FY 2022 AGENCY FINANCIAL REPORT 1 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S

DISCUSSION

and ANALYSIS

(UNAUDITED)
FY 2022 AGENCY FINANCIAL REPORT 2 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

About the Management’s Discussion and Analysis

he U.S. Department of Education (Department) 

continued to enhance the content quality, report 

layout, and public accessibility of the fiscal year 

(FY) 2022 Agency Financial Report (AFR) by refining 

graphics and providing more useful, balanced, and easily 

understood information about the Broad-Based Debt 

Relief, COVID-19 funding relief bills and the 

Department’s loan programs, including additional cost and 

risk information. The Department also chose relevant web 

content to provide users with more information about the 

Department’s operations and performance. To take 

advantage of the hyperlinks embedded in the report, the 

Department recommends reading it on the Internet. To 

continue to improve the quality and usefulness of 

information provided in the AFR, the Department 

encourages the public and other stakeholders to provide 

feedback and suggestions at AFRComments@ed.gov.

This section highlights information on the Department’s 

performance, financial statements, systems and controls, 

compliance with laws and regulations, and actions taken or 

planned to address select challenges.

MISSION AND 

ORGANIZATIONAL STRUCTURE

This section provides information about the Department’s 

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

active links include the organization chart and principal 

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

a description of selected offices by function.

THE DEPARTMENT’S APPROACH 

TO PERFORMANCE

This section provides a summary of the Department’s 

performance goals and results for FY 2022. Since the 

Department has chosen to produce separate financial 

and performance reports, a detailed discussion of 

performance information for FY 2022 will be provided in 

the Department’s FY 2022 Annual Performance Report and 

FY 2024 Annual Performance Plan to be released online 

at the same time as the President’s FY 2024 Budget of the 

United States Government (President’s Budget) in February 

2023. For more information, prior year performance 

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

Department also urges readers to seek programmatic data 

as it is reported in the Congressional Budget Justification, 

as well as on the web pages of individual programs. 

Any questions or comments about the Department’s 

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

For more details on performance, please refer to the 

Department’s budget and performance web page at www.

Performance.gov.

FINANCIAL HIGHLIGHTS

This section provides summarized information and analyses 

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

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

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

information contained in the financial statements and 

related notes and provides an analysis of key financial 

statement changes.

ANALYSIS OF SYSTEMS, CONTROLS, 

AND LEGAL COMPLIANCE

The Department’s internal control framework and its 

assessment of controls, in accordance with Office of 

Management and Budget (OMB) Circular A-123, 

Management’s Responsibility for Enterprise Risk 

Management and Internal Control, provide assurance 

to Department leadership and external stakeholders that 

financial data produced by the Department’s business and 

financial processes and systems are complete, accurate, 

and reliable.

FORWARD-LOOKING INFORMATION

The Forward-Looking Information section describes the 

challenges that the Department aims to address to achieve 

progress on Direct Loans, Next Generation Federal Student 

Aid (Next Gen FSA), Leveraging Data as a Strategic Asset, 

and the new G6 modernization.
FY 2022 AGENCY FINANCIAL REPORT 3 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

About the Department

Our Mission

The U.S. Department of Education’s 

mission is to promote student achievement 

and preparation for global competitiveness 

by fostering educational excellence and 

ensuring equal access.

Who We Are. In 1867, the federal government recognized 

that furthering education was a national priority and 

created a federal education agency to collect and report 

statistical data. The Department was established as a 

Cabinet-level agency in 1980. Today, the Department 

supports programs in every area and level of education from 

preschool through postdoctoral research.

The Department makes funds and information available to 

individuals pursuing an education, colleges and universities, 

state educational agencies, and school districts by engaging 

in four major categories of activities:

• Establishing policies related to federal education 

funding, including distributing funds, collecting on 

student loans, and using data to monitor the 

use of funds.

• Supporting data collection and research on 

America’s schools.

• Identifying major issues in education and focusing 

national attention on them.

• Enforcing federal laws promoting equal access and 

prohibiting discrimination in programs that receive 

federal funds.

Our Public Benefit. The Department executes the 

laws passed by Congress to promote student academic 

achievement and preparation for global competitiveness. 

The Department works with students, parents, educational 

institutions, school districts, and states to foster educational 

excellence and to ensure equal access to a high-quality 

education for all students. While recognizing the primary 

role of states and school districts in providing high-quality 

education, the Department is committed to helping ensure 

students throughout the nation develop skills to succeed 

in school, pursue postsecondary options, and transition 

to the workforce. The Department’s vision is to improve 

educational outcomes for all students.

Many of the Department’s programs involve awarding 

grants to state and local educational agencies and 

providing grants and loans to postsecondary students. The 

Department’s largest outlays are for its portfolio of student 

loans (see the Financial Highlights and Notes sections). 

Grant programs constitute the second-largest driver of 

outlays. The grant programs include student aid to help 

pay for college through Pell Grants, Work-Study, and other 

campus-based programs; grants awarded based on statutory 

formulas mostly for elementary and secondary education; 

and competitive grant programs to promote innovation. 

The Department also supports research, collects education 

statistics, and enforces civil rights laws. The Department 

manages and spends financial resources on programs 

designed to support parents, teachers, principals, school 

leadership, institutions, and states in the pursuit of instilling 

knowledge and transferring skills to students.
FY 2022 AGENCY FINANCIAL REPORT 4 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

The Department in Fiscal Year 2022

This chart reflects the coordinating structure of the U.S. Department of Education. A text version of the FY 2022 

coordinating structure of the Department is available.

 

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

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

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

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

through Historically Black Colleges and Universities.
FY 2022 AGENCY FINANCIAL REPORT 5 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

The Department’s Approach to Performance

PERFORMANCE MANAGEMENT

FRAMEWORK

In accordance with the GPRA Modernization Act of 

2010,

1

 the Department’s framework for performance 

management begins with the Strategic Plan, which serves 

as the foundation for establishing and implementing 

priorities, highlighting performance goals and objectives, 

and developing performance indicators to gauge progress 

and outcomes. Progress toward the Department’s strategic 

goals and its two-year Agency Priority Goals (APGs) are 

measured using data-driven review and analysis. Additional 

information on performance management is available in the 

Annual Performance Plans and Annual Performance Reports.

2

The FY 2022–26 Strategic Plan is comprised of five Strategic 

Goals and three FY 2022 and FY 2023 APGs. The Strategic 

Plan aims to address administration priorities, such as 

recovering from the coronavirus disease 2019 (COVID-19) 

pandemic; ensuring high-quality, equitable secondary and 

postsecondary education; and providing diverse learning 

environments for all students, especially those who have 

been underserved. Each supporting strategic objective 

has corresponding performance indicators to assess the 

Department’s progress on achieving the Strategic Goals and 

objectives. For additional information about Performance 

Management at the Department, visit ED Strategic Plans 

and Annual Reports or email PIO@ed.gov.

1 GPRA Modernization Act of 2010 amends the Government Performance and 

Results Act of 1993 (GPRA).

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

Strategic Plan.

FY 2022–26 Strategic Goals 

and Strategic Objectives

Strategic Goal 1: Promote equity in student access to educational 

resources, opportunities, and inclusive environments.

Strategic Objective 1.1 Prioritize the equitable and adequate 

distribution of resources to communities of 

concentrated poverty, in an effort to provide 

underserved students with high-quality 

educational opportunities.

Strategic Objective 1.2 Ensure all students have access to wellrounded, rigorous, engaging, and diverse 

learning opportunities and environments to 

support their success in school.

Strategic Objective 1.3 Support states, school districts, and 

institutions of higher education to promote 

and protect students’ nondiscriminatory and 

equal access to education, as provided by 

Federal civil rights laws.

Strategic Objective 1.4 Promote greater access and supports for 

youth and adults to engage in learning, 

succeed in postsecondary education, and 

increase their employability in high-demand 

occupations.

Strategic Goal 1 focuses on outcomes related to improving 

and promoting educational equities for all students 

through adequate resources, opportunities, and supports. 

In FY 2022, $46.2 billion was appropriated to the 

Department in support of Strategic Goal 1. 

Multiple reports, such as those from the National 

Assessment of Educational Progress and the Program 

for International Student Assessment, suggest that 

inequalities in resources, policies, programs, services, and 

practices serve as barriers to access to equal educational 

opportunities for underserved students that need to be 

redressed. In support of Strategic Goal 1, the Department 

provided accessible digital instructional materials to blind, 

visually impaired, and print-disabled students, supporting 

499,260 accessible digital instructional material downloads. 

Additionally in FY 2022, the Department issued guidance 

on the rights of public-school students with disabilities, 

including behavioral disabilities, at the elementary and 

secondary education level, to nondiscrimination on the 

basis of disability, under Section 504 of the Rehabilitation 

Act of 1973, in the context of discipline.

In FY 2022, the Department also released for public 

comment proposed changes to its regulations implementing 

Title IX of the Education Amendments of 1972 that 

would advance Title IX’s goal of ensuring that no person 
FY 2022 AGENCY FINANCIAL REPORT 6 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

experiences sex discrimination, sex-based harassment, or 

sexual violence in education and help elementary and 

secondary schools implement this vital legislation. 

The devastating and adverse impacts of the COVID-19 

pandemic exacerbated previously documented gaps in 

educational opportunity. The American Rescue Plan Act 

of 2021 (ARP) provides states and districts with critical 

resources to address these challenges. The $122 billion 

American Rescue Plan Elementary and Secondary School 

Emergency Relief (ARP ESSER) Fund provides state 

educational agencies and local educational agencies (LEAs) 

flexible resources that can support hiring, preparing, and 

retaining high-quality teachers and school personnel to 

address teacher shortages and build a stronger pipeline for 

the future; promote learning acceleration, for example, 

through summer learning and enrichment and high-quality 

tutoring; and improve indoor air quality through upgrades 

to heating, ventilation, and air conditioning systems. 

The ARP also requires that LEAs use 20 percent of their 

ARP ESSER allocation to address the academic impact 

of lost instructional time through the implementation 

of evidence-based interventions and that interventions 

respond to students’ social, emotional, and mental health 

and academic needs and address the disproportionate 

impact of COVID-19 on students. In FY 2022, the 

Department continued monitoring work around 

the COVID-19 pandemic relief funds. Systems were 

implemented to ensure the Department was providing the 

required oversight and the technical systems to support 

states in addition to timely responses to guidance requests. 

The ARP further facilitates Strategic Goal 1 by providing 

much needed relief to help districts and schools recover and 

increase capacity to improve student outcomes and address 

historical inequities.

Strategic Goal 2: Support a diverse and talented 

educator workforce and professional growth to strengthen 

student learning.

Strategic Objective 2.1 Strengthen and diversify the educator 

pipeline and workforce.

Strategic Objective 2.2 Identify and promote evidence-based 

practices or strategies that support diverse 

districts (including rural districts) with high 

rates of poverty in recruiting, selecting, 

preparing, and retaining well-qualified 

(including in-field fully certified) and effective 

teachers, principals, paraprofessionals, and 

specialized instructional support personnel.

Strategic Objective 2.3 Support the professional growth, retention, 

and advancement of talented, experienced 

educators and other school personnel and 

their capacity to meet the social, emotional, 

mental health, and academic needs of 

underserved students.

Strategic Goal 2 focuses on outcomes related to supporting 

and increasing diversity and talent in the educator workforce 

and professional growth. Teachers are essential to the learning 

and development of the students they serve. However, the 

educator workforce faces several challenges that limit students’ 

educational opportunities and place at risk the success of 

students, particularly those who have been underserved by 

education systems. In FY 2022, $16.3 billion was appropriated 

to the Department in support of Strategic Goal 2. 

It is essential to attract, prepare, support, develop, and 

retain a diverse, well-qualified, experienced, and effective 

pool of educators by ensuring candidates have access to 

high-quality comprehensive preparation programs, and that 

steps are taken to support and retain qualified, experienced, 

and effective educators. In FY 2022, the Department 

aligned 18 grant competitions focusing more than $414 

million in federal funding toward projects that are designed 

to advance diversity in the educator workforce and 

professional development. 

The Department is committed to and focused on making 

substantial progress in decreasing teacher shortages nationwide 

that have increased in the wake of the COVID-19 pandemic. 

Therefore, the Department encourages the use of ARP ESSER 

funds to prepare and retain a diverse educator workforce. 

In FY 2022, the Department continued to provide several 

resources to state educational agencies and local educational 

agencies that focused on the use of American Rescue Plan 

(ARP) funds and provided concrete examples of how states, 

districts, and schools are using federal COVID-19 dollars to 

strengthen the teacher pipeline, get more educators in the 

classroom, and accelerate student recovery. Districts and higher 

education institutions are partnering to create and expand 

residency programs, offer paraprofessional internships, and 

get college graduates credentialed and in the classroom more 

quickly. These partnerships provide students across the country 
FY 2022 AGENCY FINANCIAL REPORT 7 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

more classroom time working with qualified educators and 

addressing the academic impact of COVID-19.

Strategic Goal 3: Meet students’ social, emotional, and 

academic needs.

Strategic Objective 3.1 Support the development and 

implementation of multitiered systems of 

supports to increase students’ engagement; 

social, emotional, and mental health; wellbeing; and academic success.

Strategic Objective 3.2 Foster supportive, inclusive, and identitysafe learning environments and ensure the 

individual needs of underserved students 

are met through appropriately designed 

instruction, evidence-based practices, and 

related supports and services.

Strategic Objective 3.3 Strengthen learning environments, support 

professional development, and improve 

educator credentialing for emergent bilingual 

students and multilingual learners.

Strategic Goal 3 focuses on meeting students’ social, 

emotional, and academic needs. Learning and development 

across a student’s life span are influenced by several 

interrelated factors, including the individual’s social, 

emotional, academic, and career development. In FY 2022, 

$20.1 billion was appropriated to the Department in 

support of Strategic Goal 3. 

Research has shown that a safe, healthy, and equitable 

school climate that addresses students’ social and emotional 

development is associated with higher student attendance 

and engagement, improved student connectedness, and 

better social and emotional health. The Title IV, Part A 

Centers provide state educational agencies (SEAs) with 

dedicated support for implementing the Title IV, Part A 

(Title IV-A) Student Support and Academic Enrichment 

(SSAE) program. 

In support of Strategic Goal 3, the Office of Special 

Education and Rehabilitative Services issued Individuals 

with Disabilities Education Act discipline guidance that 

included a Dear Colleague Letter, a question and answer 

document, and a companion technical assistance document 

that provides examples of proven practices to address 

inequities and disparities in the use of discipline, including 

exclusionary discipline practices. The Department supports 

the education community in creating and maintaining 

healthy school environments that can contribute to 

lifelong benefits.

Strategic Goal 4: Increase postsecondary value by focusing on 

equity-conscious strategies to address access to high-quality 

institutions, affordability, completion, post-enrollment success, 

and support for inclusive institutions.

Strategic Objective 4.1 Support educational institutions and state 

systems in efforts to raise academic quality 

and college completion for all students, 

especially for underserved students, such 

as first-generation students, students from 

low-income backgrounds, students of color, 

and students with disabilities.

Strategic Objective 4.2 Improve the administration of student 

aid programs to help eligible students 

receive aid; support borrowers in 

successfully repaying their loans, 

claiming loan forgiveness benefits, and 

mitigating student loan default; and hold 

contractors accountable.

Strategic Objective 4.3 Increase equitable access to secondary 

and postsecondary programs that have 

clear on-ramps to both high-quality jobs 

and additional high-quality postsecondary 

educational opportunities.

Strategic Objective 4.4 Improve the alignment across secondary, 

postsecondary, and career and technical 

education programs, including through 

transparent and effective transition 

processes, inclusive pathways, and clear 

credentialing requirements.

