments of IHEs, with an emphasis on 

institutions that enroll large proportions of minority and 

financially disadvantaged students. Also includes Student 

Service grant programs supporting low-income, firstgeneration students and individuals with disabilities as 

they progress through the academic pipeline from middle 

school to graduate school, in addition to programs focused 

on college readiness, campus-based childcare, and graduate 

fellowships. Also includes International and Foreign 

Language Education grant and fellowship programs that 

strengthen foreign language instruction, area/international 

studies teaching and research, professional development 

for educators, and curriculum development at the K–12, 

graduate, and postsecondary levels.

Career, Technical, and Adult Education—Includes 

programs that are related to adult education and literacy, 

career and technical education, community colleges and 

correctional education.

Impact Aid—Provides funds to LEAs to replace the lost 

local revenue that would otherwise be to educate children of 

federal workers that live on government property, which is 

exempt from local property taxes that finance education.

Innovation and Improvement—Includes support for 

nontraditional programs that improve student achievement 

and attainment; supports the development of educational 

television and digital media programs targeted at preschool 

and early elementary school children and their families 

to promote early learning and school readiness, with 

a particular interest in reaching low-income children; 

and supports LEAs and their partners in implementing, 

evaluating, and refining tools and approaches for developing 

the noncognitive skills of middle school students to increase 

student success. 

English Language Acquisition—Provides funds primarily 

by formula to states to improve services for English learners. 

Also provides discretionary funds to support national 

activities, including professional development to increase 

the supply of high-quality teachers of English learners and a 

national clearinghouse on English language acquisition. 

Hurricane Education Recovery—Provides onetime emergency-relief grants, funded by supplemental 

appropriations acts enacted in response to specific events, 

to support schools and students directly affected by natural 

disasters. Assists students displaced or disrupted by such 

disasters as well as eligible agencies and institutions that 

require funding to cover unexpected expenses and return to 

normal operations. 

Institute of Education Sciences—Provides funding 

to: support research, development, and dissemination 

activities that provide parents, teachers, and schools with 

evidence-based information on effective educational 

practices; support statistical data collection activities 

conducted by the National Center for Education Statistics; 

support the ongoing National Assessment of Educational 

Progress and the National Assessment Governing 

Board; support research to build the evidence base on 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 81

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

improving special education and early intervention 

services and outcomes for infants, toddlers, and children 

with disabilities; and support studies, evaluations, and 

assessments related to IDEA.

NOTE 11. COVID-19 ACTIVITY 

Congress passed multiple COVID-19 relief bills in 

FY 2020 and FY 2021 including the following that 

provided the Department with 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 as 

described starting on page 84. The largest component of 

the education funding provided by the COVID-19 relief 

appropriations established the Education Stabilization 

Fund which included the (1) Elementary and Secondary 

School Emergency Relief Fund, (2) Higher Education 

Emergency Relief Fund, (3) Governor’s Emergency 

Education Relief Fund, and (4) funds for outlying areas. 

The Education Stabilization Fund is being distributed to 

recipients through various grant programs.

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. A Dear Colleague 

Letter released on May 12, 2021, expanded the pause on 

federal student loan interest and collections on all defaulted 

loans in the FFEL Program that are managed by guaranty 

agencies, retroactive to March 2020. The Department 

authorized guaranty agencies to reimburse themselves from 

the Federal Fund for lost revenue that they will realize 

because of these actions. However, that reimbursement 

will only cover the share of what a guaranty agency might 

have reasonably collected during the pandemic but for 

the suspension.

Funding for student loan repayment deferrals was provided 

through FY 2020 and FY 2021 indefinite appropriations 

totaling $42.2 billion and $56.2 billion, respectively. Cost 

impacts of the student loan repayment deferrals 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 a subsidy expense 

that reduced the overall credit program loan receivable 

balances. (see Notes 5 and 10)

In addition to suspending student loan repayments, other 

COVID-19 relief provided to student loan borrowers 

included the following:

• The Department stopped all federal wage garnishments 

and collection actions for borrowers with federally held 

loans in default.

• The Department provided relief for certain borrowers 

who received student loan discharges due to total and 

permanent disability. Unless it is through a process 

with the VA, borrowers receiving this discharge are, by 

regulation, subject to a three-year monitoring period 

during which they must provide the Department with 

information about their earnings from employment. 

Per regulation, borrowers whose earnings exceed certain 

thresholds and borrowers who do not meet certain 

other criteria will have their loans reinstated. The 

Department provided relief to ensure no borrowers 

are at risk of having their loans reinstated, meaning 

they would have to repay their debt—for failure to 

provide earnings information during the COVID-19 

emergency. This change was made retroactive 

to March 13, 2020, the start of the COVID-19 

national emergency.

• The Department requested a waiver from the Small 

Business Administration to immediately help nearly 

30,000 small business owners in the Paycheck 

Protection program who faced difficulties because they 

were delinquent or in default on a federal student loan.

Unobligated CARES Act balances as of the end of 

FY 2020 totaling $672 million were carried forward to 

FY 2021 and are reported in the FY 2021 COVID-19 

following schedule as Unobligated Balances from Prior 

Year Budget Authority (Net) together with $26 million 

of net downward adjustments to FY 2020 CARES Act 

unpaid obligations recorded in FY 2021. Obligated and 

unobligated COVID-19 funds remaining to be disbursed 

as of the end of FY 2020 totaled $19.6 billion. Obligated 

and unobligated COVID-19 funds remaining to be 

disbursed as of the end September 30, 2021, totaled 

$222.0 billion. (see Note 3)

The tables on pages 82 and 83 provide more detail on the 

Department’s funded COVID-19 activity for FY 2021 

and FY 2020, respectively.
82 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

COVID-19 Activity

(Dollars in Millions)

2021

Unobligated 

Balance from 

Prior Year 

Budget Authority 

(Net)

Appropriations Appropriations

Transferred Obligated Unobligated Outlays

Transfers 

to General 

Fund

Net Costs 

(See Note 

10)

COVID-19 Direct Appropriations

Education Stabilization Fund

Elementary and Secondary 

School Emergency Relief Fund

Allocations to States $ - $ 176,286 $ - $ 161,349 $ 14,937 $ 19,021 $ - $ 20,035 

Assistance for homeless 

Children and Youth - 800 - 799 1 1 - 1 

higher Education Emergency 

Relief Fund

higher Education Funds to 

Students 113 24,066 - 23,982 197 10,838 - 14,097 

higher Education Funds to 

Institutions 155 32,157 100 32,084 328 15,225 - 15,226 

Proprietary Institutions Grant 

Funds for Students - 1,077 - 843 234 473 - 475 

hbCus, and Minority Serving 

Institutions (MSIs) 

MSIs 5 1,207 - 1,169 43 391 - 397 

hbCus - 2,576 - 2,575 1 791 - 793 

Tribally Controlled Colleges 

and universities (TCCus) - 225 - 223 2 36 - 36 

Strengthening Institutions 

Program 9 663 - 606 66 231 - 231 

Fund for the Improvement of 

Postsecondary Education 203 - - 91 112 140 - 140 

Supplemental Assistance 

and Support - 311 - 226 85 5 - 12 

Governor’s Emergency Education 

Relief Fund

Emergency Education 

Relief Grants 48 1,303 - 1,351 - 1,055 - 1,061 

Emergency Assistance to NonPublic Schools Program - 5,500 - 3,327 2,173 277 - 280 

Outlying Areas - 1,259 - 1,259 - 114 - 114 

bureau of Indian Education - 409 (409) - - - - - 

Discretionary Grants - - - - - 16 - 16 

Total Education 

Stabilization Fund 533 247,839 (309) 229,884 18,179 48,614 - 52,914 

Individuals with Disabilities 

Education Act Grants - 3,030 - 2,991 39 - - - 

School Improvement Programs - 170 - 113 57 - - - 

American Indian Resilience in 

Education - 20 - - 20 - - - 

Safe Schools & 

Citizenship Education 100 - (100) - - - - - 

Gallaudet university - 30 - 30 - 16 - 16 

howard university - 55 - 55 - 44 - 44 

National Technical Institute for 

the Deaf - 30 - 30 - 6 - 6 

hbCu Loan Deferment 30 - - - 30 - - - 

Student Aid Administration 24 121 - 91 54 8 - 8 

Program Administration 4 30 - 12 22 11 - 11 

Inspector General 7 10 - 4 13 2 - 2 

Institute of Education Sciences - 128 - 27 101 20 - 20 

Total COVID-19 Direct 

Appropriations 698 251,463 (409) 233,237 18,515 48,721 - 53,021 

COVID-19 Indirect Appropriations 

(See Note 5)

Student Loan Deferrals

DL Program - 52,181 - 52,181 - 52,181 2,707 49,474 

FFEL Program - 4,006 - 4,006 - 4,006 359 3,647 

hEAL Program - 1 - 1 - 1 - 1 

TEACh Program - 21 - 21 - 21 - 21 

Total Student Loan Deferrals - 56,209 - 56,209 - 56,209 3,066 53,143 

Total COVID-19 Indirect 

Appropriations - 56,209 - 56,209 - 56,209 3,066 53,143 

Total COVID-19 Activity $ 698 $ 307,672 $ (409) $ 289,446 $ 18,515 $ 104,930 $ 3,066 $ 106,164 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 83

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

COVID-19 Activity

(Dollars in Millions)

2020

Appropriations Appropriations

Transferred Obligated Unobligated Outlays Transfers to General Fund

Net Costs 

(See Note 10)