Strategic Goal 4 focuses on increasing the value of 

postsecondary education by addressing access, affordability, 

and degree and credential completion. The goal puts a 

particular emphasis on supporting educational institutions 

and state systems in their efforts to improve academic 

outcomes for all students and especially underserved 

student populations (i.e. first-generation, low-income 

background, students of color, and students with 

disabilities). In FY 2022, $91.9 billion was appropriated to 

support Goal 4.

In support of Goal 4, the Department announced the 

availability of $5 million in funds to support a new College 

Completion Fund for Postsecondary Student Success. 

The funding will support grants to Historically Black 

Colleges and Universities, Tribal Colleges and Universities, 

and Minority-Serving Institutions such as HispanicServing Institutions—many of which are community 

colleges—to invest in data-driven and evidence-based 

reforms that encourage postsecondary retention, transfer, 

and completion.
FY 2022 AGENCY FINANCIAL REPORT 8 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Strategic Goal 5: Enhance the Department’s internal capacity to 

optimize the delivery of its mission.

Strategic Objective 5.1 Manage information technology as a 

strategic resource and driver to promote the 

advancement of the missions executed by 

the Department’s 21st-century workforce.

Strategic Objective 5.2 Strengthen agency-wide data governance 

and build capacity to improve data access, 

data management, and enterprise data 

analytics in support of agency goals. 

Strategic Objective 5.3 Recruit, retain, and develop the workforce 

needed to meet the Department’s mission 

now and into the future.

Strategic Objective 5.4 Deliver mission outcomes and value for 

taxpayers through efficient acquisition 

management and proactive industry 

partnerships while promoting small 

businesses.

Strategic Goal 5 is focused on continuously improving 

agency operations as the Department manages, engages, 

and empowers the workforce; purchases products and 

services; enhances and secures information technology 

resources; and leverages data to support evidencebased decision-making. In FY 2022, $59 million was 

appropriated to support Goal 5. 

In FY 2022, the Department was recognized for its 

leading-edge work in data governance and in the effective 

execution of the agency’s Data Maturity Assessment by 

the Partnership for Public Service. The Department was 

also recognized as a pioneer by the Data Foundation for 

its progress in the advancement of data literacy and data 

skill development across the agency. The Department has 

shared its effective practices in this space with numerous 

federal agencies including the Department of State, Office 

of National Defense Intelligence, and the Department 

of Health and Human Services. The Department also 

chairs a federal working group building a Federal Data 

Skills Catalog. 

The Department took immediate action in FY 2022 

regarding the Office of Management and Budget Memo 

M-22-09 Moving the U.S. Government Toward Zero Trust 

Cybersecurity Principles by onboarding a GS-15 zero-trust 

architecture program manager and releasing a Department 

Strategy and project schedule for full implementation by 

the end of FY 2024.

Strategic Goal 5 prioritizes reducing potential procurement 

barriers and increasing procurement opportunities for 

small, underserved, and disadvantaged businesses. In 

support of Goal 5, 15.43% of contracts have been awarded 

to small business, which exceeds the goal of 14%. The 

Department also received an A on the FY 2021 Small 

Business Scorecard.
FY 2022 AGENCY FINANCIAL REPORT 9 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

THE DEPARTMENT’S AGENCY PRIORITY GOALS

The Department has identified three Agency Priority Goals (APGs) for FY 2022 and FY 2023 which seek to address the 

impact of the COVID-19 pandemic, effectively manage federal student loans, and reduce disparities in attainment of highquality degrees and credentials. 

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

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

2023, the Department will respond to the impact of the COVID-19 pandemic and the need to continuously provide for 

high-quality educational environments and capabilities by supporting state educational agencies, local educational 

agencies, and institutions of higher education to:

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

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

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

assistance engagements.

Related Strategic 

Objectives

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

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

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

opportunities and environments to support their success in school.

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

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

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

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

practices, and related supports and services.

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

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

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

Related Strategic 

Objective

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

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

default; and hold contractors accountable.

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

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

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

2023, the Department will increase the number and diversity of higher education grant applicants from community 

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

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

in attaining improved educational outcomes.

Related Strategic 

Objective

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

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

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

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

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

default; and hold contractors accountable.
FY 2022 AGENCY FINANCIAL REPORT 10 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Financial Highlights

The financial statements, notes, and underlying business 

processes, systems, and controls are audited by an 

independent accounting firm with audit oversight provided 

by the Office of Inspector General (OIG). This year, 

the Department received a disclaimer of opinion on its 

FY 2022 financial statements. The financial statements 

and notes for FY 2022 are on pages 52–99, and the 

Independent Auditors’ Report begins on page 104.

The financial statements are prepared to report the financial 

position and results of operations of the reporting entity, 

consistent with the requirements of 31 U.S.C. § 3515(b). 

The statements are prepared from the Department’s 

books and records in accordance with generally accepted 

accounting principles for federal entities and the formats 

prescribed by OMB. Reports used to monitor and control 

INTRODUCTION

This section provides summarized information and analyses 

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

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

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

information contained in the financial statements and 

related notes.

The Department consistently produces complete, accurate, 

and timely financial information. The Department’s 

financial statements and notes are prepared in accordance 

with accounting principles generally accepted in the United 

States for federal agencies issued by the Federal Accounting 

Standards Advisory Board and the format and content 

specified by Office of Management and Budget (OMB) 

Circular No. A-136, Financial Reporting Requirements. 

Financial Statement Lines 

with Significant Changes

Amount Total Changes Changes Due to COVID-19

 FY 2022 FY 2021 Amount Percentage Amount Percentage

Balance Sheets

Fund Balance with Treasury $ 317.0 $ 351.9 $ (34.9) -9.9% $ (80.7) -22.9%

Loan Receivables, Net - Direct Loan Program 816.5 1,104.9 (288.4) -26.1% (409.2) -37.0%

Loan Receivables, Net - Federal Family Education 

Loan (FFEL) Program 39.8 58.2 (18.4) -31.6% (23.0) -39.5%

Cash and Other Monetary Assets 0.7 1.9 (1.2) -63.2% - 0.0%

Debt Associated with Loans - Direct Loan Program 837.4 1,142.2 (304.8) -26.7% (437.4) -38.3%

Debt Associated with Loans - FFEL Program 67.0 78.3 (11.3) -14.4% (26.1) -33.3%

Subsidy Due to Treasury 27.0 1.5 25.5 1,700.0% - 0.0%

Guaranty Agency Funds Due to Treasury 0.7 1.9 (1.2) -63.2% - 0.0%

Loan Guarantee Liabilities 10.7 7.5 3.2 42.7% - 0.0%

Accrued Grant Liabilities 5.1 7.6 (2.5) -32.9% (1.5) -19.7%

Statements of Net Cost

Total Program Gross Costs 628.6 279.7 348.9 124.7% 431.8 123.8%

Total Program Earned Revenue (65.2) (40.0) (25.2) 63.0% (27.3) 108.3%

Statements of Budgetary Resources

Unobligated Balance from Prior Year Budget 

Authority (Net) 65.3 41.4 23.9 57.7% 17.9 43.2%

Appropriations (Discretionary and Mandatory) 597.2 476.8 120.4 25.3% 154.9 32.5%

New Obligations and Upward Adjustments (Total) 813.7 627.5 186.2 29.7% 190.8 30.4%

Unobligated Balance, End of Year (Total) 88.3 62.1 26.2 42.2% (17.9) -28.8%

Outlays, Net 668.5 267.1 401.4 150.3% 437.9 163.9%

Distributed Offsetting Receipts (29.1) (6.6) (22.5) 340.9% - 0.0%

Table 1. Key Financial Statement Changes

(Dollars in Billions)
FY 2022 AGENCY FINANCIAL REPORT 11 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

The broad-based debt relief announced on 

August 24, 2022, is expected to impact up 

to 43 million borrowers. Nearly 8 million 

borrowers may be eligible to receive one-time 

broad-based debt relief automatically because 

relevant income data is already available to the 

Department. If all borrowers claim relief they are 

entitled to, this action will provide relief to up to

43 million borrowers.

In addition, because of the other debt relief 

actions taken by the Department:

•	1.1 million borrowers have already received 

discharges related to borrower defense or 

school closures.

•	More than 1 million borrowers have already 

received additional credit toward forgiveness 

through the temporary changes to the 

PSLF program. 

•	More than 425,000 borrowers received loan 

relief due to a total and permanent disability.

budgetary resources are prepared from the same books 

and records. The financial statements should be read with 

the understanding that they are for a component of the 

U.S. government.

FINANCIAL STATEMENT IMPACTS OF 

DEBT RELIEF ACTIONS 

During FY 2022, the Department announced significant 

actions to provide relief to federal student loan borrowers, 

including extensions to the student loan repayment pause, 

and several additional debt relief actions. Debt relief actions 

that occurred or were announced during FY 2022 include:

• Providing one-time broad-based student loan debt relief 

of up to $20,000 in debt cancellation for Pell Grant 

recipients with loans held by the Department and up 

to $10,000 in debt cancellation to non-Pell Grant 

recipients. Applications for this debt relief launched on 

October 17, 2022.

• Revamping the Public Service Loan Forgiveness (PSLF) 

program, including temporary changes that allow 

student borrowers to get credit for past periods of 

repayment on loans that would not otherwise qualify for 

PSLF, including payments made on loans from FFEL 

Program, Perkins Loan Program, and other federal 

student loans. Additionally, the temporary changes allow 

past periods of repayment to count for certain types of 

deferment or forbearance periods, or if the borrowers 

were not on a qualified repayment plan. The changes 

also eliminate barriers for military service members 

to receive PSLF. The temporary changes expired on 

October 31, 2022.

• Approving borrower defense and closed school 

discharges for borrowers whose institutions took 

advantage of them, including borrowers who attended 

Corinthian Colleges Inc., the ITT Technical Institute, 

Marinello Schools of Beauty, Westwood College, 

DeVry University, Minnesota School of Business and/or 

Globe University.

• Providing relief for borrowers who have a total and 

permanent disability.

Although forgiveness of loan principal and interest 

associated with some of these actions will not occur until 

future fiscal years, these actions have already resulted in 

significant increases in cancellations of loan principal and 

interest for loans held by the Department. 
FY 2022 AGENCY FINANCIAL REPORT 12 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

As shown in Figure 1, cancellations of loan principal and 

interest increased 181% during FY 2022, primarily for the 

Direct Loan Program. A large portion of cancellations of 

loan principal and interest during FY 2022 were associated 

with the PSLF program and discharges for total and 

permanent disability, as they made up 46.7% and 40.8% 

of total cancellations, respectively. Other notable types of 

cancellation activity include borrower defense discharges, 

cancellations of loan principal and interest for loans in 

default status, and discharges due to death of the borrower.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1. Loan Cancellations 

(Dollars in Billions) FY 2022

Direct Loan 

Program FFEL Program

Loan 

Cancellation Type Principal Interest Principal Interest Other Total

Discharges for 

closed schools $ 443 $ 56 $ 36 $ 7 $ 0 $ 542

Discharges due 

to death of the 

borrower

766 60 34 6 0 866 

Discharges for total 

and permanent 

disability

7,537 1,129 2,363 877 2 11,908 

Public service loan 

forgiveness 13,036 594 0 0 0 13,630 

Borrower defense 

discharges 877 0 146 3 0 1,026 

Cancellation of loans 

in default status 447 72 172 134 6 831 

Other 310 (25) 9 (2) 69 361 

Total Loan 

Cancellations $ 23,416 $ 1,886 $ 2,760 $ 1,025 $ 77 $ 29,164

FY 2022 Loan Cancellations

(Dollars in Millions)
FY 2022 AGENCY FINANCIAL REPORT 13 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

FINANCIAL STATEMENT IMPACTS OF 

COVID-19 ACTIVITIES 

Many of the significant changes to the Department’s 

financial statements resulted from the impacts due to 

coronavirus disease 2019 (COVID-19) activities. Congress 

passed multiple COVID-19 relief bills in FY 2020 and 

FY 2021, including the following that provided a total 

of $282.5 billion of direct appropriation funding for 

educational purposes:

• Coronavirus Aid, Relief, and Economic Security Act of 

2020 (CARES Act) $31.0 billion

• Coronavirus Response and Relief Supplemental 

Appropriations Act of 2021 (CRRSAA) $82.0 billion

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

These appropriations funded a variety of programs 

administered primarily through grant programs. The largest 

component of the education funding provided by the 

COVID-19 relief appropriations established the Education 

Stabilization Fund which included (1) the Elementary and 

Secondary School Emergency Relief Fund, (2) the Higher 

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

Emergency Education Relief Fund, and (4) funds for 

outlying areas. 

The COVID-19 relief legislation and administrative actions 

also provided support for student loan borrowers by:

• Providing broad-based debt relief to address the financial 

harms of the pandemic by smoothing the transition 

back to repayment and helping borrowers at the 

highest risk of delinquencies or default once payments 

resume. Applications for this debt relief launched on 

October 17, 2022.

• Temporarily suspending nearly all federal student loan 

payments, interest free. 

• Authorizing Guaranty Agencies to reimburse themselves 

from the Federal Student Loan Reserve Fund for lost 

revenue that resulted from student loan repayment 

deferrals. This reimbursement covers the share of what a 

guaranty agency might have reasonably collected during 

the pandemic, but for the suspension.

• Making temporary changes to the PSLF program 

through a Limited PSLF Waiver to allow student 

borrowers to get credit for payments made while 

working for a qualifying employer, regardless of loan 

type or repayment plan. 

• Addressing issues with income-driven repayment (IDR) 

payment counting by allowing any borrower who 

made IDR-qualifying payments to count toward IDR, 

regardless of repayment plan. 

Funding for each of these actions was provided through 

indefinite appropriations. Cost impacts of the COVID-19 

loan modifications were recorded as loan modifications 

and are a component of subsidy expense, which reduced 

the overall loan receivable balances for the student loan 

programs. Detailed explanations of the COVID-19 Direct 

Loan Program loan modifications are provided in the 

Analysis of Direct Loan Program Subsidy Expense section 

beginning on page 21 and in Note 5 of the financial 

statements beginning on page 66.

The direct and indirect funding stemming from the 

combined COVID-19 relief legislation and administrative 

actions is summarized in Figure 2. Obligated and 

unobligated COVID-19 funds remaining to be disbursed as 

of September 30, 2022, totaled $142.1 billion. Most of the 

undisbursed funds are for the Elementary and Secondary 

School Emergency Relief (ESSER) Fund. While states 

may have made subawards for all of their ESSER funding, 

subawardees may still be in the process of completing 

their obligations and requesting reimbursement from the 

states who will then in turn drawdown the remaining 

undisbursed funds.
FY 2022 AGENCY FINANCIAL REPORT 14 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Elementary and Secondary School Emergency Relief 

(ESSER) Fund—Funds provided for state educational 

agencies (SEAs) and local educational agencies (LEAs) 

to support continued learning for K-12 students whose 

educations have been disrupted by COVID-19, and grants 

for the specific needs of homeless children and youth to 

address the challenges of COVID-19.

Higher Education Emergency Relief Fund (HEERF) —

Funds provided for institutions of higher education (IHEs) 

to address needs directly related to COVID-19, including 

transitioning courses to distance education and granting 

aid to students for educational costs such as food, housing, 

course materials, health care, and child care. 

Governor’s Emergency Education Relief (GEER) 

Fund—Grants provided to state governors to ensure 

education continues for students of all ages impacted by the 

COVID-19 national emergency. 

Outlying Areas, Bureau of Indian Education (BIE), 

and Discretionary Grants—Funds provided for outlying 

areas and discretionary grants to states with the highest 

COVID-19 burdens. 

Figure 2. COVID-19 Funding Flow

(Dollars in Billions)
FY 2022 AGENCY FINANCIAL REPORT 15 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

 

 

 

 

 

 

 

 

 

 

Figure 3. Assets by Type

 

 

 

 

 

 

 

 

 

 

Figure 4. Liabilities by Type

BALANCE SHEETS

The consolidated balance sheets present, as of a specific 

point in time (the end of the fiscal year), the Department’s 

total assets, total liabilities, and net position.