COVID-19 Direct Appropriations

Education Stabilization Fund

Elementary and Secondary 

School Emergency Relief Fund

Allocations to States $ 13,229 $ - $ 13,229 $ - $ 1,552 $ - $1,552 

Assistance for homeless 

Children and Youth - - - - - - - 

higher Education Emergency 

Relief Fund

higher Education Funds to 

Students 6,279 - 6,188 91 5,382 - 5,396 

higher Education Funds to 

Institutions 6,279 - 6,127 152 3,320 - 3,387 

Proprietary Institutions Grant 

Funds for Students - - - - - - - 

hbCus, and Minority Serving 

Institutions (MSIs) 

MSIs 270 - 265 5 66 - 66 

hbCus 577 - 577 - 161 - 161 

Tribally Controlled Colleges 

and universities (TCCus) 50 - 50 - 17 - 17 

Strengthening 

Institutions Program 149 - 141 8 43 - 43 

Fund for the Improvement of 

Postsecondary Education 349 - 145 204 64 - 65 

Supplemental Assistance 

and Support - - - - - - - 

Governor’s Emergency Education 

Relief Fund

Emergency Education 

Relief Grants 2,953 - 2,905 48 535 - 536 

Emergency Assistance to NonPublic Schools Program - - - - - - - 

Outlying Areas 154 - 154 - 21 - 21 

bureau of Indian Education 154 (154) - - - - - 

Discretionary Grants 307 - 307 - - - - 

Total Education 

Stabilization Fund 30,750 (154) 30,088 508 11,161 - 11,244 

Individuals with Disabilities 

Education Act Grants - - - - - - - 

Safe Schools & 

Citizenship Education - - - - - - - 

School Improvement Programs - - - - - - - 

American Indian Resilience 

in Education 100 - - 100 - - - 

Gallaudet university 7 - 7 - 2 - 2 

howard university 13 - 13 - 13 - 13 

National Technical Institute for 

the Deaf - - - - - - - 

hbCu Loan Deferment 62 - 32 30 32 - 32 

Student Aid Administration 40 - 17 23 9 - 9 

Program Administration 8 - 4 4 - - - 

Inspector General 7 - - 7 - - - 

Institute of Education Sciences - - - - - - - 

Total COVID-19 Direct 

Appropriations 30,987 (154) 30,161 672 11,217 - 11,300 

COVID-19 Indirect Appropriations 

(See Note 5)

Student Loan Deferrals

DL Program 38,825 - 38,825 - 38,825 263 38,562 

FFEL Program 3,325 - 3,325 - 3,325 28 3,297 

hEAL Program 3 - 3 - 3 - 3 

TEACh Program 16 - 16 - 16 - 16 

Total Student Loan Deferrals 42,169 - 42,169 - 42,169 291 41,878 

Total COVID-19 Indirect 

Appropriations 42,169 - 42,169 - 42,169 291 41,878 

Total COVID-19 Activity $ 73,156 $ (154) $ 72,330 $ 672 $ 53,386 $ 291 $ 53,178 
84 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Elementary and Secondary School Emergency Relief 

(ESSER) Fund—Supports continued learning for 

K–12 students whose education has been disrupted 

by COVID-19.

• Allocations to States—Provides grants to states 

based on the same proportion that each state receives 

under the Elementary and Secondary Education Act

(ESEA) Title-IA. States must distribute at least 

90 percent of funds to local education agencies 

based on their proportional share of ESEA Title I-A 

funds. States have the option to reserve 10 percent 

of the allocation for emergency needs as determined 

by the state to address issues responding to the 

COVID-19 pandemic. 

• Assistance for Homeless Children and Youth—

Provides grants to supports the specific needs of 

homeless children and youth with wraparound 

services to address the challenges of COVID-19, 

and to enable homeless children and youth to attend 

school and fully participate in school activities.

Higher Education Emergency Relief Fund (HEERF) 

—Provides grants for IHEs to address needs directly 

related to COVID-19, including transitioning courses 

to distance education and granting aid to students for 

educational costs such as food, housing, course materials, 

health care, and childcare. The fund is distributed 

through the following grant programs. 

• Higher Education Funds to Students—Provides 

grants to IHEs to give emergency financial aid grants 

to students whose lives have been disrupted, many of 

whom are facing financial challenges and struggling to 

make ends meet. Institutions have the responsibility of 

determining how grants will be distributed to students, 

how the amount of each student grant is calculated, 

and the development of any instructions or directions 

that are provided to students about the grant. 

• Higher Education Funds to Institutions—Provides 

grants to IHEs which can use up to one-half of 

the total funds to cover any costs associated with 

significant changes to the delivery of instruction due 

to COVID-19. Institutions are encouraged to use the 

funds to expand remote learning programs, build IT 

capacity to support such programs, and train faculty 

and staff to operate effectively in a remote learning 

environment. They are also encouraged to use the 

funds to expand support for students with the most 

significant financial needs arising from the COVID-19 

pandemic, including eligible expenses under a 

student’s cost of attendance, such as course materials, 

technology, health care, childcare, food, and housing.

• Proprietary Institutions Grant Funds for Students—

Provides grants to proprietary IHEs to give emergency 

financial aid grants to students, which may be used for 

any component of the student’s cost of attendance or 

for emergency costs that arise due to COVID-19, such 

as tuition, food, housing, health care (including mental 

health care) or childcare.