The Department’s assets totaled $1,176.7 billion as of 

September 30, 2022. As shown in Figure 3, most assets 

relate to loans receivables, $858.6 billion, which comprised 

73.0 percent of all assets. Direct loans comprise the largest 

share of these receivables. Analysis of the net change 

in Direct Loan Program receivable balances begins on 

page 16. All other assets totaled $318.1 billion, most of 

which was Fund Balance with Treasury, $317.0 billion, 

which decreased by $34.9 billion during FY 2022, largely 

due to a decrease in undisbursed COVID-19 funds as of 

September 30, 2022.

The Department’s liabilities totaled $954.9 billion as 

of September 30, 2022. As shown in Figure 4, most of 

the Department’s liabilities are also associated with loan 

programs, primarily amounts borrowed from the U.S. 

Department of the Treasury (Treasury) to fund student 

loans. Debt associated with the Direct Loan Program 

totaled $837.4 billion as of September 30, 2022. Analysis 

of debt associated with the Direct Loan Program begins on 

page 18.
FY 2022 AGENCY FINANCIAL REPORT 16 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

ANALYSIS OF DIRECT LOAN PROGR AM 

RECEIVABLES, NET

Figure 5 shows the changes in the Direct Loan Program 

receivable components over the past five years. The principal 

amount has continued to grow as the Direct Loan Program 

has originated all new federal loans since July 2010, when 

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

the rate of increase in principal slowed as enrollment 

stagnated and sometimes declined. Also, accrued interest 

amounts had been increasing as more Direct Loans were 

moving into active repayment statuses, and the rate of 

enrollment in income-driven repayment plans that allow for 

payments to be lower than interest accrual had increased. 

The rate of increase in principal has slowed in recent years 

as the Direct Loan program has disbursed fewer than $95 

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

stagnant, and in some cases declining, enrollment. Even 

so, new loan disbursements continue to exceed overall loan 

principal repayments—student loan borrowers have many 

options to stretch out their repayment terms and reduce their 

monthly payments. The student loan repayment deferrals 

implemented in response to COVID-19 caused the rate of 

increase in principal to be lower in FYs 2020, 2021, and 

2022 compared to previous years.

In accordance with the Federal Credit Reform Act of 1990, the 

Department’s financial statements report the value of direct 

loans (credit program receivables) at the net present value of 

their future cash flows, discounted at a fixed rate established 

based on Treasury securities. The difference between the 

recorded principal and interest balance and the net present 

value of the loans is referred to as the “allowance for subsidy,” 

which can be positive or negative.

A negative allowance for subsidy balance means that the 

present value of funds expected to be recovered is less than 

the principal outstanding. The increase in the negative 

allowance from FY 2018 through FY 2022 is due primarily 

to higher subsidy costs, the main causes being high 

participation in IDR plans and the COVID-19 deferrals of 

student loan repayments. In addition to these factors, the 

increase in the negative allowance for subsidy during FY 

2022 was also due to higher subsidy costs due to broad-based 

debt relief (see discussion in the Analysis of Direct Loan 

Program Subsidy Expense section on page 21). 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 5. Components of Direct Loan Receivables, Net

(Dollars in Billions)

Direct Loan 

Component 

(Dollars in 

Billions)

Fiscal Year

2018 2019 2020 2021 2022

Principal $ 1,083.7 $ 1,164.9 $ 1,224.8 $ 1,292.2 $ 1,341.8 

Rate of Increase 

in Principal 8.5% 7.5% 5.1% 5.5% 3.8%

Accrued Interest $ 72.0 $ 83.3 $ 92.1 $ 86.5 $ 86.7 

Allowance for 

Subsidy $ (40.7) $ (124.4) $ (216.4) $ (273.9) $ (611.9)

Total No. of 

Direct Loan 

Borrowers 

(in Millions)

34.2 35.1 35.9 37.0 37.1 
FY 2022 AGENCY FINANCIAL REPORT 17 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

Table 2 shows the payment status of the direct loan 

principal and interest balances outstanding over the past 

five years. The Current Repayment category consists of 

loans that are being paid back on time, including the 

current portion of loans being repaid pursuant to IDR 

plans. Loans in the Delinquent category are past due 

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

includes loans that are more than 360 days delinquent 

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

and loans in disability status. 

While technical default is 271 days delinquent, default is 

defined as 361 days delinquent for reporting purposes.

The balances reported for Current Repayment and 

Delinquent in FY 2020, FY 2021, and FY 2022 are 

significantly lower than other years, primarily due to the 

COVID-19 student loan repayment deferrals that placed 

loans in forbearance and subsequently cured delinquencies. 

As a result of the COVID-19 student loan repayment 

deferrals, the delinquent balances are now zero.

While the COVID-19 student loan repayment deferrals 

suspended payments for federally owned student loans, 

some borrowers elected to continue to make student loan 

payments. In addition to improving borrowers’ overall 

financial health, factors that may have influenced borrowers 

to continue making payments on their student loans during 

forbearance include the following:

• Borrower flexibility to make payments or suspend

payments as their financial circumstances permitted

without notification to the loan servicer.

• Potential earlier loan payoff.

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

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

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

principal. During the pause, this quickly increased to

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

each dollar goes toward principal).

• Potentially improving the borrower’s credit rating

by reducing the student debt balance. The relative

strength of FSA borrower payment activity has been

driven, in part, by efforts of borrowers to improve

their credit stance to purchase homes during the

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

Department of Housing and Urban Development and

Federal Housing Authority implemented nontemporary

policy changes to improve the underwriting stance of

federal student loan borrowers.

• Potentially improved overall borrower financial health

and reduced financial stress by reducing student debt.

Loan Status

Fiscal Year

2018 2019 2020** 2021** 2022**

Total No. of 

Direct Loan 

Recipients 

(in Millions)

34.2 35.1 35.9 37.0 37.1

Total Dollar 

Amount of 

Direct Loans 

Outstanding

$1,155.70 $1,248.10 $1,316.90 $1,378.70 $1,428.50

Current 

Repayment1 $ 531.20 $ 594.70 $ 14.20 $ 16.20 $ 11.80 

% Current 

Repayment 46.0% 47.6% 1.1% 1.2% 0.8%

In School, 

Grace Period, 

and Education 

Deferments

$ 295.50 $ 294.80 $ 282.80 $ 271.90 $ 259.50 

% In School, 

Grace Period, 

and Education 

Deferments

25.6% 23.6% 21.5% 19.7% 18.2%

Forbearance 

and 

Noneducation 

Deferments

$ 121.50 $ 133.20 $ 887.50 $ 967.80 $ 1,039.70 

% Forbearance 

and 

Noneducation 

Deferments

10.5% 10.7% 67.4% 70.2% 72.8%

Delinquent 

(Past Due 

31–360 Days)

$ 92.50 $ 90.80 $ 0.50 $ 0.00 $ 0.00

% Delinquent 

(Past Due 

31–360 Days)

8.0% 7.3% 0.0% 0.0% 0.0%

Default/

Bankruptcy/

Other*

$ 115.00 $ 134.60 $ 131.90 $ 122.80 $ 117.50 

% Default/

Bankruptcy/

Other*

10.0% 10.8% 10.0% 8.9% 8.2%

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

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

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

of loans on income-driven repayment plans.

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

Portfolio (principal and interest)

**Student loan payment pause in effect from March 2020 

Table 2. Payment Status of Direct Loan Principal and 

Interest Balance

(Dollars in Billions)
FY 2022 AGENCY FINANCIAL REPORT 18 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

ANALYSIS OF DEBT ASSOCIATED WITH 

LOANS, DIRECT LOAN PROGR AM 

The Department borrows funds to disburse new loans 

and pay credit program outlays and related costs. The 

Department repays Treasury after consideration of cash 

position and the liability for future cash outflows. 

The Department’s total debt associated with the 

Direct Loan Program was $837.4 billion as of 

September 30, 2022, which was a $304.8 billion decrease 

from FY 2021. Total debt decreased largely because the 

Department received subsidy appropriations for loan 

modifications during FY 2022 and used these resources to 

repay debt to Treasury.

Figure 6 shows the Direct Loan Program cumulative 

borrowing and repayment activity that resulted in the debt 

amount on the balance sheet. A diagram depicting the 

Direct Loan Program financing process is displayed with 

related trend data as Figure 7 on page 19 of this report.

 

 

 

 

 

 

 

 

Figure 6. Components of Direct Loan 

Receivables, Net 

(Dollars in Billions)
FY 2022 AGENCY FINANCIAL REPORT 19 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

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

Fiscal Year 2018 2019 2020 2021 2022

Net Borrowing $ 89.1 $ 41.5 $ (32.0) $ (17.9) $ (304.8)

Borrowing from Treasury 155.3 137.6 116.9 120.0 162.8 

Debt Repayments to Treasury (66.2) (96.1) (148.9) (137.9) (467.6)

Interest Expense to Treasury (32.3) (33.8) (34.7) (33.0) (30.6)

Interest Earned from Treasury 3.9 4.1 4.8 4.2 7.6 

Cumulative Taxpayer Cost / (Savings) 40.7 124.4 216.4 273.9 611.9 

Current Subsidy Expense / (Revenue) 4.4 61.5 100.9 93.9 385.4 

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

Fiscal Year 2018 2019 2020** 2021** 2022**

Loan Disbursements $ 134.1 $ 130.7 $ 117.4 $ 104.8 $ 120.4 

Stafford Subsidized 20.3 20.0 19.1 18.3 15.7 

Stafford Unsubsidized 49.0 48.1 46.1 44.1 45.5 

Parent Loan for Undergraduate Students (PLUS) 23.1 22.7 21.7 20.8 22.2 

Consolidation1 41.6 39.8 30.4 21.5 36.9 

Loan Collections2 84.9 91.3 69.9 37.2 45.5 

Principal 63.5 67.0 55.3 33.3 41.3 

Interest 19.5 22.4 12.9 2.3 2.6 

Fees 1.9 1.9 1.7 1.6 1.6 

* Numbers may not add due to rounding.

** Student loan payment pause in effect from March 2020 through December 2022.

1

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

2

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

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
FY 2022 AGENCY FINANCIAL REPORT 20 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

STATEMENTS OF NET COST

The consolidated statements of net cost report the 

Department’s components of the net cost of operations for 

a given fiscal year. Net cost of operations consists of the 

gross costs incurred less any exchange (i.e., earned) revenue 

from activities. Gross costs are composed of the cost of 

credit and grant programs, and operating costs. Exchange 

revenue is primarily interest earned on credit program 

loans. Figure 8 shows the Department’s gross costs and 

earned revenue over the past five years. As shown in Table 

1 and discussed in more detail below, significant changes in 

the Department’s net costs for FY 2022 were primarily due 

to loan modifications and reestimates (subsidy expense) and 

grant expenses related to COVID-19 activities. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 9. Primary Components of Gross Costs and Earned Revenue 

(Dollars in Billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 8. Gross Costs & Earned Revenue 

(Dollars in Billions)

GROSS COSTS AND EARNED REVENUE BY TYPE

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

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

subsidy amortization. 

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

• Grant expenses. (See Figure 11)
FY 2022 AGENCY FINANCIAL REPORT 21 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

ANALYSIS OF DIRECT LOAN PROGR AM 

SUBSIDY EXPENSE 

The Department’s gross costs can fluctuate significantly 

each year as a result of changes in estimated subsidy 

expenses—primarily subsidy expenses for direct loans. The 

primary components of subsidy expenses include year-end 

subsidy re-estimates and loan modifications. 

Subsidy expenses are estimates of the present value cost 

of providing direct loans but exclude the administrative 

costs of issuing and servicing the loans. The Department 

estimates subsidy expenses using a set of econometric and 

financial models as well as cash flow models. 

The Department estimates subsidy expenses annually for 

new loans disbursed in the current year and updates the 

previous cost estimates for outstanding loans disbursed in 

prior years based on various updated assumptions (subsidy 

re-estimates). The Department also updates subsidy 

expenses due to changes to terms of existing loans (subsidy 

modifications). Figure 10 shows these three components of 

the Direct Loan Program subsidy expense for the past five 

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

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

costs, and assumptions concerning borrowers’ selection of 

repayment plans impact the estimated cost calculation and 

determine whether the individual components and overall 

subsidy expense are positive or negative. 

The Direct Loan Program subsidy expense for new loans 

disbursed in the current year was negative from FY 2018 

through FY 2019 primarily because lending interest rates 

charged were greater than the historically low rates at which 

the Department borrowed from Treasury. In practical 

terms, a negative subsidy occurs when the interest and/

or fees charged to the borrower are more than sufficient to 

cover the interest on Treasury borrowings and the costs of 

borrower default. Subsidy expense for new loans disbursed 

since FY 2020 has been positive due to rising enrollment 

in IDR plans and a reduction in projected future income 

of borrowers in IDR plans, both of which contribute to a 

higher expected cost to the government for issuing student 

loans by reducing the amount that many borrowers will 

repay over the life of their loans and/or creating a student 

loan forgiveness benefit for amounts remaining after 20 or 

25 years, particularly common among high-debt borrowers.

The Department updates its subsidy cost estimates each 

year for outstanding loans disbursed in prior years using 

a process referred to as a subsidy re-estimate. The total 

of Direct Loan subsidy re-estimates during FY 2022 was 

a net $21.9 billion downward subsidy re-estimate. The 

components of the Direct Loan Program subsidy reestimates are summarized in Figure 10.

Figure 10. Direct Loan Program Subsidy

(Dollars in Billions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018 2019 2020 2021 2022

Subsidy Expense for New 

Loans Disbursed in the 

Current Year $ (3.1) $ (3.0) $ 5.1 $ 1.6 $ 7.3 

Subsidy Re-estimates 7.4 64.5 56.1 24.0 (21.9)

Loan Modifications 0.1 - 39.7 68.3 400.0 

Total Subsidy Expense $ 4.4 $ 61.5 $ 100.9 $ 93.9 $ 385.4 

Subsidy Re-estimate Components 2022 2021

Income-Driven Repayment (IDR) 

Model Changes $ (24.0) $ 22.4 

Prior Year's Cohort Assumption Changes 7.7 15.5 

Interest on the Re-Estimate (0.4) 5.0 

Default 3.0 (6.4)

Repayment Plan Selection (3.0) 0.7 

Discount Rates (16.6) (11.5)

Non-IDR Discharges 2.9 3.2 

Deferment And Forbearance 2.6 (4.8)

Collections (1.7) 1.5 

Interactive Effects 7.4 (1.6)

Other Assumptions 0.2 - 

Total Direct Loan Program Subsidy 

Re-estimates $ (21.9) $ 24.0 

Modification Costs

Loan Modification Components 2022 2021

Student Loan Repayment Deferrals $ 48.6 $ 49.5 

Broad-Based Debt Relief 337.3 - 

Shift to Business Process Operations (9.1) - 

PSLF Waiver 9.1 - 

IDR Waiver 14.1 - 

Total and Permanent Disability - 18.7 

Faith-Based Final Rule - 0.1 

Total Direct Loan Program 

Loan Modifications $ 400.0 $ 68.3 
FY 2022 AGENCY FINANCIAL REPORT 22 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 11. Grant Expenses by Program Areas 

(Dollars in Billions)

COVID-19 Grant Expenses

(Dollars in Millions)

COVID-19 Grants FY 2022 FY 2021

Education Stabilization Fund:

Elementary and Secondary School 

Emergency Relief Fund

$ 48,502 $ 20,036 

Higher Education Emergency 

Relief Fund

 25,976 31,407 

Governor’s Emergency Education 

Relief Fund

 2,654 1,341 

Outlying Areas & Discretionary Grants 312 130 

Total Education Stabilization Fund 77,444 52,914 

Other COVID-19 Grants 865 66 

Total COVID-19 Grants $ 78,309 $ 52,980 

The Department also updates previous cost estimates 

based on any new legislation or other government actions 

that change the terms of existing loans and alter the 

estimated subsidy cost. This process is referred to as a 

modification. During FY 2022, the Department recorded 

a total of $400.0 billion in net upward modifications. The 

table below Figure 10 also identifies the components of 

modifications that were recorded during FY 2022. More 

detail about these modifications and components of reestimated subsidy cost can be found in the notes to the 

financial statements beginning on page 56.