• Minority Serving Institutions (MSIs)—Provides 

grants to MSIs to defray institutional expenses, which 

may include lost revenue, reimbursement for expenses 

already incurred, technology costs associated with 

the transition to distance education, faculty and staff 

training, and payroll. MSIs include institutions that 

are eligible to participate in the following programs: 

Predominantly Black Institutions, Alaska Native 

and Native Hawaiian-Serving Institutions, Asian 

American and Native American Pacific IslanderServing Institutions, Native American-Serving 

Nontribal Institutions, Developing Hispanic-Serving 

Institutions program, and Promoting Postbaccalaureate 

Opportunities for Hispanic Americans. MSIs are 

encouraged to use as much of these funds as possible 

to provide students eligible for financial aid with grants 

for any component of the student’s cost of attendance, 

including tuition, course materials, and technology.

• Historically Black Colleges and Universities 

(HBCUs)—Provides grants to HBCUs to defray 

institutional expenses, which may include lost 

revenue, reimbursement for expenses already incurred, 

technology costs associated with the transition to 

distance education, faculty and staff training, and 

payroll. HBCUs are also encouraged to use as much 

of these funds as possible to provide students eligible 

for financial aid with grants for any component of the 

student’s cost of attendance, including tuition, course 

materials, and technology.

• Tribally Controlled Colleges and Universities 

(TCCUs)—Provides grants to TCCUs to defray 

institutional expenses, which may include lost 

revenue, reimbursement for expenses already incurred, 

technology costs associated with the transition to 

distance education, faculty and staff training, and 

payroll. TCCUs are also encouraged to use as much 

of these funds as possible to provide students eligible 

for financial aid with grants for any component of the 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 85

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

student’s cost of attendance, including tuition, course 

materials, and technology. 

• Strengthening Institutions Program—Provides grants 

to institutions that are not participating in the MSI 

programs but have at least 50 percent of their degree 

students receiving need-based assistance under Title 

IV of the Higher Education Act or have a substantial 

number of enrolled students receiving Pell Grants and 

have low educational and general expenditures. These 

funds can be used to defray institutional expenses, 

which may include lost revenue, reimbursement for 

expenses already incurred, technology costs associated 

with the transition to distance education, faculty 

and staff training, and payroll. These institutions are 

encouraged to use as much of these funds as possible 

to provide students eligible for financial aid with grants 

for any component of the student’s cost of attendance, 

including tuition, course materials, and technology. 

• Fund for the Improvement of Postsecondary 

Education (FIPSE)—Provides grants that support 

projects to encourage innovative reform and expand 

education opportunities to underrepresented groups. 

Institutions can use these additional FIPSE funds to 

defray institutional expenses, which may include lost 

revenue, reimbursement for expenses already incurred, 

technology costs associated with the transition to 

distance education, faculty and staff training, and 

payroll. Institutions are also encouraged to use as much 

of these funds as possible to provide students eligible 

for financial aid with grants for any component of the 

student’s cost of attendance, including tuition, course 

materials, and technology.

• Supplemental Assistance and Support—Provides 

discretionary grants to institutions of higher education 

with unmet needs related to recovery from disruptions 

in the finances, day-to-day operations, instruction, and 

student support due to COVID-19.

Governor’s Emergency Education Relief (GEER) 

Fund—Provides grants to state governors to ensure 

education continues for students of all ages impacted by 

the COVID-19 national emergency. The GEER Fund 

is a flexible emergency block grant designed to enable 

governors to decide how best to meet the needs of 

students, schools (including charter schools and nonpublic schools), postsecondary institutions, and other 

education-related organizations.

• Emergency Education Relief Grants—Provide 

grants to state governors for the purpose of providing 

local educational agencies (LEA), IHEs, and other 

education-related entities with emergency assistance as 

a result COVID-19.

• Emergency Assistance to Non-Public Schools 

Program—Provides grants to state governors to 

provide services or assistance to eligible non-public 

schools to address COVID-19 impacts.

Outlying Areas, Bureau of Indian Education, and 

Discretionary Grants—Provides funding for outlying 

areas and states with the highest COVID-19 burdens. 

These funds are distributed through the following grant 

programs.

• Outlying Areas—Provides grants for the outlying 

areas of the United States, specifically: the U.S. Virgin 

Islands, Guam, the Commonwealth of the Northern 

Mariana Islands, and American Samoa. Money made 

available from these grants will be used in response 

to COVID-19 and was calculated via formula. Each 

outlying area received two block grants from the 

Education Stabilization Fund—one to the governor’s 

offices and one to the SEA.

• Bureau of Indian Education—Provides funding for 

programs operated by the Bureau of Indian Education 

(BIE), in consultation with the Secretary of Interior. 

The Department transferred these funds to BIE.

• Discretionary Grants—Provides grants to states to use 

to create adaptable, innovative learning opportunities 

for K–12 and postsecondary learners in response to the 

COVID-19 national emergency. 