The FY 2022 year-end subsidy re-estimates also resulted 

in a $25.5 billion increase in the Subsidy Due to Treasury 

shown in Table 1 on page 10 of this report. This represents 

the amount of accrued downward re-estimates of subsidy 

expense that will be transferred to Treasury in the 

succeeding fiscal year upon receipt of authority from OMB. 

More detail on Subsidy Due to Treasury can be found in 

the notes to the financial statements beginning on page 56.

GRANT EXPENSES

As shown in Figure 11, overall grant expenses changed 

primarily because of COVID-19 grants. More detail 

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

the financial statements beginning on page 87. In addition 

to COVID-19 funded grants, the Department has more 

than 100 other grant and loan programs. The three largest 

of these grant program areas are:

• Pell Grants—Provides need-based grants to students 

to promote access to postsecondary education. Grant 

amounts are dependent on the student’s expected family 

contribution, the cost of attendance (as determined by 

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

a full academic year or less. Pell Grants are the single 

largest source of grant aid for postsecondary education.

• Education for the Disadvantaged—Primarily consists 

of grants that provide financial assistance through 

SEAs to LEAs and public schools with high numbers 

or percentages of poor children to help ensure that all 

children meet challenging state academic content and 

student academic achievement standards. The program 

also provides funds to states to support educational 

services to children of migratory farmworkers and fishers 

and to neglected or delinquent children and youth 

in state-run institutions, attending community day 

programs, and in correctional facilities.

• Special Education—Primarily consists of Individuals 

with Disabilities Education Act grants that provide 

funds by formula to states to assist them in providing 

a free appropriate public education in the least 

restrictive environment for children with disabilities 

ages 3 through 21 and assists states in providing early 

intervention services for infants and toddlers from 

birth through age 2 and their families. Also provides 

discretionary grants to IHEs and other nonprofit 

organizations to support research, demonstrations, 

technical assistance and dissemination, technology, 

personnel development and parent training, and 

information centers. 

In addition to student loans and grants, the Department 

offers other discretionary grants under a variety of 

authorizing legislation, with approximately 90 percent of 

nonstudent aid funds awarded by formula and 10 percent 

through competitive processes.
FY 2022 AGENCY FINANCIAL REPORT 23 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

STATEMENTS OF CHANGES IN 

NET POSITION

The consolidated statements of changes in net position 

report the beginning net position, the summary effect of 

transactions that affect net position during the fiscal year, 

and the ending net position. Net position is the residual 

difference between assets and liabilities and consists of 

unexpended appropriations and cumulative results of 

operations. Unexpended appropriations include undelivered 

orders and unobligated balances for grant and administrative 

operations. Cumulative results of operations represent the 

net difference since inception between (1) expenses and (2) 

revenues and financing sources.

STATEMENTS OF BUDGETARY 

RESOURCES

The combined statements of budgetary resources present 

information on how budgetary resources were made 

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

Information in the statements is based on budgetary 

transactions as prescribed by OMB and Treasury.

Figure 12 shows the components of the Department’s 

budgetary resources, which totaled $902.0 billion for FY 

2022, increasing from $689.6 billion, or 30.8 percent, 

from the prior year. This increase was primarily due to a net 

increase in appropriations received totaling $120.4 billion, 

of which $154.9 billion was for an increase in direct and 

indirect appropriations for COVID-19 activity.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 12. Components of Budgetary Resources 

(Dollars in Billions)

Other significant changes to the Department’s combined 

statements of budgetary resources include the following:

• Unobligated Balances from Prior Year Budget Authority 

(Net) increased by $23.9 billion, or 57.7 percent. Of 

this increase, $17.9 billion was due to COVID-19 

funded balances.

• New Obligations and Upward Adjustments (Total) 

decreased by $186.2 billion, or 29.7 percent, due 

primarily to a decrease of $190.8 billion for grant 

obligations funded by the COVID-19 appropriations 

and loan modifications for COVID-19 student 

loan deferrals, broad-based debt relief, and IDR and 

PSLF Waivers.

• Unobligated Balance, End of Year increased $26.2 

billion, or 42.2 percent. This increase was largely due 

to a $42.5 billion increase in unapportioned balances 

for the credit program accounts, net of a $17.9 billion 

decrease due to COVID-19-funded balances.
FY 2022 AGENCY FINANCIAL REPORT 24 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Table 3. Outlays, Distributed Offsetting Receipts, and 

Disbursements, Net

(Dollars in Billions)

FY 2022 FY 2021

Outlays, Net

Credit Programs $510.0 $141.7 

Grants 155.3 122.4 

Contractual Services 2.5 2.3 

Personnel Compensation and Benefits 0.7 0.7 

Total Outlays, Net $668.5 $267.1 

Distributed Offsetting Receipts

Negative Subsidies and Downward 

Re-estimates Of Subsidies (28.2) (5.6)

Repayment of Perkins Loans and 

Capital Contributions (0.7) (0.9)

Other (0.2) (0.1)

Total Distributed Offsetting Receipts $(29.1) $(6.6)

Disbursements, Net

Direct Loan Program

Gross Disbursements $177.6 $143.8 

Offsetting Collections (526.6) (171.5)

Total Direct Loan Program 

Disbursements, Net (349.0) (27.7)

FFEL Program

Gross Disbursements 10.3 8.3 

Offsetting Collections (43.6) (19.2)

Total FFEL Program Disbursements, Net (33.3) (10.9)

Other Loan Programs

Gross Disbursements 0.5 0.7 

Offsetting Collections (0.5) (2.0)

Total Other Loan Program 

Disbursements, Net - (1.3)

Total Disbursements, Net $(382.3) $(39.9)

The combined statements of budgetary resources also 

present the Department’s summary disbursement and 

collection amounts shown in Table 3.

Outlays, Net is comprised of gross outlays and offsetting 

collections in the Department’s budgetary funds. Outlays, 

net increased $401.4 billion (150.3 percent) due primarily 

to an increase of $368.3 billion in credit programs 

outlays. Total credit program outlays during FY 2022, 

$510.0 billion, included $461.1 billion associated with 

upward loan modifications.

Distributed Offsetting Receipts primarily represents 

amounts paid from the Direct Loan Program and FFEL 

Program financing accounts to Treasury General Fund 

receipt accounts for downward current fiscal year executed 

subsidy re-estimates and modifications, and negative 

subsidies. The $22.5 billion net increase in FY 2022 versus 

FY 2021 was attributed to the Direct Loan Program. 

Disbursements, Net is comprised of gross outlays and 

offsetting collections in the Department’s credit program 

nonbudgetary financing funds. Of the $342.4 billion net 

decrease in FY 2022 versus FY 2021, $321.3 billion was 

attributed to the Direct Loan Program.
FY 2022 AGENCY FINANCIAL REPORT 25 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

Analysis of Systems, Controls, and Legal Compliance

MANAGEMENT ASSURANCES

The Secretary of the Department of Education’s Fiscal Year 2022 Statement of Assurance provided below is the final report 

produced by the Department’s annual assurance process.

STATEMENT OF ASSURANCE

 FISCAL YEAR 2022

January 23, 2023

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

risks and maintaining effective internal control to meet the objectives of the Federal Managers’ 

Financial Integrity Act of 1982 (FMFIA).

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

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

Control, management assessed risk and evaluated the effectiveness of the Department’s internal 

controls to support effective and efficient operations, reliable reporting, and compliance with 

applicable laws and regulations.

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

require management to ensure the Department’s financial management systems provide 

reliable, consistent disclosure of financial data. Management evaluated the Department’s 

financial management systems for substantial compliance with FFMIA requirements. The 

Department also conducted a separate assessment of the effectiveness of its internal control 

over reporting with consideration of its Data Quality Plan (DQP) in accordance with 

Appendix A of OMB Circular A-123.

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

internal control to meet the objectives of Sections 2 and 4 of the Federal Managers’ Financial 

Integrity Act. The Department conducted its assessment of risk and internal control in 

accordance with OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk 

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

provide reasonable assurance that internal control over operations, reporting, and compliance 

were operating effectively as of September 30, 2022.

Miguel A. Cardona, Ed.D.
FY 2022 AGENCY FINANCIAL REPORT 26 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

INTRODUCTION

Strong risk management practices and internal control 

help the Department run its operations efficiently and 

effectively, report reliable information about its operations 

and financial position, and comply with applicable laws 

and regulations. The FMFIA requires federal agencies to 

establish internal controls that provide reasonable assurance 

that agency objectives will be achieved. OMB Circular 

A-123, Management’s Responsibility for Enterprise Risk 

Management (ERM) and Internal Control implements 

FMFIA and defines management’s responsibilities for 

ERM and internal control. The circular provides guidance 

to federal managers to improve accountability and 

effectiveness of federal programs and mission-support 

operations. This is achieved through implementation of 

ERM practices and by establishing, maintaining, and 

assessing internal control effectiveness. Furthermore, 

the guidance requires federal agencies to provide 

reasonable assurance that it has met the three objectives of 

internal control:

• Operations—Effectiveness and efficiency of operations.

• Reporting—Reliability of reporting for internal and 

external use. 

• Compliance—Compliance with applicable laws 

and regulations. 

This section describes the Department’s internal control 

framework, and explains assurances provided by the 

Department’s leadership. 

Enterprise Risk Management Framework

The Department’s Enterprise Risk Management (ERM) 

program supports agency-wide efforts to maximize the 

Department’s value to students and taxpayers through 

achievement of strategic goals and objectives. The 

Department’s ERM program strategically focuses on the 

complete spectrum of the organization’s significant risks 

and the combined impact of those risks as an interrelated 

portfolio rather than simply addressing risks within silos. 

This coordinated approach leverages data and analytical 

solutions to identify, measure, and assess challenges related 

to mission delivery and resource management. Through 

ERM, the Department has established a systematic and 

deliberate view of risk into key management practices, 

ultimately yielding more effective performance and 

operational outcomes. 

The Division of Enterprise Data Analytics and Risk 

Management (EDARM), within the Office of Finance and 

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

and formally aligns ERM and internal controls processes. 

EDARM leverages partnerships with agency leaders (e.g., 

the Senior Management Council, the Senior Executive 

Cadre, political leadership) to identify, measure, and assess 

challenges related to mission delivery, policy development, 

and operations to develop coordinated, actionable 

response plans.

EDARM collaborated with every Principal Office 

Component (POC) to identify and evaluate risk priority 

within each POC and at the Department wide level. The 

FY 2022 Department of Education ERM profile was 

published with the aggregated result and analysis from the 

annual assessment process. This profile highlights the top 

11 risks for the Department around the following 5 main 

functional processes:

• Financial Management: Student Loan Cost Estimation, 

Budget Formulation.

• Human Capital Management: Recruitment & Hiring, 

Workforce & Succession Planning, Employee Training 

& Development.

• Information Technology Management: IT Process 

Governance, Cybersecurity, and Infrastructure.

• Data Management: Data Quality.

• Oversight and Compliance: Grants and 

Contracts Management.

In FY 2022, EDARM also launched the ERM digital tool 

for collecting, analyzing, and reporting risk data to promote 

transparency and accountability across the Department.

EDARM continues to make progress in developing and 

implementing new trainings, tools, and helpful content to 

better educate and promote healthy risk culture, a culture 

of continuous improvement within the Department—

where data and awareness of enterprise risk are used to 

objectively inform strategic and operational decisions and 

optimize agency performance.
FY 2022 AGENCY FINANCIAL REPORT 27 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

Internal Control Framework

The Department’s internal control framework helps to ensure that the Department achieves its strategic goals and objectives 

related to delivering education services effectively and efficiently, complies with applicable laws and regulations, and prepares 

accurate reports. The Department maintains a comprehensive internal control framework and assurance process as depicted in the 

following diagram.

The Department continues to focus on streamlining and 

coordinating internal control activities to ensure efficiency 

of operations, recognize the connection points across 

areas, and enable transparency of information across the 

Department. This framework enables increased compliance, 

process efficiency, oversight, and more informed monitoring 

of internal controls and risk management by all offices 

and governance bodies, including the Department’s Senior 

Management Council. The framework also allows for 

the Department to obtain outcomes from an improved 

control system and reduced risk landscape. Furthermore, 

this streamlined approach helps the Department provide 

reasonable assurance to internal and external stakeholders that 

the data produced by the Department is complete, accurate, 

and reliable; internal controls are in place and working as 

intended; and operations are efficient and effective.

ANALYSIS OF CONTROLS

Overall, the Department relies on annual assurances 

provided by the heads of its principal offices, supported 

by risk-based internal control evaluations and testing – as 

well as annual internal control training provided for all 

employees – to demonstrate reasonable, but not absolute, 

assurance that its internal controls are well-designed, 

in place, and working as intended. The Department’s 

annual assurance process conforms to the requirements 

contained in the revised U.S. Government Accountability 

Office (GAO) publication, Standards for Internal Control 

in the Federal Government (commonly referred to as the 

“Green Book”) and OMB Circular A-123, Management’s 

Responsibility for Enterprise Risk Management and 

Internal Control. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 13. Department of Education Internal Control Framework
FY 2022 AGENCY FINANCIAL REPORT 28 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

In FY 2022, the Department and Federal Student Aid 

(FSA) did not self-identify any material weaknesses 

related to the effectiveness and efficiency of its operations. 

However, an area of noncompliance with laws and 

regulations is noted in the Analysis of Legal Compliance 

section below. The Department acknowledges that it has 

areas of control that need further strengthening, as well as 

major challenges identified by the Department’s Office of 

the Inspector General (OIG) in its FY 2023 Management 

Challenges report. As an example, data quality and 

reporting are a challenge identified by the OIG. The 

Department, its grantees, and its subrecipients must have 

effective controls to ensure that reported data are accurate 

and complete. The Department relies on program data to 

evaluate program performance and inform management 

decisions. The establishment of a Data Quality Plan (DQP) 

integrated into testing of controls is helping to address this 

challenge identified by the OIG.

The Department maintains processes and procedures 

to identify, document, and assess internal control over 

reporting and operations. Key activities include: 

• Maintaining process documentation for the 

Department’s significant business processes 

and subprocesses.

• Maintaining an extensive library of key financial, 

operational, and information technology (IT) controls.

• Providing technical assistance to principal offices to help 

them understand and monitor key controls.

• Refining the DQP to improve reporting controls and 

data quality.

• Implementing a risk-based control testing strategy.

• Developing corrective action plans when internal 

control deficiencies are found and tracking progress 

against those plans.

• Recommending and assisting with implementation 

of robust tools to design more efficient and effective 

operating procedures.

In accordance with OMB Circular A-123, the Department 

also conducted a separate assessment of the effectiveness 

of the Department’s internal control over reporting, 

operations, and compliance with key financial management 

laws and regulations, as described below. 

Internal Control Over Reporting 

In FY 2022, the Department tested a proportionate 

number of key financial controls in significant business 

processes in non-grant areas based on qualitative risk 

assessments and rotational test plans. The internal controls 

assessment did not find any control deficiencies or material 

weakness. However, recommendations have been provided 

to process owners to strengthen internal controls, such 

as verifying immaterial differences, obtaining electronic 

signatures, and updating policies and procedures.