In addition to the Education Stabilization Fund, 

COVID-19 appropriations also included funding for the 

following.

Individuals with Disabilities Education Act Grants—

Provides grants to states to help them recover from the 

impact of the COVID-19 and to safely reopen schools and 

sustain safe operations. These grants assist states 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 birth through age 2 and their families.
86 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

NOTE 12. Statements of budgetary Resources

The SBR compares budgetary resources with the status of those resources. As of September 30, 2021, budgetary resources 

were $689.6 billion, and net agency outlays were $260.5 billion. As of September 30, 2020, budgetary resources were 

$473.2 billion, and net agency outlays were $161.5 billion.

Net Adjustments to Unobligated Balances Brought Forward, October 1

(Dollars in Millions)

2021 2020

Budgetary

Non-Budgetary 

Credit Reform 

Financing 

Accounts

Budgetary

Non-Budgetary 

Credit Reform 

Financing 

Accounts

Prior Year Unobligated Balance, End of Year (Total) $ 19,904 $ 22,726 $ 16,774 $ 18,324 

Recoveries of Prior Year unpaid Obligations 1,317 16,676 1,426 18,220 

borrowing Authority Withdrawn - (13,566) - (15,004)

Actual Repayments of Debt, Prior-Year balances - (5,444) - (12,720)

Actual Capital Transfers to the Treasury General Fund (97) - (265) - 

Canceled Authority (354) - (305) - 

Downward Adjustments of Prior-Year Paid Delivered Orders 3 257 128 301 

Other Differences (1) 1 (2) (2)

Unobligated Balance from Prior Year Budget Authority (Net) $ 20,772 $ 20,650 $ 17,756 $ 9,119 

School Improvement Programs—Provides additional 

funds to SEAs to make competitive subgrants to LEAs 

that demonstrate the greatest need for the funds and the 

strongest commitment to use the funds to provide adequate 

resources to substantially raise the achievement of students 

in their lowest-performing schools.

American Indian Resilience in Education—Provides 

grants to tribal education agencies for activities authorized 

under Section 6121(c) of the Elementary and Secondary 

Education Act of 1965. Those activities include a broad 

range of direct services to Indian children and youth, their 

teachers, and families.

Safe Schools and Citizenship Education—The CARES 

Act provided additional funding for this program to 

prevent, prepare for, and respond to COVID-19, including 

disinfecting affected schools, and assisting in counseling and 

distance learning. The CRRSAA subsequently authorized 

these additional funds to be reallocated to the HEERF. 

Gallaudet University—Provides funding to help address 

challenges associated with COVID-19.

Howard University—Provides funding to help address 

challenges associated with COVID-19.

HBCU Loan Deferment—Provides funding for 

the deferment of loan repayments for HBCUs that 

were provided low-cost capital financing for campus 

maintenance and construction projects. During the 

period of the deferment, the Department was required 

to pay the required principal and interest due. At the end 

of the deferment, the HBCU is required to repay the 

Department for payments made on its behalf.

Student Aid Administration—Provides funding for 

the additional costs of administering the COVID-19 

provisions affecting student financial aid programs.

Program Administration—Provides funding to 

the Department to fund costs of administrating the 

COVID-19 appropriations.

Inspector General—Provides funding for salaries and 

expenses necessary for Office of Inspector General 

oversight and audit of COVID-19 programs, grants, and 

projects.

Institute of Education Sciences—Provides funding for 

research to address learning loss caused by the coronavirus 

and to disseminate findings to SEAs, LEAs, and other 

others, and for carrying out the National Assessment of 

Educational Progress Authorization Act.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 87

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

During the periods ended September 30, 2021, and September 30, 2020, certain adjustments were made to the balance of 

unobligated budgetary resources available as of October 1, 2020, and October 1, 2019. These adjustments included, among 

other things, recoveries of prior year unpaid obligations that result from downward adjustments of undelivered orders that 

were obligated in a prior fiscal year.

Unused Borrowing Authority 

(Dollars in Millions)

2021 2020

Beginning Balance - Unused Borrowing Authority $ 48,230 $ 55,845 

Current Year borrowing Authority 129,407 135,589 

Funds Drawn from Treasury (122,093) (128,200)

borrowing Authority Withdrawn (13,566) (15,004)

Ending Balance - Unused Borrowing Authority $ 41,978 $ 48,230 

The Department is given authority to draw funds from Treasury to finance the Direct Loan, FFEL, and other loan programs. 

Unused borrowing authority is a budgetary resource and is available to support obligations for these programs. The 

Department periodically reviews its borrowing authority balances in relation to its obligations, resulting in the withdrawal of 

unused amounts.

Undelivered Orders at the End of the Period

(Dollars in Millions)

2021 2020

Intragovernmental With the Public Intragovernmental With the Public

unpaid $ 252 $ 321,379 $ 180 $ 138,621 

Paid 104 1,287 121 503 

Undelivered Orders $ 356 $ 322,666 $ 301 $ 139,124 

Undelivered orders represent the amount of goods and/or services ordered that have not been actually or constructively 

received. Paid amounts include any orders that may have been prepaid or advanced but for which delivery or performance 

has not yet occurred.

Unpaid undelivered orders increased significantly in FY 2021 primarily due to a $184.5 billion increase in unpaid 

undelivered COVID-19 fund balances (see Note 3).
88 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Distributed Offsetting Receipts

(Dollars in Millions)

2021 2020

Negative Subsidies and Downward Re-estimates of Subsidies:

Direct Loan Program $ 4,809 $ 5,382 

FFEL Program 589 6,865 

hEAL Program 25 - 

TEACh Program 3 36 

Facilities Loan Programs 207 48 

Total Negative Subsidies and Downward Re-estimates of Subsidies 5,633 12,331 

Repayment of Perkins Loans and Capital Contributions 866 1,317 

Other 126 (38)

Distributed Offsetting Receipts $ 6,625 $ 13,610 

Distributed offsetting receipts are amounts that the Department collects from the public or from other federal agencies that 

are used to offset or reduce the Department’s budget outlays. The Department’s outlays are measured on both a gross and 

net basis, with net outlays being reduced by offsetting receipts.

Most of the distributed offsetting receipts line item on the SBR 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

Explanation of Differences between the SBR and the Budget of the U.S. Government 

(Dollars in Millions)

Budgetary 

Resources

New Obligations 

and Upward 

Adjustments 

(Total)

Distributed 

Offsetting 

Receipts

Net Outlays

Combined Statements of Budgetary Resources $ 473,447 $ 430,822 $ 13,610 $ 204,415 

Expired Funds (2,368) (733) - - 

FFEL Guaranty Agency Amounts Included in the 

President's budget 6,125 6,125 - - 

Distributed Offsetting Receipts - - - 13,610 

Other 5 - 53 54 

Budget of the United States Government1 $ 477,209 $ 436,214 $ 13,663 $ 218,079 

1

 Amounts obtained from the Appendix, budget of the united States Government, FY 2022

The FY 2023 President’s Budget, which presents the actual amounts for the year ending September 30, 2021, has not been 

published as of the issue date of these financial statements. The FY 2023 President’s Budget is scheduled for release in 

February 2022 and will be made available on OMB’s website. The table above reconciles the FY 2020 SBR to the FY 2022 

President’s Budget (FY 2020 actual amounts) for budgetary resources, new obligations and upward adjustments, distributed 

offsetting receipts, and net outlays.

Reconciling differences exist because the President’s Budget excludes expired funds. Additionally, the President’s Budget 

includes a public enterprise fund that reflects the gross obligations by the FFEL Program for the estimated activity of the 

consolidated federal fund of the guaranty agencies. Ownership by the federal government is independent of the actual 

control of the assets. Since the actual operation of the federal fund is independent from the Department’s direct control, 

budgetary resources and new obligations and upward adjustments are estimated and disclosed in the President’s Budget 

to approximate the gross activities of the combined federal fund. Amounts reported on the SBR for the federal fund are 

compiled by combining all guaranty agencies’ annual reports to determine a net valuation amount for the federal fund.
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 89

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

NOTE 13. Reconciliation of Net Cost to Net Outlays

(Dollars in Millions)

2021 2020

Intragovernmental With the 

Public Total Intragovernmental With the 

Public Total

Net Cost $ 31,606 $ 208,099 $ 239,705 $ 33,158 $ 156,260 $ 189,418 

Components of Net Cost Not Part of 

Budgetary Outlays:

Year-End Credit Reform Subsidy 

Accrual Re-Estimates - (28,399) (28,399) - (52,571) (52,571)

Loan Modification Adjustment Transfers - 2,837 2,837 - (54) (54)

Property and Equipment 

Depreciation Expense - (1) (1) - (1) (1)

Property and Equipment Disposals 

and Revaluations - - - - (1) (1)

Increase/(Decrease) in Assets:

Loans Receivables, Net (Non-FCRA) - (62) (62) - 398 398 

Other Assets (13) 22 9 58 (46) 12 

(Increase)/Decrease in Liabilities:

Accounts Payable (1) (597) (598) - (137) (137)

Loan Guarantee Liabilities (Non-FRCA) - (2) (2) - (5) (5)

Other Liabilities 171 (5,728) (5,557) (150) 709 559 

Financing Sources:

Imputed Costs (36) - (36) (30) - (30)

Total Components of Net Cost Not Part of 

Budgetary Outlays 121 (31,930) (31,809) (122) (51,708) (51,830)

Components of Budget Outlays Not Part of 

Net Cost:

Effect of Prior-Year Credit Reform 

Subsidy Re-estimates - 52,571 52,571 - 67,225 67,225 

Acquisition of Capital Assets - 1 1 - - - 

Financing Sources:

 Donated Revenue - (1) (1) - - - 

Total Components of Budget Outlays Not 

Part of Net Cost - 52,571 52,571 - 67,225 67,225 

Miscellaneous Items:

Other Loan Activities (Non-FCRA) (89) - (89) (351) - (351)

Non-Entity Activity 82 - 82 (37) - (37)

Non-Exchange Revenues (9) - (9) (10) - (10)

Other Temporary Timing Differences

Total Miscellaneous Items (16) - (16) (398) - (398)

Budgetary Agency Outlays, Net $ 260,451 $ 204,415 
90 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

This reconciliation explains the relationship between the 

Department’s net cost and its net outlays. Reconciling 

items result from transactions that did not result in a 

current period outlay but did result in a current period 

cost, and current period outlays that did not result in a 

current period cost. 