Internal Control Over Operations 

In FY 2022, the Department reviewed a number of 

operational processes based on qualitative risk assessments 

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

detected some control deficiencies but none that would 

rise to the level of material weakness. As a result, tools 

have been developed in the areas of workforce planning, 

acquisition planning and the procurement process to better 

utilize resources, improve the flow, timeliness and quality of 

information and allow for more effective decision-making. 

A major accomplishment has been the development of a 

workforce dashboard that consolidates relevant and up-todate human resources data from multiple systems in a single 

location and visually depicts complex relationships in an 

easily digestible manner, enhancing decision-makers’ ability 

to identify critical human resource trends and challenges 

across the Department.
FY 2022 AGENCY FINANCIAL REPORT 29 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

ANALYSIS OF FINANCIAL 

MANAGEMENT SYSTEMS

The FFMIA requires management to ensure that the 

Department’s financial management systems consistently 

provide reliable data that comply with system requirements, 

applicable federal accounting standards, and the U.S. 

Standard General Ledger at the transaction level. Appendix 

D to OMB Circular A-123, Compliance with the 

FFMIA, and OMB Circular A-130, Managing Federal 

Information as a Strategic Resource, provide specific guidance 

to agency managers when assessing conformance to 

FFMIA requirements. 

The Department’s vision for its financial management 

systems is to provide objective financial information to 

stakeholders to support data-driven decision-making, 

promote sound financial management, and enhance 

financial reporting and compliance activities. The 

Department’s core financial applications are integrated 

under common management control as part of the 

Education Central Automated Processing System 

(EDCAPS). EDCAPS is a suite of financial applications 

(subsystems), including commercial off-the-shelf, custom 

code, and interfaces that encompass the Department’s core 

financial management processes. Specifically, EDCAPS 

provides the following functions:

• General ledger—Preparation of financial statements and 

reconciliation of general ledger balances with subsystems 

maintained in program areas and Treasury.

• Funds management—Budget formulation, budget 

execution, and funds control.

• Grants pre- and post-award processing, including grant 

payment processing.

• Contract pre-and post-award processing.

• Receivables management.

• Cost management.

• Recipient management.

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

miscellaneous payments).

EDCAPS is composed of five main integrated components: 

• Financial Management Support System (FMSS)—

FMSS is the Department’s core financial system. It 

provides financial management functions such as the 

general ledger, financial statement preparation, funds 

control and budget execution, purchase receiving, 

accounts receivable, and accounts payable.

• The FMSS Oracle E-Business Suite application resides 

behind the Department firewall and not an externalfacing application.

• Contracts and Purchasing Support System (CPSS)—CPSS 

provides the Department with a central repository to 

enter, retrieve, manage, and view acquisition/contractrelated data. The centralized data provides enhanced 

information dissemination, with the ability to respond 

to both internal and external information requests.

• Grants Management System (G5)—G5 provides 

the Department with a platform to manage all grant 

activities, from initial recipient contact to grant 

processing to payments and grant closeout. This singlesystem approach provides improved grant information 

management, recipient response time, and accuracy of 

financial management information.

• E2 Travel System—E2 provides the Department, under 

a GSA contract with third party, with a platform to 

manage travel functions. EDCAPS interfaces with E2 

in accordance with an established Memorandum of 

Understanding and Information Security Agreement 

between the Department and the vendor.

The following diagram provides the data flow in and out 

of EDCAPS, including data flow with other Department 

applications/systems and external applications/systems.
FY 2022 AGENCY FINANCIAL REPORT 30 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Across all its components, EDCAPS is serving approximately 

2,800 Departmental internal users in Washington, D.C. 

and 10 regional offices throughout the United States and 

territories. EDCAPS is serving approximately 40,970 

external users, mostly users of Grants Management System 

(G5). In FY 2022, the Department conducted an annual risk 

assessment of EDCAPS and tested 103 IT security controls 

out of a baseline of 630 IT security controls, as follows:

• EDCAPS—183

• FMSS—28

• CPSS—12

• G5—33

• E2—12

The Department designated the FMSS as a mission-critical 

system that provides core financial management services 

3 Number of IT controls tested. No significant deficiencies or material weaknesses 

were identified.

and focused its system strategy on the following areas 

during FY 2022: 

• Managing and implementing cross-validation rules 

throughout the fiscal year to prevent invalid accounting 

transactions from being processed.

• Transmitting the Department’s spending data related to 

contracts, grants, loans, and other financial assistance 

awards for the USASpending.gov initiative as part of 

the Federal Funding Accountability and Transparency 

Act of 2006 (FFATA) and Digital Accountability and 

Transparency Act of 2014 (DATA Act).

• Transmitting the entire Department’s payments through 

the Department of Treasury Secure Payment System.

The FMSS Oracle E-Business Suite application is behind 

the Department firewall and not external-facing. FMSS 

includes the following interfaces to multiple applications 

which are either not part of the Oracle suite of applications 

in the Enterprise Resource Plan or are external systems:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
FY 2022 AGENCY FINANCIAL REPORT 31 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

• Department Systems:

 Oracle Enterprise Performance Management Cloud 

Planning (formerly Hyperion).

 Fiserv Frontier.

 G5.

 CPSS.

• External Systems:

 Treasury systems (Invoice Processing Platform [IPP] 

invoices/receipts/obligation data, IPP invoice status; 

payment files, debt referrals, CRS invoices, warrants, 

Treasury confirmations, CIR collections and 

administrative return, collections/payments).

 Department of Interior systems (Payroll). 

 E2 Travel System.

The Department’s financial management systems are designed 

to support effective internal control and produce accurate, 

reliable, and timely financial data and information. Based on 

self-assessments, system-level general controls tests, and the 

results of internal and external audits, the Department has 

not identified any material weaknesses in controls over these 

systems. The Department has also determined that its financial 

management systems substantially comply with FFMIA 

requirements. However, as noted below in the Analysis of Legal 

Compliance section, the Department continues to address 

issues and improve its controls over systems.

ANALYSIS OF LEGAL COMPLIANCE

The Department is committed to maintaining compliance 

with applicable laws and regulations. Below are some examples:

Payment Integrity Information Act of 2019 (PIIA)

The Payment Integrity Information Act of 2019 (PIIA), 

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

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

reorganize and revise several existing improper payments 

statutes,4

 which establish requirements for federal agencies 

to cut down on improper payments made by the federal 

government. PIIA requires federal agencies to report 

improper payments annually for programs that are deemed 

susceptible to significant improper payments. PIIA also 

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

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

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

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

126 Stat. 2390.

requires each agency’s OIG to review the agency’s improper 

payment reporting in its Agency Financial Report (AFR) 

and accompanying materials, and to determine whether the 

agency has met six compliance requirements. 

In its annual improper payment compliance audit for 

FY 2021, the OIG concluded that the Department was 

not compliant with PIIA because it did not meet one of the 

six compliance requirements. Specifically, the Department 

reported an improper payment estimate for the Title I, Part A 

program of 14.77 percent. To comply with 31 U.S.C. section 

3351(2)(F), an agency must report an improper payment 

rate of less than 10 percent for each program and activity 

for which an estimate was published. The Department’s 

improper payment estimates were not reliable for three of its 

programs (Title I, Part A; Pell; and Direct Loan) that required 

an estimate for FY 2021. Specifically, the improper payment 

sampling and estimation plan the Department developed 

for the Title I, Part A program was not adequate for State 

Educational Agencies (SEAs) that use an advance payment 

process that does not allow the SEA to directly link payment 

transactions (expenditures) to specific G5 system drawdowns.

This determination of noncompliance with PIIA does 

not represent a material weakness in the Department’s 

internal controls. 

Debt Collection Improvement Act of 1996 (DCIA)

The Debt Collection Improvement Act of 1996 (DCIA), 

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

into law as part of the Omnibus Consolidated Rescissions 

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

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

increase the collection of nontax debts owed to the federal 

government. Additionally, the Digital Accountability and 

Transparency Act of 2014 (DATA Act), Pub. L. 113-101, 

128 Stat. 1146, amended Section 3716(c)(6) of the DCIA 

to require notification of a legally enforceable nontax debt 

that is over 120 days delinquent to the Department of 

the Treasury for purposes of administrative offset. While 

the Department continued to work toward an accelerated 

process to refer delinquent debt to Treasury, extension of 

the provisions of the Coronavirus Aid, Relief, and Economic 

Security Act (CARES Act) in FY 2022 continued to afford 

administrative forbearance for eligible loans. Beginning in 

March 2020, the provisions of the CARES Act suspended 

involuntary collection through the Treasury Offset Program. 

The suspension of involuntary collections will continue 

to apply through 2023. Pursuant to the CARES Act and 

related authorities, no loans were required to be transferred to 

Treasury during FY 2022. Accordingly, the Department was 

and is compliant with DCIA as amended by the DATA Act.
FY 2022 AGENCY FINANCIAL REPORT 32 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Federal Information Security Modernization Act of 2014 (FISMA)

The Federal Information Security Modernization Act of 2014 (FISMA 2014) requires federal agencies to develop, document, 

and implement an agencywide program to provide security for the information and relevant information technology systems. The 

Act supports the operations and assets of the agency and helps to ensure the confidentiality, integrity, and availability of all systemrelated information.

The Department’s and FSA’s information security programs completed numerous significant activities in FY 2022 to improve 

cybersecurity capabilities and functions, some of which include:

• The Department received an overall Federal Information Security Modernization Act of 2014 (FISMA) assessment of 

“Effective,” or a Level 4 Cybersecurity Maturity Level for FY 2022, which marks a significant improvement from FY 2021. 

This is the first time the Department has achieved this level with seven of nine FISMA domains increasing in score, as 

supported by information in the graphics below.

• In February 2022, the Department implemented a 

new cybersecurity policy framework aligned with 

Executive Order (EO) 14028 Improving the Nation’s 

Cybersecurity and National Institute of Standards 

and Technology (NIST) Special Publication 800-

53, Revision 5. The updated framework ensures a 

more comprehensive inventory of policies that directly 

align with the latest catalog of security control families 

and requirements levied through EO 14028. Five 

Instructions and 22 Standards have been converted 

into 20 new Standards (control families) aligned 

with the Cybersecurity Framework (CSF) and NIST 

800-53, Revision 5. The framework modernizes the 

Department’s cybersecurity policies, enables system 

Security 

Function Metric Domain

Maturity 

Level

Change 

from 

2021

Met 

Federal 

Goal

Identify Risk Management Consistently 

Implemented =

Identify Supply Chain Risk 

Management

Consistently 

Implemented ▲

Protect Configuration 

Management

Managed 

and 

Measurable ▲ 

Protect

Identity and 

Access 

Management

Consistently 

Implemented ▲

Protect Data Protection 

and Privacy

Consistently 

Implemented =

Protect Security Training

Managed 

and 

Measurable ▲ 

Detect

Information 

Security 

Continuous 

Monitoring

Managed 

and 

Measurable ▲ 

Respond Incident Response

Managed 

and 

Measurable ▲ 

Recover Contingency 

Planning

Managed 

and 

Measurable ▲ 

 

FISMA Recommendations 2018–2022

 

 

 

 

stakeholders to find the Department’s requirements 

quickly, and allows for updates to the Department’s 

system of record for FISMA reporting, Cyber Security 

Assessment and Management System (CSAM) with EDdefined control parameters to support System Security 

Plan (SSP) development and assessments. This includes 

control overlays for requirements not within 800-

53 control baselines, and enhances maintenance and 

strengthens the ability to update for new requirements 

while maintaining mapping to CSF rapidly and 

NIST controls.

• The Department released Standard PR.DS: Protection 

of Federal Tax Information. Released in January 2022, 

this standard establishes the Department standards 
FY 2022 AGENCY FINANCIAL REPORT 33 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

for safeguarding the confidentiality of Federal Tax 

Information (FTI) as required by Internal Revenue 

Service (IRS) Safeguards Program 1 and IRS Publication 

1075, Tax Information Security and Privacy Guidelines 

for Federal, State and Local Agencies. This is in 

accordance with Internal Revenue Code (IRC), Section 

6103(p)(4)3; and IRS Publication 1075, as a condition 

of receiving FTI directly from either the IRS or from 

secondary sources. 

• Office of the Chief Information Officer (OCIO) refined 

and used the Department’s cybersecurity risk tolerance 

and appetite, which integrates with the Department’s 

overall ERM program. In FY 2022, OCIO updated 

its target profile and key performance indicators (KPI) 

and key risk indicators (KRI) to support tracking and 

reporting progress made towards the Department’s 

OCIO ERM target profile. OCIO continues 

membership and participation in ERM Working Groups 

and mini working groups (ERMWG) to continue 

to mature integration of Cyber Risk Management 

with ERM:

 ERM maturity model metric refinement.

 ERM digital tools risk reporting and analysis.

 ERM training for leaders and staff.

 ERM knowledge management.

• The Department’s Security Assessment Team worked 

with OCIO to implement the Ongoing Security 

Assessment & Authorization (OSA) program, which 

started in December 2021. The OSA program and 

method of assessment replaced the older static-point-intime assessment model of Assessment & Authorization. 

The threshold for entry into the OSA program is a risk 

assessment that focuses on the following areas: system 

demonstration, control baseline and inheritance review, 

and the Department’s CSF Scorecard and discrepancy 

reports. The OSA program will reduce steps and modify 

artifacts to improve efficiency. The overall outcome 

is more frequent system stakeholder engagement and 

timely risk visibility. 

• OCIO publishes monthly Department’s CSF Risk 

Scorecards as part of the Department’s Information 

Security Continuous Monitoring efforts to identify 

cybersecurity risks, issues, and opportunities for 

improvements in its cybersecurity protections. The 

Department CSF Risk Scorecard provides a detailed 

analysis tool for authorizing officials, information 

system owners, and information system security officers 

to prioritize and mitigate risks to the Department’s 

information systems. In FY 2022, the Department 

continued to mature its risk management processes 

through enhancements made to the CSF Risk Scorecard. 

These enhancements have improved the accuracy and 

timeliness of the Department’s risk reporting and 

continuous monitoring. System stakeholders are now 

provided daily visibility of their system’s risk and data 

quality. Additional views were established to augment 

and consolidate risk reporting to allow the Department’s 

authorizing officials to quickly identify which systems 

require attention and prioritization of authorization 

and risk reduction activities. These enhancements are 

targeted to result in a reduced number of past due Plan 

of Actions and Milestones (POA&M) and data quality 

issues. With near-real time risk scoring and reporting 

in place, executive and system level stakeholders can 

effectively prioritize and manage the Department’s 

cybersecurity risk daily.

• Throughout the year, the Department continued 

outreach and risk communications by disseminating 

monthly “State of IT” reports to the Department’s 

senior leaders. These executive-level reports provide 

the Department’s senior leaders with a holistic view 

of their IT investments, services, and cybersecurity 

posture through comprehensive IT and cybersecurity 

trends, metrics, and key insights to prompt topdown engagement and actions. These reports prepare 

senior POC leaders for the Monthly Deputy Secretary 

cybersecurity briefings facilitated by the Department’s 

Chief Information Security Officer (CISO). The 

meeting communicates Department cyber risks, trends, 

metrics, key insights, upcoming announcements, 

and actions.

• The Department continued to mature its risk 

management processes through enhancements to the CSF 

Risk Scorecard. POC leadership can now monitor status 

of program-level business continuity planning and testing 

activities. These enhancements allowed the Department 

to close corrective action plan (CAP) 8.3 from the FY 

2020 FISMA audit and are targeted to result in consistent 

implementation of business continuity planning activities. 

In FY 2022 Quarter 1, the Department enhanced its 

Power BI reporting to track and report compliance 

with the Department’s 14028 mandates including, but 

not limited to, Multifactor Authentication (MFA), 

encryption, and resiliency. The FISMA Dashboard was 

also enhanced to visualize compliance statuses against 

recently released FY 2022 OCIO Metrics reporting 

guidelines (v1.1), issued by OMB/Cybersecurity and 

Infrastructure Security Agency (CISA) in support of EO 

14028 requirements. 
FY 2022 AGENCY FINANCIAL REPORT 34 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

• In FY 2022, the Department was approached to 

provide a demonstration of its cybersecurity risk 

scoring and visualization capabilities to several partner 

federal Departments. As a result of the Department’s 

demonstration of risk scoring and visualization 

capabilities, the partner Departments have expressed 

interest in establishing similar capabilities within their 

cybersecurity mission space.

• The Department established a Vulnerability Disclosure 

Policy (VDP) program in FY 2021, to provide an 

open channel and legal safe harbor for the discoverer 

of vulnerabilities to report it to the Department. The 

VDP allows the research community and others to alert 

the Department about vulnerabilities in its systems 

through a clearly established program. The Department 

expanded the VDP program in FY 2022 Quarter 1 

to cover all internet accessible Department systems. 

Information submitted to the Department under the 

VDP will be used to mitigate or remediate internetaccessible systems and services vulnerabilities, or 

vendors’ internet-accessible systems or services.

• The Department updated internal vulnerability 

management procedures in accordance with Binding 

Operational Directive (BOD) 22-01 Reducing the 

Significant Risk of Known Exploited Vulnerabilities. 

The Department continues to remediate each 

vulnerability according to the timelines set forth in the 

CISA-managed vulnerability catalog. The Department is 

working with CISA to mature Continuous Diagnostics 

and Mitigation (CDM) capabilities to augment 

and enhance remediation actions as required by 

this directive.

• The Department developed and implemented a new 

FISMA 2014 reporting dashboard through Microsoft 

Power BI to reflect the updated FY 2022 OCIO 

Metrics. The new dashboard allows leadership to 

visualize all data collected across the Department in 

support of its quarterly reporting requirements to 

DHS and OMB. The dashboard provides the ability to 

proactively identify discrepancies or potential risks as a 

result of data captured and presented to both leadership 

and FISMA 2014 metric owners for action. 

• The Department took immediate action in Quarter 

1 and Quarter 2 regarding M-22-09 Moving the 

U.S. Government Toward Zero Trust Cybersecurity 

Principles by creating, funding, and onboarding a GS15 zero-trust architecture (ZTA) program manager and 

releasing a Department strategy and project schedule 

for full implementation by the end of FY 2024. The 

Department received the initial transfer of $15 million 

in Technology Modernization Fund (TMF) funds, 

used to:

 establish a ZTA Project Management office (PMO).

 engage the recompete of Enterprise Identity, 

Credential, and Access Management (ICAM).

 obtain Secure Access Service Edge (SASE) & 

Security Orchestration Automation & Response 

(SOAR) capabilities. 

There is ongoing collaboration between ZTA, ICAM, 

Enterprise Detection and Response (EDR), and Cyber Data 

Lake (CDL) PMOs to fulfill progress towards all pillars of 

Zero Trust. A “zero trust” approach to security provides the 

Department with a necessary and defensible architecture 

against increasingly sophisticated cyber-attacks. The 

Department is on track to meet the requirements set forth 

by OMB and maintain a resilient cybersecurity posture. 

• During the first half of FY 2022, OCIO successfully 

continued to provide IT services to support nearly 

100% telework in response to the COVID-19 

pandemic. However, during the second half of FY 2022, 

the Department shifted from nearly 100% telework to 

a hybrid telework posture. Throughout this transition, 

there was no significant impact or compromise to 

the Department Information Security Program, and 

the Department continued execution of missions 

without interruption. Despite the challenging work 

environment necessitated by the COVD-19 pandemic 

and the evolving technology changes to meet working 

requirements, the Department did not have any major 

information security incidents occur. To continue 

strengthening its cloud portfolio, the Department 

has continued its close working relationship with the 

FedRAMP Project Management Office (PMO) which 

established increased reoccurring continuous monitoring 

meetings with participating agencies to help improve the 

security posture of those Cloud Service Providers.

• In response to the January 2022 Apache Log4j 

vulnerability, the Department Vulnerability 

Management (VM) team identified all impacted 

systems, assets, and remediation actions. All reports 

were forwarded to the EDSOC for further incident 

response activities. The EDSOC coordinated across 

the Department (FSA Security Operations Center 

[SOC], CSOC, etc.) to identify impacted assets, patch 

immediately, block indicators of compromise, and take 

necessary incident response actions if compromises were 

discovered. The EDSOC completed all network traffic 

and forensics analysis on the Department’s systems 

and concluded that no Department assets showed 
FY 2022 AGENCY FINANCIAL REPORT 35 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

indication of a successful compromise. The Department 

was selected to participate in the first Cybersecurity 

Safety Review Board analysis of Log4j and was cited 

as providing the most input and support of Federal 

Cabinet-level Departments.

• In response to Emergency Directive 22-03 Mitigate 

VMWare Vulnerabilities, the Department issued a CISO 

Memorandum on May 20, 2022. Information System 

Owners and Information System Security Officers 

were required to enumerate all instances of impacted 

VMWare products within their system authorization 

boundaries, report findings to the OCIO VM team, and 

deploy updates (or remove the VMWare product until 

an update is available). There were no findings of impact 

to the Department, which was reported to CISA. 

• The Department implemented measures in the wake 

of the COVID-19 pandemic to permit remote work, 

including issuance of Standard PR.AC: Emergency 

personal identity verification (PIV) Alternative Standard. 

As restrictions have been lifted and per the requirement 

of Homeland Security Presidential Directive 12, the 

Department released a CISO memorandum on April 

15, 2022, for the rescission of Standard PR.AC. As a 

result of the memo, more than 90% of Department 

users are now utilizing PIV. This ensures the security of 

user access to the Department’s networks and systems.

• In support of SOC consolidation and maturation, 

the Department continues to identify task separation, 

integrate security tooling, coordinate incident 

investigation and response, and remove duplication 

between the Department’s two SOCs, EDSOC 

and FSA SOC. Existing milestones include refining 

current processes that support incident response 

and management to be aligned to a singular source, 

establishing automation within our incident response 

tool, and evolving training on newly enhanced processes 

and technologies. In FY 2021, the SOC maturation 

plan was updated to address key requirements levied 

on the Department in support of the recently released 

EO 14028 on Improving the Nation’s Cybersecurity 

and NIST 800-53 Revision 5. Updates to the plan in 

FY 2022 will result in improved incident response (IR) 

maturation in keeping within Federal IR requirements, 

continued improvement to our data loss prevention 

systems, increased cost savings through virtualization, 

and increased use of specialized personnel dedicated 

to threat intelligence analysis, law enforcement 

cooperation, and hunt team activities, providing a 

more robust and complete threat analysis product to 

our customer.
FY 2022 AGENCY FINANCIAL REPORT 36 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Forward-Looking Information

This section summarizes information pertinent to the 

Department’s future progress and success.

DIRECT LOAN PROGRAM

The Department’s largest program, the William D. Ford 

Federal Direct Loan (Direct Loan) Program, provides 

students and their families with funds to help pay for their 

postsecondary education costs. The following describes 

(1) the steps the Department has taken to help make 

student debt more manageable and (2) the risks inherent in 

estimating the cost of the program.

Managing Student Loan Debt

Each year, federal student loans help millions of Americans 

obtain a college education—an investment that, on average, 

has high returns. While the average return to having a 

college degree remains high,5

 some students leave school 

poorly equipped to manage their debt.

Traditionally, federal student loans had fixed-payment 10-

year repayment schedules, making it difficult for borrowers 

to begin repaying at the start of their career when their 

salaries are low. The recent expansion of income-driven 

repayment (IDR) plans allows students the opportunity for 

greater financial flexibility as it pertains to their monthly 

repayment. For more details on these plans, visit FSA’s How

to Repay Your Loans Portal.

Recent trends in student loan repayment data show that:

• More than 73 percent of the direct loan portfolio is in 

administrative forbearance—the suspended payment 

status provided to students through the extension of the 

student loan repayment deferrals.

• As of June 2022, nearly 8.4 million direct loan 

recipients were enrolled in IDR plans, representing 

a 1 percent increase from June 2021 and a 3 percent 

increase from June 2020. Overall, more than 45 percent 

of direct loan dollars and 33 percent of borrowers in 

repayment are enrolled in an IDR plan.

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

The Department continues to work relentlessly to make 

student loan debt more manageable. Looking to the future, 

the Department will:

• Continue conducting outreach efforts to inform student 

loan borrowers of their repayment options before the 

emergency loan relief measures expire. 

• Work to improve customer service and student aid 

systems and processes by implementing FSA’s Next Gen 

FSA, see page 39.

• Continue to support the development of additional 

tools, such as the College Scorecard and College 

Financing Plan, to increase transparency around 

higher education costs and outcomes that may help 

students and families make informed decisions before 

college enrollment.

Managing Risks and Uncertainty Facing the Direct 

Loan Program’s Cost Estimates

Direct Loan Program costs are estimated consistent with 

the requirements of the Federal Credit Reform Act of 1990. 

Under the act, the future disbursements and collections 

associated with a cohort of loans are estimated for the 

entire life of the loan, up to 40 years in this case. The 

actual performance of a loan cohort tends to deviate from 

the estimated performance during that time, which is not 

unexpected in developing estimates. Estimation of Federal 

credit programs involves inherent risk. The Department 

utilizes the best data available with modeling techniques 

that have been examined over time by several outside 

entities. Management has confidence over the estimates by 

using several different tools to analyze cost estimates. Reestimates on the loan portfolio are performed twice a year 

ensuring that the most up to date data and models are used. 

There are four types of inherent risk, described below, that 

make estimating lifetime program costs a difficult task.

Legislative, Regulatory, and Policy Risk

There are inherent risks to estimating future lifetime 

disbursements and collections for a cohort stemming 

from legislative, regulatory, or administrative actions. For 

instance, the cost structure of the Direct Loan Program may 
FY 2022 AGENCY FINANCIAL REPORT 37 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

be significantly altered if policies around loan forgiveness 

are expanded. In addition, the effects on financial modeling 

and estimation associated with recent legislative, regulatory, 

and policy action is difficult to interpret given the lack of 

actual trend data availability. Some examples of current 

risks include the following:

Extension of Student Loan Payment Relief During the 

COVID-19 Pandemic: The emergency relief measures 

in the Direct Loan Program, including suspending loan 

payments, halting collections on defaulted loans, and 

setting interest rates to 0 percent have been extended. 

These actions have insulated federal student loan 

performance from economic disruption caused by the 

COVID-19 pandemic, while at the same time reducing 

the amount of loan repayments being remitted to the 

Department. As the pandemic is ongoing, there is 

uncertainty regarding cost estimates as future actions to 

support borrowers during the return to repayment in 2023 

could affect those received payments. 

Income-Driven Repayment Plans: Without consideration 

of impacts from the pandemic, IDR plans tend to be more 

costly to the government than non-IDR plans. For the 2022 

loan cohort, it is estimated that the government will recover 

47 percent less for loans in IDR plans as compared to loans 

in standard plans. It is important to be careful in making 

such comparisons, however, as the underlying characteristics 

of borrowers (and the corresponding behavioral dynamics 

driving selection of plans) also impact the overall cost of 

loans under each plan. Also, having more repayment plan 

options complicates repayment plan selection, since the 

tradeoff decisions when selecting the plans vary by borrower 

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

the proliferation of IDR plans has made IDR terms more 

generous and made the plans available to a greater number 

of borrowers; these plans are traditionally more costly to 

the government. Selected comparisons between projected 

originations and borrower repayments under the different 

IDR plans are available on the Department’s website. Future 

commitment to promote these programs, and potential 

increased participation in these plans, are areas of uncertainty. 

Future legislative and/or regulatory activity could also affect 

the underlying cost of IDR plans.

Public Service Loan Forgiveness: Enacted in 2007, the 

Public Service Loan Forgiveness (PSLF) program allows 

a direct loan borrower to have the balance of their direct 

loans forgiven after having made 120 qualifying monthly 

payments under a qualifying repayment plan, while working 

full time for a qualifying public service employer (such as 

government or certain types of nonprofit organizations). In 

general, forgiveness provided via PSLF raises the cost of the 

Direct Loan Program; however, there is still uncertainty as 

to how many borrowers will take advantage of the program. 

Much of this uncertainty arises because borrowers are not 

required to apply for the program or provide any supporting 

documentation on their employment until after having made 

the 120 qualifying monthly payments.

On October 5, 2021, the Department announced a 

temporary change to the PSLF program to allow previously 

ineligible loans to be immediately eligible for forgiveness, 

or additional progress toward forgiveness, with no further 

action from the borrower. The changes included a limited 

PSLF waiver that allows all payments by student borrowers 

to count toward PSLF, regardless of loan program or 

payment plan and a review of denied PSLF applications 

for errors, giving borrowers the ability to have their PSLF 

determinations reconsidered. Borrowers who have not 

previously certified employment have been able to apply for 

the waiver. Two permanent changes to military borrowers 

working toward PSLF were also implemented. This 

opportunity ended on October 31, 2022. 

The Consolidated Appropriations Act, FY 2018, and the 

Department of Education Appropriations Act, FY 2019, each 

provided $350 million toward Temporary Expanded Public 

Service Loan Forgiveness (TEPSLF) for borrowers who 

met eligibility for public service employment but were not 

enrolled in a qualified repayment plan. The Consolidated 

Appropriations Act, FY 2020, and the Consolidated 

Appropriations Act, FY 2021, each provided $50 million 

for TEPSLF. 

Data on approved PSLF applications first became available 

in FY 2018 since borrowers first became eligible for PSLF 

discharges starting October 1, 2017, after having made 

120 qualifying payments. As of July 31, 2022, the total 

number of borrowers who received forgiveness from 

the PSLF waiver exceeded 172,000. The value of this 

forgiveness totaled $10.5 billion. Including TEPSLF and 

PSLF discharges not associated with the waiver, the value of 

forgiveness exceeded $12 billion. 

As of July 31, 2022, the number of borrowers with certified 

employment totaled nearly 1.33 million. The low number 

of approved PSLF applications in relation to employment 

certifications may be partially due to the complicated 

nature of the program, in particular the determination of 

what constitutes a qualifying payment. In addition, many 

borrowers who file employment certification forms early in 

their careers may also move into private sector employment 

before completing the 10 years of qualifying payments and 

thus may (a) never apply for forgiveness or (b) apply for 

forgiveness much later after returning to public service work. 

Any future congressional or regulatory action that may affect 

eligibility for PSLF continues to be an area of uncertainty.
FY 2022 AGENCY FINANCIAL REPORT 38 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Broad-Based Debt Relief: In August, the administration 

announced its plan to cancel up to $20,000 in student 

debt for eligible borrowers to give working and middleclass families more breathing room as they recover from 

the pandemic. As a result of Student Debt Relief, millions 

of borrowers will no longer have to make repayments on 

their loans and millions more will be able to substantially 

reduce their repayments. The Department estimates that 

the vast majority of eligible borrowers—81%—will take the 

necessary steps to get relief. This assumption is uncertain, as 

other relief programs vary in terms of take-up rates. 

The executive action carrying out the plan for Student 

Debt Relief is based on extensive legal analysis by multiple 

federal offices concluding that the action is within the 

Secretary’s authority and otherwise complies with the 

law. That conclusion is reflected in a memorandum by the 

Office of the General Counsel and an opinion from the 

Department of Justice’s Office of Legal Counsel, which 

were both made available with the action’s announcement 

on August 24. As is the case with many high-profile 

executive actions, the plan is the subject of recent litigation, 

which is pending. The Department cannot predict the 

outcome of litigation, but the conclusions in the legal 

memoranda made available in August have not changed in 

the intervening time. Accordingly, the Department plans to 

vigorously defend the executive action against all existing 

and future challenges. 