Disbursements for new FCRA loans and collections of 

principal and interest on existing FCRA loans are recorded 

in nonbudgetary credit reform financing accounts. 

These disbursements and collections are reported on the 

Statement of Budgetary Resources as disbursements, net, 

and not as agency outlays, net. Since these disbursements 

and collections affect neither net cost of operations 

nor agency outlays, net, they are excluded from this 

reconciliation as are any increases or decreases in the 

FCRA loan receivable balances. 

The two major reconciling differences, both associated 

with the Department’s FCRA loan programs, are for 

Year-End Credit Reform Subsidy Accrual Re-Estimates 

(current-year subsidy accrual costs) and Effect of PriorYear Credit Reform Subsidy Re-Estimates (current-year 

budget subsidy costs).

• Current-year subsidy accrual costs are the portion 

of the current-year loan subsidy re-estimates not 

impacting the current year outlays.

• Current-year budget subsidy costs are current year 

indirect appropriations provided to fund subsidy 

costs accrued in the prior year. This includes the 

portion of the current year’s executed President’s 

Budget re-estimates not included in this year’s net cost 

subsidy expense. 

NOTE 14. Commitments and Contingencies

The Department discloses contingencies where any of the 

conditions for liability recognition are not met and there is 

at least a reasonable possibility that a loss or an additional 

loss may have been incurred in accordance with FASAB 

Standard No. 5, Accounting for Liabilities of the Federal 

Government. The following commitments are amounts 

for contractual arrangements that may require future 

financial obligations.

Future Minimum Lease Payments

(Dollars in Millions)

2021 2020

2022 $ 69 2021 $ 72 

2023 71 2022 75 

2024 71 2023 77 

2025 72 2024 74 

2026 73 2025 75 

After 2026 75 After 2025 77 

Total $ 431 Total $ 450 

The Department leases from the GSA all or a portion of 

14 privately owned and 12 publicly owned buildings in 

20 cities. The table above presents the estimated future 

minimum lease payments for these privately and publicly 

owned buildings.

GuARANTY AGENCIES

The Department may assist guaranty agencies experiencing 

financial difficulties. The Department has not done so 

in FY 2021 or FY 2020 and does not expect to in future 

years. No provision has been made in the financial 

statements for potential liabilities.

LITIGATION AND OThER CLAIMS

The Department is involved in various lawsuits incidental 

to its operations. In the opinion of management, the 

ultimate resolution of pending litigation will not have a 

material impact on the Department’s financial position. 

As appropriate, the Department would seek recovery from 

Treasury’s Judgment Fund for any loss in litigation that 

may occur. The Judgment Fund is a permanent, indefinite 

appropriation available to pay judgments against the 

government if appropriated funds cannot be used. 

The cost of loan forgiveness related to borrower defense 

claims reflected in the accompanying financial statements 

is limited to loans originated through September 30, 

2021. The final disposition of claims filed and those yet 

to be filed from loans originated before September 30, 
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 91

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

2021, is not expected to have a material impact on these 

financial statements.

OT h E R M AT T E R S 

Some portion of the current-year financial assistance 

expenses (grants) may include funded recipient 

expenditures that are subsequently disallowed through 

program review or audit processes. In the opinion of 

management, the ultimate disposition of these matters 

will not have a material effect on the Department’s 

financial position.

NOTE 15. Subsequent Event

The Department announced in October 2021 significant 

changes to some of the eligibility criteria and potential 

forgiveness of loans as part of the PSLF program. The 

PSLF program provides debt relief to teachers, nurses, 

firefighters, service members and others serving their 

communities. By canceling loans after 10 years of public 

service, PSLF removes the burden of student debt on 

public servants. Policy changes to be implemented in 

FY 2022 will result in 22,000 borrowers who have 

consolidated loans—including previously ineligible 

loans—being immediately eligible for $1.74 billion 

in forgiveness without the need for further action on 

their part. Another 27,000 borrowers could potentially 

qualify for an additional $2.82 billion in forgiveness if 

they certify additional periods of employment. All told, 

the Department estimates that over 550,000 borrowers 

who have previously consolidated their loans will see an 

increase in qualifying payments with the average borrower 

receiving another two years of progress toward forgiveness. 

Many more will also see progress as borrowers consolidate 

into the Direct Loan Program and apply for PSLF, and as 

the Department rolls out other changes during FY 2022. 