Borrower Defense to Repayment: On June 22, 2022, 

the Department and the plaintiffs reached a proposed 

settlement in the case titled Sweet v. Cardona (formerly 

Sweet v. DeVos). If approved by the court, that agreement 

will affect the processing of borrower defense applications 

in FY 2023. In the proposed settlements, if the borrower 

defense application is related to federal student loans 

taken out to pay for attendance at any school on the 

list of schools attached to the settlement agreement, 

the borrower will receive “Full Settlement Relief.” Full 

Settlement Relief means that the federal student loan(s) 

associated with the borrower’s attendance at the school will 

be discharged, the Department will refund any amounts 

paid to it on those loans, and the credit tradeline for those 

loans will be deleted from the borrower’s credit report.

Estimation Risk

Actual student loan outcomes may deviate from estimated 

student loan outcomes, which is not unexpected given 

the long projection window of up to 40 years. The Direct 

Loan Program is subject to a significantly large number 

of borrower-level events and future economic factors that 

heavily impact the ultimate cost of student loans. For 

example, assumptions that need to be estimated for loans 

originating in FY 2022 include how long students will 

remain in school; what repayment plan will be chosen; 

whether the loan will be consolidated; whether the 

borrower will die prior to completing repayment, become 

disabled, bankrupt, or have another claim for discharge or 

forgiveness (closed school loan discharge, borrower defense 

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

or forbearance; whether the loan will go into default and, if 

so, what collections will be received on the defaulted loan; 

and, if the loan is in an IDR plan, what the borrower’s 

employment (public sector or not) and income and family 

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

generally made based on historical data about borrower 

characteristics and behavior, which are more difficult to 

estimate. Lastly, the direct loan portfolio has grown from 

approximately $356 billion in FY 2011 to more than $1.3 

trillion as of the end of FY 2022. This growth naturally 

results in larger re-estimates, since a re-estimate worth 1 

percent of the portfolio today would be more than three 

times as large as a similar re-estimate in FY 2011.

Macroeconomic Risk

The ultimate amount, timing, and total value of future 

borrower repayments under the Direct Loan Program are 

heavily affected by certain economic factors, especially since 

the introduction of IDR plans.

In 2022, the COVID-19 pandemic continued to cause 

widespread disruption to the American economy. The 

emergency relief measures provided by Congress and the 

President resulted in flexibilities for federal student loan 

borrowers, continuing to prevent spikes in delinquency 

and default rates. Involuntary loan collections from wage 

garnishment, tax refund reductions, and reductions of 

federal benefits such as Social Security are also suspended. 

However, the ultimate impact of the pandemic on longterm Direct Loan Program costs will depend on, among 

other things, short- and long-term unemployment, 

economic growth trends, and potential structural changes 

in the overall economy and job markets. Some types of 

macroeconomic risk are inherent to student loan cost 

estimation, and the Department analyzes them regularly—

though some of these risks have been exacerbated by the 

unprecedented worldwide pandemic. New risks have also 

developed due to the conditions surrounding the pandemic. 

Specific examples of macroeconomic risk include:

Interest Rates: Direct Loan Program cost estimates are very 

sensitive to changes in interest rates. Under the current 

program terms, the fixed borrower rates for direct loans 

are established in advance of the upcoming school year, 
FY 2022 AGENCY FINANCIAL REPORT 39 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

while the Treasury fixed interest rate on the Department’s 

borrowings to fund those loans is not set until after 

those awards are fully disbursed, which can be as much 

as 18 months later. Unexpected changes in interest rates 

during this time can significantly impact Direct Loan 

Program cost.

Unemployment: Unemployment rates have been shown 

to affect both student loan volume and student loan 

repayment decisions and behavior. During periods of 

economic downturn, displaced workers have tended to 

pursue higher education opportunities in high numbers 

to strengthen their credentials, change career paths, or 

improve future employment opportunities. The exact 

impact on the cost estimates from the current period 

remains an area of uncertainty. For instance, higher shortterm unemployment rates could have an impact on future 

collections of already defaulted loans by increasing the risk 

of fewer collections from wage garnishment and tax refund 

reductions. A sensitivity analysis examining the impact 

of a 5 percent reduction in default collections, limited to 

cohorts 2017–21, resulted in a projected increase in the reestimate of $3.4 billion.

Wage Growth: The estimated costs of IDR plans are 

largely dependent on trends in observed wage growth. To 

the extent that future wage growth deviates significantly 

from prior wage growth, actual costs of IDR plans may 

deviate from estimated costs. The Department will closely 

monitor impacts to wage growth because of the pandemic. 

The estimates are sensitive to slight changes in model 

assumptions. The Department continues to manage risks in 

this area by building its knowledge about its borrower base 

and remaining informed of labor market statistics.

Operational Risk

Unforeseen issues in administering and servicing student 

loans may impact the cost estimates. For example, in 

December 2019, the President signed the Fostering 

Undergraduate Talent by Unlocking Resources for Education 

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

Internal Revenue Code to allow the IRS to share taxpayer 

data directly with the Department. Once implemented, this 

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

plan by allowing automated data sharing between federal 

agencies and eliminating the need for borrowers to annually 

recertify their income. A timeline for implementation of 

the FUTURE Act is uncertain. Similarly, the Department is 

working to implement the FAFSA Simplification Act, which 

makes significant changes to the need analysis formula that 

will also introduce operational challenges. The Department 

invests significant resources to ensure continuous 

improvements in cybersecurity defenses based on current and 

emerging threats. Despite this investment, security threats to 

operations are ongoing and incidents may happen without 

warning, potentially disrupting student loan administration 

and ultimately borrower cash flows, which can be impacted 

by the timing of when collections or disbursements are 

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

unpredictable disruptions in the administrative status quo 

may impact student loan cost estimates.

Another potentially unforeseen issue that may impact cost 

estimates is when federal loan servicers or private collection 

agencies exit the student loan servicing program, as several 

have over the last year. The Department remains committed 

to ensuring that borrowers receive high-quality service that 

helps them access the benefits granted by law.

NEXT GEN FSA

About FSA

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

beyond high school, Federal Student Aid (FSA) delivers 

approximately $112 billion in aid each year to students 

and their families. Through programs authorized under the 

Higher Education Act of 1965, as amended, FSA provides 

grants, loans, and work-study funds for college and career 

school. FSA’s loan portfolio has grown to more than $1.6 

trillion. FSA also provides oversight of approximately 5,600 

postsecondary institutions that participate in the federal 

student aid programs. In every interaction with students 

and their families, FSA strives to be the most trusted and 

reliable source of student financial aid information and 

services in the nation.

The Vision

Through the Next Generation Federal Student Aid 

(Next Gen FSA) initiative, the Department continues to 

modernize FSA’s programs, technology, processes, and 

operations to improve student, parent, and borrower 

experiences and outcomes, as well as those of student 

aid partners. Moreover, through Next Gen FSA, the 

Department continues to strengthen cybersecurity 

protections for students, parents, borrowers, institutions, 

and other financial partners.

Legacy Environment

In the current federal student aid process, students and 

families navigate a complex and fragmented landscape and 

interact with multiple systems, vendors, processes, and 

interfaces across a multitude of brands and user experiences. 

This poor customer experience creates confusion and results 
FY 2022 AGENCY FINANCIAL REPORT 40 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

in customers failing to understand how to apply for and 

maintain their aid eligibility. Because of a confusing current 

state, federal student loan borrowers do not know for 

which loan forgiveness and repayment options they qualify. 

Additionally, operational complexities result in higher 

administrative costs and hinder effective oversight of the 

Department’s vendors.

Next Gen FSA Environment

FSA combined multiple websites, contact centers, and 

other customer interfaces into a simplified, consistent, and 

engaging customer experience, which has been enhanced 

by standardized training and tools. FSA’s website—

StudentAid.gov—continues to be customers’ single front 

door on the web. FSA continues to enhance its modern selfservice and consumer information tools that help customers 

understand the aid they have received, their remaining 

eligibility, for what loan forgiveness programs they may be 

eligible, and how they can manage loan repayment in a way 

that meets their goals.

Some of FSA’s Digital and Customer Care (DCC) 

tools include the Federal Student Aid Estimator, Loan 

Simulator, Aidan Virtual Assistant, and a Public Service 

Loan Forgiveness (PSLF) help tool. In FY 2022, FSA 

launched Medallia, a new survey tool, that allows FSA to 

use customers’ feedback to better serve them, and FSA 

retired the myStudentAid mobile app due to low usage. In 

FY 2022, FSA also enhanced the PSLF Help Tool to reflect 

program changes as a result of the limited PSLF waiver 

the Department announced. FSA enhanced resources and 

tools to help borrowers prepare for student loan payments 

to restart after the COVID-19 payment pause ends. FSA 

also updated the income-driven repayment (IDR) plan 

application to allow borrowers to self-certify income 

and better streamline the application process, as well as 

updated its virtual assistant to answer more IDR planrelated questions.

Customers now are getting questions answered through 

contact centers staffed by Next Gen Business Process 

Operations (BPO) vendors, which the Department brought 

online in FY 2022 under enhanced cybersecurity standards. 

BPO is the personnel component of the Next Gen vision. 

These vendors manage millions of customer interactions, 

have been trained in a uniform way, and operate on a 

single contact center platform that will improve operational 

consistency, efficiency, and oversight. While managing 

customer and partner relations, BPO vendors:

• Deliver efficient and effective customer and 

partner experiences.

• Improve customer outcomes.

• Ensure compliance with consumer 

protections standards.

• Establish greater operational flexibility.

• Reduce operational complexity.

In FY 2022, FSA required customers who create a new 

account on StudentAid.gov to set up and use two-step 

verification, a commonly-used process where students, 

parents, and borrowers must provide two or more pieces 

of information to verify their identity to gain access to an 

application or digital resource. Two-step verification helps 

prevent cybercriminals from illegally obtaining student aid 

account information and credentials used to access online 

tools, such as the Free Application for Federal Student Aid

(FAFSA®), PSLF Help Tool, and Loan Simulator. The 

Department’s actions meet the requirements—in Executive 

Order 14028 - Improving the Nation’s Cybersecurity—to 

implement multi-factor authentication.

Next Gen remains deeply committed to improving the FSA 

experience for partners as well as customers. In FY 2022, 

FSA introduced an enhanced, modernized National Student 

Loan Data System (NSLDS®) Professional Access website 

for the institutions and other partners that administer the 

federal student aid programs. The updated site is more 

secure and easier to navigate. The site also improves the user 

experience, eliminates the need for users to toggle between 

systems to see students’ grant information, and simplifies 

the process to download most reports.

The FSA Partner Connect website, fsapartners.ed.gov, 

consolidates the tools that partners use regularly onto 

a single digital platform that streamlines operational 

information by award year, provides notifications related to 

a partner’s specific school activities, tracks scheduled system 

outages, and more. FSA Partner Connect also reduces the 

administrative burden on financial aid professionals at 

more than 5,600 postsecondary schools around the globe, 

allowing them more time to serve students. FSA’s future 

plans for the Partner Connect site include replacing the 

legacy Postsecondary Education Participants System (PEPS) 

and redesigning the Application for Approval to Participate 

in the Federal Student Financial Aid Programs (E-App).

In FY 2022, FSA posted the solicitation for its long-term 

loan servicing solution, the Unified Servicing and Data 

Solution (USDS). Currently, six federal loan servicers (i.e., 

legacy loan servicers) support borrowers first while they are 
FY 2022 AGENCY FINANCIAL REPORT 41 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

in school and in loan repayment. Each legacy loan servicer 

operates under its own brand and has its own website and 

self-service tools for customers. This disjointed servicing 

system is often confusing for borrowers, and they are 

understandably frustrated when they receive inconsistent 

information about something as important as their student 

loans. The overarching goals of the USDS are to:

• Provide all federally managed borrowers with complete 

account management capabilities on StudentAid.gov.

• Increase servicer accountability to reduce loan 

delinquencies and defaults and other customer service 

benchmarks through clear, measurable service-level 

agreements and performance incentives.

• Allow FSA to collect more and better data from legacy 

loan servicers to improve account transfers, borrowers’ 

access to information, and FSA’s ability to monitor 

servicer performance.

• Bring legacy loan servicers up to enhanced 

cybersecurity standards.

To maintain the stability of the loan servicing environment, 

FSA expects to award new loan servicing contracts through 

the USDS and ensure that USDS vendors are compliant 

with modern cybersecurity standards before the legacy loan 

servicing contracts expire in December 2023. Through the 

USDS solicitation, FSA will award contracts to multiple 

loan servicers who will help guide more than 35 million 

student loan borrowers with federally managed loans 

through successful repayment.

LEVER AGING DATA AS A 

STRATEGIC ASSET

The Department continues to focus on leveraging its data 

as a strategic asset by further implementing requirements 

in the Foundations for Evidence-Based Policymaking Act 

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

Strategy. The Department has implemented efforts 

to strengthen data governance while overseeing the 

unprecedented investment in students and schools through 

the Education Stabilization Fund, created and subsequently 

augmented through the triad of COVID relief laws. This 

section highlights five areas guiding the Department 

towards realizing the power of data in daily operations and 

national policy: (1) the ED Data Strategy; (2) Open Data; 

(3) the Education Stabilization Fund Transparency Portal; 

(4) Data Quality; and (5) the ED Learning Agenda.

The Department’s Data Strategy

The FY 2020 Action Plan for the Federal Data Strategy called 

for agencies to “put in place a data strategy or road map,” 

and in December 2020, the Department completed and 

published its inaugural Data Strategy. The Department’s 

Data Governance Board (DGB) guided the development 

of four goals—to strengthen agency-wide data governance, 

build human capacity to leverage data, advance the strategic 

use of data, and to improve data access, transparency, and 

privacy. The Office of the Chief Data Officer (OCDO) led 

agency-wide working groups composed of representatives 

of each principal office to develop 19 objectives and a 

multi-year action plan to guide implementation throughout 

FY 2021 and FY 2022. 

December 2021 marked the completion of the first year 

implementing the Department’s Data Strategy and 

executing its priority goals and objectives designed to realize 

the full potential of data to drive decision-making and 

support our nation’s students. Building on progress made in 

FY 2021, the DGB and OCDO coordinated across principal 

offices of the Department in FY 2022 to implement data 

governance policies, strengthen data management functions, 

launch an agency data literacy program, conduct research for 

a data privacy playbook, improve our data quality approach, 

and more. 

More specifically, in FY 2022, OCDO recommended 

improvements to the management of data-related 

investments through the Department’s capital planning 

process, to support Goal 1 of the Data Strategy, 

documenting the current state and target state, with an 

implementation plan for Quarter Four of FY 2022. The 

agency also continued exemplary progress in Goal 2 

with the implementation of a suite of new curricular 

opportunities for Department staff to enhance their data 

competencies and skills, continued internal outreach 

and advocacy through weekly and monthly data skill 

engagements and principal office-specific sessions, 

and a focus on cross-agency engagement to share the 

Department’s leading-edge work in this space. 

As evidence of the impact and effectiveness of these efforts to 

instill a data centric culture throughout the Department, in 

early FY 2022, the DGB completed a review of the FY 2021 

Agency Data Maturity Assessment (DMA), in which 93% 

of ED’s principal offices improved their data maturity from 

FY 2020. This analysis of the DMA further informed the 

DGB’s priorities for FY 2022, which include a focus on data 

management strategies and oversight as well as data quality. 

ED’s pioneering work in the Data Maturity arena was 

highlighted in a Partnership for Public Service issue brief as an 

example for other federal agencies to emulate. 
FY 2022 AGENCY FINANCIAL REPORT 42 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Finally, OCDO and the DGB have commenced an analysis 

to gauge the progress and accomplishments rendered through 

ED’s inaugural Data Strategy with the goal of publishing by 

early FY 2023 the agency’s Data Strategy version 2.0 to guide 

and inform efforts throughout FYs 2023, 2024, and 2025. 

Open Data

Improving access to Department data, while maintaining its 

quality and confidentiality, is key to expanding the agency’s 

ability to generate evidence to inform policy and program 

decisions. Increasing access to data for Department staff, 

federal, state, and local lawmakers, and researchers can 

help the Department to make new connections and foster 

evidence-based decision making. 

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

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

initial population of public data profiles. A central repository 

for Department data assets, ODP is a fully featured, 

robust, and highly scalable data repository that maintains 

all data assets in a fully searchable catalog. As required 

by the Evidence Act and guided by Data Strategy Goal 4, 

throughout FY 2022, the Department continued to advance 

towards a comprehensive data inventory by further expanding 

on the ODP; increasing its catalogued data assets for both 

externally available open data and internal sources subject to 

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

growing the number of Department open data assets listed in 

the Federal Data Catalogue. 

The ODP significantly improves the Department’s ability to 

grow and operationalize its comprehensive data inventory 

while progressing on open data requirements. In FY 2022, 

OCDO and the National Center for Education Statistics 

(NCES) worked to catalogue and consolidate NCES 

data sets to the comprehensive data inventory. The data 

inventory will become significantly more comprehensive 

when that consolidation has been completed later in 

FY 2022. Additionally, the Open Data Platform has been 

enhanced to provide principal office data stewards with 

login.gov access as well as improved upload and meta data 

entry interface that will simplify growing and maintaining 

the comprehensive data inventory. 

Finally, while guidance related to the consistent 

implementation of Title II of the Evidence Act remains 

unpublished by OMB and the 2022 Federal Data Strategy 

Action Plan has yet to be released to agencies, the Department 

remains committed to publishing and executing the Act’s 

required open data plan by the end of FY 2022. Collectively, 

the Department remains at the forefront of federal agencies 

in realizing the requirements of the Open, Public, Electronic 

and Necessary Government Data Act (OPEN) (Title II of the 

Evidence Act), and the ODP is leading example of how the 

Department is making its data open by default. 

Education Stabilization Fund Public 

Transparency Portal

Launched publicly in the first quarter of FY 2021, 

the Education Stabilization Fund (ESF) Transparency 

Portal (Portal), located at covid-relief-data.ed.gov, is 

the Department’s website dedicated to collecting and 

disseminating data and information about the ESF programs 

managed by the Department and authorized through the 

Coronavirus Aid, Relief, and Economic Security (CARES) Act, 

Coronavirus Response and Relief Supplemental Appropriations 

(CRRSA) Act, and the American Rescue Plan (ARP) Act. 

The Portal provides decision-makers, parents, students, 

teachers, education leaders, and taxpayers with information 

about ESF programs and discloses how states, districts, 

and institutions of higher education (IHEs) spent COVID 

relief funds. The funding data is from public data sources 

and reflects data collected by the Department and data 

released or shared by other federal agencies, including the 

General Services Administration, and the Department of 

the Treasury. The Portal enables state and IHE grantees to 

submit annual performance reports on funding authorized 

through the ESSER, GEER, EANS, and HEER Funds, 

providing the public and decision makers fuller insight into 

the expenditures and usage of ESF program funds. 

Throughout FY 2022, the Department executed several 

enhancements to the Portal which improved transparency 

and increased accountability. For example, in FY 2022, the 

Office of Elementary and Secondary Education (OESE) 

collaborated with OCDO to include state level award and 

expenditure data for the Emergency Assistance to NonPublic Schools (EANS) program authorized through the 

ARP Act. This feature was in addition to a cyclical monthly 

refresh of award and expenditure data for all ESF programs 

as disclosed on USAspending.gov and subsequently 

published to the Portal. 

OCDO, in coordination with OESE and the Office of 

Postsecondary Education, also developed and published 

the Year 2 Annual Performance Report (APR) forms for 

the ESSER, GEER, and HEER Fund programs and Year 1 

APR form for the EANS program. This involved the review 

and adjudication of hundreds of public comments and the 

training on the APR form requirements via webinars for 

grantees of each of the four main ESF programs featured on 

the Portal. ESSER and GEER grantees were also afforded 

the opportunity to submit corrections to improve the 

quality of their now final Year 1 APR data submissions 

documenting usage of CARES Act funds. Collectively, the 

enhanced level of technical assistance provided to ESF grant 
FY 2022 AGENCY FINANCIAL REPORT 43 U.S. DEPARTMENT OF EDUCATION

M A N A G E M E N T ’ S D I S C U S S I O N A N D A N A LY S I S ( U N A U D I T E D ) 

recipients in FY 2022 supports the Department’s efforts 

to improve the quality and accuracy of the data it receives 

from ESF grantees on the expenditure and use of funding 

under CARES, CRRSA, and ARP Acts. 

Beginning in quarter three of FY 2022, the Department 

commenced collection of Year 2 APR data for the ESSER, 

GEER, and HEER Fund grantees and Year 1 data for 

EANS prime grantees through the Portal. The Department 

anticipates publishing the near 5,000 APRs collectively 

received across the four main ESF programs represented on 

the Portal in the first quarter of FY 2023. An exemplar of 

open, transparent data, the Portal is fully responsive to the 

mandate in the OPEN Government Data Act (Title II of 

the Evidence Act) to make public data open and accessible. 

Data Quality

The Department, states, and schools must have effective 

controls to ensure that reported data are accurate, reliable, 

and accessible to improve the use of that data at the 

Department and in the education community. However, 

the Department’s program offices have historically 

had varying levels of data quality control among their 

data sets, and findings from the 2023 Office of Inspector 

General’s Management Challenges Report citing a lack 

of overall integrity and persistent weaknesses in the data 

quality and reporting it receives from grantees provide 

further evidence that a comprehensive strategy is warranted.

The ED Data Strategy Objective 1.5 calls for the 

Department to “Implement a cohesive data quality 

approach for the agency, leveraging best practices, technical 

assistance, and controls.” Building on efforts launched 

in previous fiscal years, the Department has continued 

to refine and execute components of a multi-pronged 

approach to address root causes and improve data quality. 

Executing initially with grantees participating in ESF 

programs, such actions throughout FY 2022 have included 

ensuring grantees are aware of their data responsibilities 

under the conditions of their grants and of the credible 

consequences for noncompliance, ranging from additional 

informal monitoring through termination of the grant. 

Resources and technical assistance have also been levied to 

improve the varying capacity of grantees in reporting data 

and varying capacity among Department staff in reviewing 

grantee-reported data. 

As monitoring program performance remains a key motive 

for improving data quality, improving the development, 

reporting, and use of the agency’s programs’ performance 

and accountability measures remains a focus for the 

Department as well (Data Strategy Objective 3.4). The 

focus throughout FY 2021 and into FY 2022 has been 

the review of the Government Performance and Results 

Act (GPRA) lifecycle with agency stakeholders. The 

Department’s work has included drafting a framework for 

review of performance measures that support evidencebased decisions, incorporating budget guidance for 

programs, the development of a data quality review 

checklist for performance measures, and identifying 

opportunities to review the work during the Information 

Collection Request process. 

The Department has continued to work on developing 

data quality controls for each stage of the data lifecycle, 

including mechanisms for evaluating, preventing, and 

remediating data irregularities to assure higher quality data 

for the agency to use in meeting its mission and strategic 

objectives. To help further this goal, in FY 2022, the 

Department completed and published in October 2023, 

a Data Quality Playbook, outlining authorities, tools, and 

resources for grant program managers. The playbook helps 

grant program managers assess and improve data quality 

before submission, proposes meaningful incentives for data 

submitters, strengthens communication strategies, and 

proposes ways to reduce the burden on both Department 

staff and grantees. The playbook provides guidance for 

strengthening the agency’s data quality standards to help 

reduce data quality issues and improve data interoperability. 

It also builds common language for discussing data quality 

with internal and external stakeholders and provides 

recommendations for handling common irregularities. 

Other critical initiatives planned for implementation 

in FY 2022 and start of FY 2023 include updating the 

Department’s Information Quality Act (IQA) Guidelines and 

the establishment of data quality plans as a component in 

early stages of the data collection (and investment lifecycle). 

To better align with updated expectations from the Office of 

Management and Budget (OMB M-19-15), the Evidence Act, 

as well as organizational need, the Department plans to revise 

its IQA Guidelines to provide clearer guidance to the public 

(and Department staff) about data quality requirements, 

processes, and appeals. The Department will also be placing a 

stronger emphasis on the establishment and transparency of 

data quality plans in advance of data collection or creation, to 

ensure appropriate levels of resourcing are provided to ensure 

data are fit for purpose. 

The Department’s Learning Agenda 

The Department’s FY 2022–FY 2026 Learning Agenda was 

published in July 2022, in conjunction with the release of 

the Department’s Strategic Plan. The Learning Agenda is 

aligned to the Department’s goals and strategic objectives, 

reflecting the Secretary’s priorities for the Department over 
FY 2022 AGENCY FINANCIAL REPORT 44 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

the next four years. The Learning Agenda is complemented 

by an Annual Evaluation Plan. The Annual Evaluation 

Plan includes a listing of the Department’s most significant 

evaluation activities in a given fiscal year. All Evidence Act 

deliverables are located at https://www.ed.gov/data. 

The Learning Agenda was developed in consultation with 

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

ELG is co-chaired by the Department’s Evaluation Officer 

and the Director of the Department’s Grants Policy Office 

(GPO) and includes members from the Department’s 

primary grant-making offices as well as mission-support 

units, such as the Department’s Budget Service, and Office 

of General Counsel, and ex-officio representatives from the 

Office of the Chief Data Officer, the Statistical Official, 

and the Performance Improvement Officer. Feedback 

from OMB and consultation with stakeholders across 

government, education, and the general public, was also 

used to inform the Department’s Learning Agenda. 

In addition to advising the Evaluation Officer on the 

development of the Learning Agenda, the ELG advises 

Department leaders on how to support the capacity of 

Department staff to make better use of data and evidence. 

The GPO, led by the ELG co-chair, continues to spearhead 

a range of internal training opportunities for Department 

staff to bolster the use of the Secretary’s policy priorities, 

including the use of evidence in program design, and to 

consider how the Department’s grantmaking activities can 

build evidence for improvement in the future. 

CONTINUOUS IMPROVEMENT

Improving critical infrastructure, systems and overall 

capacity, and ensuring sound strategic decision-making 

regarding allocation of resources are essential to the 

Department’s future progress and success. Implementing 

the new G6 modernization is one of the Department’s 

key initiatives.

G5 Modernization/G6 

The G5 modernization project is an initiative that started 

in 2019 to develop a new grants management system that 

will support the Department’s grant programs and the 

broader grants community. G6 is the modernized system 

that will replace G5, allowing users to apply, track, and 

manage all grants through an improved user experience. It 

will modernize and consolidate existing business processes 

and manual workarounds into one platform and streamline 

the grants management lifecycle, improving oversight 

and monitoring. 

Project Objectives 

The Department’s Grants Management System, G5, is 

a custom-built, full life cycle grants management and 

payment system that has reached the end of life. Despite 

years of ongoing G5 maintenance, stakeholders continue to 

identify concerns regarding the system’s functionality and/

or ease of use. The Department’s current grant processes 

rely on multiple systems utilizing various technologies. 

Much of the data is duplicated, there is a lack of visibility, 

and there are ad-hoc workarounds. 

To effectively address the needs of all users, the Business 

Systems Support Division within the Office of Finance 

and Operations initiated the G5 Modernization Initiative 

to replace G5 and implement a state-of-the-art grants 

management system. The objective of this program is to 

implement an enterprise-wide grants management platform 

that achieves the following objectives: 

1. Improved effectiveness of grant programs by 

streamlining grant processes, tools, and 

technology agency-wide.

2. Enhanced and modularized grants platform

with superior customer experience using industry 

best practices. 

3. Reduced cost by minimizing disjointed grants 

systems, lowering maintenance, and reducing 

paper. 

4. More informed decision-making by Program 

Offices by utilizing advanced analytics and 

collaboration tools. 

5. An evergreen platform capable of easily 

incorporating future technology advancements 

and compliance requirements.

System Components 

The “system” consists of two main components. 

• Education Grants Platform (EGP). The EGP 

will serve as the foundation for the entire Grants 

Segment Portfolio of Systems. The EGP, implemented 

as a “Platform of Platforms,” will house Grants 

Management functionality and capabilities needed 

across the Department. The EGP, depicted below, is 

a grants platform that incorporates Infrastructure as a 

Service provided by Amazon Web Services, Platform 

as a Service provided by Red Hat OpenShift, and a 

host of Software as a Service and traditionally deployed 
FY 2022 AGENCY FINANCIAL REPORT 45 U.S. DEPARTMENT OF EDUCATION

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tools that establish a framework for advanced analytics, technology development, and data integration for improved grant 

operations. Over time, the EGP will be used to both develop and host the Department’s grants ecosystem (technology and 

services). G6 is considered the nucleus of the EGP. 

• G6. The Department’s grants modernization initiative will implement an incremental modern, modular, and secure 

application that segments the grants process into granular modules using microservices that are interdependent, yet 

autonomous enough to be maintained separately. Managing the end-to-end grants process, G6 will combine state-ofthe-art Interactive Experience and Customer Experience frameworks to provide users with a cognitive grants experience 

powered by Artificial Intelligence, Natural Language Processing, and advanced analytics.

Agile Development 

The Grants Modernization Initiative is developing G6 

through a user-centered and incremental approach 

using the Agile methodology over multiple years. The 

subsequent years will be used to roll out G6 capabilities 

in an incremental manner to production and retire the 

corresponding capabilities from the legacy G5 system. 

As functionality is built, groups of grant users will test 

and validate what is built prior to it being released in the 

system. OFO has facilitated multiple working groups, user 

research interviews, and outreach sessions that all keep 

stakeholders informed and include them in the planning 

efforts around development. 

G6 Capabilities 

G6 is being developed to execute the G5 business processes 

and functionality across the grant lifecycle. The G6 

system will: 

• Include all the Department’s core requirements. 

• Maintain an advanced security posture for the data 

and infrastructure.

• Utilize Advanced Business Intelligence and 

Collaboration features to allow Program Officers 

to make more informed decisions with increased 

communication and visibility into data.

• Provide an intuitive user experience. 

The G6 system will have the following characteristics:

• Modular with the ability to turn off or restrict a module 

or sub-module as needed. 

• Based on an open architecture and OMB approved 

grant standards. 

• Built to ensure flexibility, adaptability, interoperability, 

and configurability. 

• Built using a modern technology stack that ensures the 

underlying technology components do not become 

outdated before reaching their end of life. 

• Mobile-enabled. 
FY 2022 AGENCY FINANCIAL REPORT 46 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

• Highly automated.

• Compliant with legislative changes. 

• Roles-based and rules-driven. 

Timeline 

In Year 1 (FY 2022), the modernization program is 

implementing the EGP. 

Looking to Year 2 (FY 2023), the program will begin its 

first phase of the G5 modernization to G6. The team will 

implement the Pre-award phase of the grants’ lifecycle, 

including Planning and Scheduling, Applications, 

Application Packages (Grants.gov, Impact Aid, Fellowship), 

Discretionary Grants, Formula Grants, Loans, Application 

Technical Review Plan, and Review Process. These 

capabilities are identified based on what is available in the 

current G5; however, the Department expects that the 

implementation team shall design the G6 system with 

a much superior user experience using the industry best 

practices, human-centered design, and federal guidelines. 

The Department is planning for the development effort for 

the remaining years and capabilities. FY 2023 to FY 2025 

will be dedicated to Phases 2, 3 and 4 where we will migrate 

different modules to the new platform and decommission 

the corresponding modules from the legacy system, 

therefore stabilizing the G6. In FY 2026, we envision 

decommissioning the legacy G5 and moving into steady 

state G6.