The Department’s financial statements do not include 

an estimate for impacts of the announced changes to the 

PSLF program eligibility criteria and potential forgiveness 

of loans.

NOTE 16. Reclassification of Statement of 

Net Cost and Statement of Operations and 

Changes in Net Position for Financial Report 

Compilation Process

To prepare the Financial Report (FR) of the U.S. 

government, Treasury requires agencies to submit an 

adjusted trial balance, which is a listing of accounts that 

appear in the financial statements. Treasury uses the trial 

balance information reported in the Governmentwide 

Treasury Account Symbol Adjusted Trial Balance System 

to develop a Reclassified Statement of Net Cost and a 

Reclassified Statement of Operations and Changes in Net 

Position for each agency, all of which show how agency 

amounts are related to particular FR statement line items. 

Treasury eliminates all intragovernmental balances from 

the reclassified statements and aggregates lines with the 

same title to develop the FR statements. 

The two schedules in this note show the Department’s 

financial statements and the Department’s reclassified 

statements before elimination of intragovernmental 

balances and before aggregation of repeated FR line items. 

The term “Non-Federal” is used in this note to refer to 

federal government amounts that result from transactions 

with non-federal entities. These include transactions with 

individuals, businesses, nonprofit entities, and state, local, 

and foreign governments.

A copy of the September 30, 2020, FR can be found on 

Treasury’s website and a copy of the September 30, 2021, 

FR will be posted to this site as soon as it is released.
92 FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION

FINANCIAL SECTION | NOTES TO ThE FINANCIAL STATEMENTS

Reclassification of Statement of Net Cost to Line Items Used for the Governmentwide Statement

of Net Cost for the Period Ending September 30, 2021

(Dollars in Millions)

FY 2021 Department Statement of Net Cost Line Items Used to Prepare FY 2021 Governmentwide 

Statement of Net Cost 

Financial Statement Line Amounts Amounts Reclassified Financial Statement Line

Total Gross Cost $ 279,666 $ 242,470 Non-Federal Gross Cost

 141 Benefit Program Costs

 36 Imputed Costs

 381 buy/Sell Cost

 36,547 borrowing and Other Interest Expense

 75 borrowing Losses

 16 Other Expenses (Without Reciprocals)

Total Gross Cost $ 279,666 $ 279,666 Department Total Gross Cost

Total Earned Revenue $ (39,961) $ (34,371) Non-Federal Earned Revenue

 (6) buy/Sell Revenue (Exchange)

 (5,572) borrowing and Other Interest Revenue (Exchange)

 (12) borrowing Gains

Total Earned Revenue (39,961) (39,961) Department Total Earned Revenue

Net Cost $239,705 $ 239,705 Net Cost
FY 2021 AGENCY FINANCIAL REPORT | U.S. DEPARTMENT OF EDUCATION 93

NOTES TO ThE FINANCIAL STATEMENTS | FINANCIAL SECTION

Reclassification of Statement of Changes in Net Position to Line Items Used for the

Governmentwide Statement of Operations and Changes in Net Position for the Period

Ending September 30, 2021

(Dollars in Millions)

FY 2021 Department Statement of Changes in Net Position Line Items Used to Prepare FY 2021 Governmentwide 

Statement of Operations and Changes in Net Position

Financial Statement Line Amounts Amounts Reclassified Financial Statement Line

unexpended Appropriations

beginning balance $ 99,314 $ 99,314 Net Position, beginning of Period

Appropriations Received 477,507 476,400 Appropriations Received as Adjusted (Rescissions and 

Other Adjustments)

Other Adjustments (Rescissions, etc.) (1,107)

Appropriations Transferred (409) (409) Non-Expenditure Transfers-out of unexpended 

Appropriations and Financing Sources

Appropriations used (273,507) (273,507) Appropriations used

Unexpended Appropriations, Ending Balance 301,798 301,798 

Cumulative Results of Operations

beginning balance (54,383) (54,383) Net Position, beginning of Period

Appropriations used 273,507 273,507 Appropriations Expended

Nonexchange Revenue 8 8 Collections transferred into a TAS Other Than the 

General Fund of the u.S. Government - Nonexchange

Donations and Forfeitures of Cash 

and Cash Equivalents 1 1 Other Taxes and Receipts

Imputed Financing from Costs Absorbed by Others 36 36 Imputed Financing Sources

Negative Subsidy Transfers, Downward Subsidy 

Re-estimates, and Other (8,168) (9,751) Non-Entity Collections Transferred to the General Fund 

of the u.S. Government

 1,732 

Accrual for Non-Entity Amounts to be Collected and 

Transferred to the General Fund of the 

u.S. Government

 5 Other Taxes and Receipts

 (154) Other budgetary Financing Sources

Net Cost (239,705) (239,705) Net Cost 

Cumulative Results of Operations, 

Ending Balance $ (28,704) $ (28,704)

Net Position $ 273,094 $ 273,094 Net Position, End of Period