FY 2023 AGENCY FINANCIAL REPORT 81 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Notes to the Consolidated Balance Sheet for

the Year Ended September 30, 2023 

NOTE 1. Summary of Significant Accounting Policies

Reporting Entity and Programs

The U.S. Department of Education (the Department), a Cabinet-level agency of the 

executive branch of the U.S. government, was established by Congress under the 

Department of Education Organization Act (Public Law 96-88), which became effective 

on May 4, 1980. The mission of the Department is to promote student achievement and 

preparation for global competitiveness by fostering educational excellence and ensuring 

equal access. 

The Department is a component of the U.S. government. For this reason, some of the 

assets and liabilities reported by the Department may be eliminated for governmentwide 

reporting because they are offset by assets and liabilities of another U.S. government 

entity. The Consolidated Balance Sheet should be read with the realization that it is for a 

component of the U.S. government. 

The Department is primarily responsible for administering federal student loan and grant 

programs and provides technical assistance to loan and grant recipients and other state 

and local partners. The largest portions of the Department’s financial activities relate to 

the execution of loan and grant programs discussed below.

Federal Student Loan Programs. The Department administers direct loan, loan 

guarantee, and other student aid programs to help students and their families finance the 

cost of postsecondary education. These include the William D. Ford Federal Direct Loan 

(Direct Loan) Program and the Federal Family Education Loan (FFEL) Program.

The Direct Loan Program, added to the Higher Education Act of 1965 (HEA) in 1993 by 

the Student Loan Reform Act of 1993, authorizes the Department to make loans through 

participating schools to eligible undergraduate and graduate students and their parents. 

The Direct Loan Program offers four types of loans: Stafford, Unsubsidized Stafford, 

Parent Loan for Undergraduate Students (PLUS), and Consolidation Loans. Evidence of 

financial need is required for an undergraduate student to receive a subsidized Stafford 

loan. The other three loan programs are available to borrowers at all income levels. Loans 

can be used only to meet qualified educational expenses.

The FFEL Program, authorized by the HEA, operates through state and private, nonprofit 

guaranty agencies that provide loan guarantees on loans made by private lenders to eligible 

students with reinsurance and interest subsidies provided by the Department. The SAFRA 

Act, which was included in the Health Care and Education Reconciliation Act of 2010, stated 

that no new FFEL loans would be made effective July 1, 2010. FFEL Program receivables 

include defaulted FFEL loans and acquired FFEL loans. Acquired FFEL loans include 

student loan assets acquired using temporary authority provided in the Ensuring Continued 

Access to Student Loans Act of 2008 (ECASLA). ECASLA gave the Department temporary 

authority to purchase FFEL loans and participation interests in those loans. The Department 

implemented three activities under this authority: loan purchase commitments; purchases of 

loan participation interests; and a put, or forward purchase commitment, with an asset-backed 

commercial paper (ABCP) Conduit. This authority expired after September 30, 2010; as a 
FY 2023 AGENCY FINANCIAL REPORT 82 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

result, loan purchase commitments and purchases of loan participation interests concluded. 

However, under the terms of the Put Agreement with the conduit, ABCP Conduit activity 

ceased operations in January 2014.

The Department also administers other credit programs for higher education. These 

include the Federal Perkins Loan program, the Teacher Education Assistance for College 

and Higher Education (TEACH) Grant program, the Health Education Assistance Loan 

(HEAL) program, and facilities loan programs that include the Historically Black Colleges 

and Universities (HBCU) Capital Financing program, along with low-interest loans to 

IHEs for the building and renovating of their facilities. (See Note 5)

Grant Programs. The Department has more than 100 grant programs. The three largest 

grant programs are Title I of the Elementary and Secondary Education Act, federal Pell 

Grant, and the Individuals with Disabilities Education Act (IDEA) grants. In addition, the 

Department offers other discretionary grants under a variety of authorizing legislation 

awarded using a competitive process, and formula grants using formulas determined by 

Congress with no application process. 

COVID-19. Congress passed multiple COVID-19 relief bills in fiscal year (FY) 2020 

and FY 2021 including the following that provided funding for educational purposes: the 

Coronavirus Aid, Relief, and Economic Security Act, of 2020 (CARES Act), the Coronavirus 

Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA), and the American 

Rescue Plan Act of 2021 (ARP). The largest component of the education funding provided 

by the COVID-19 relief appropriations established the Education Stabilization Fund, 

which includes the (1) Elementary and Secondary School Emergency Relief Fund, (2) 

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

Fund, and (4) funds for outlying areas. The Education Stabilization Fund is being 

distributed to recipients through various grant programs. The Department transferred 

$563 million of the funds to the Department of the Interior to be administered by the 

Bureau of Indian Education. (See Note 3)

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

student loan borrowers by: 

• 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.

• Making temporary changes to the PSLF program to allow student borrowers to get 

credit for payments made while working for a qualifying employer.

• Addressing issues with IDR payment counting. 

Funding for these actions was provided through indefinite appropriations. 

Other regulatory flexibilities and incentives provided to help students through 

COVID-19 included:

• Stopping all federal wage garnishments and collection actions for borrowers with 

federally held loans in default.
FY 2023 AGENCY FINANCIAL REPORT 83 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

• Federal Supplemental Educational Opportunity Grants to provide emergency aid 

to students.

• Continuation of work-study payments, even if students can no longer work on-site.

• Pell Grants, financial aid, and loans originated for the spring 2020 term, which 

students who have had to leave college campuses will not have to pay back. Moreover, 

none of this aid will count against students’ financial aid lifetime limits.

• Waiving satisfactory academic progress requirements to help ensure that students do 

not lose academic standing and the ability to receive federal financial student aid.

• Tax credits that incentivize employers to help pay for student loans.

Program Offices

The Department has three major program offices that administer most of its loan and 

grant programs: 

• Federal Student Aid (FSA) administers financial assistance programs for students 

pursuing postsecondary education and makes available federal grants, direct loans, and 

work-study funding to eligible undergraduate and graduate students.

• The Office of Elementary and Secondary Education (OESE) assists state educational 

agencies (SEA) and local educational agencies (LEA) to improve the achievement 

of preschool, elementary, and secondary school students; helps ensure equal access 

to services leading to such improvement—particularly children with high needs; 

and provides financial assistance to LEAs whose local revenues are affected by 

federal activities.

• The Office of Special Education and Rehabilitative Services (OSERS) supports programs 

that help provide early intervention and special education services to children and youth 

with disabilities. OSERS also supports programs for the vocational rehabilitation of 

youth and adults with disabilities, including preemployment transition services and other 

transition services designed to assist students with disabilities to enter postsecondary 

education and achieve employment.

Other offices that administer programs and provide leadership, technical assistance, 

and financial support to states, LEAs, and IHEs for reform, strategic investment, and 

innovation in education include: the Office of Career, Technical, and Adult Education 

(OCTAE); Office of Postsecondary Education (OPE); Institute of Education Sciences 

(IES); and Office of English Language Acquisition (OELA). In addition, the Office for 

Civil Rights (OCR) works to ensure equal access to education through the vigorous 

enforcement of civil rights and the collection of data from public schools, promotes 

educational excellence throughout the nation, and serves student populations facing 

discrimination and the advocates and institutions promoting systemic solutions to civil 

rights issues. 
FY 2023 AGENCY FINANCIAL REPORT 84 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Basis of Accounting and Presentation

The Consolidated Balance Sheet was prepared to report the financial position of the 

Department, as required by the Chief Financial Officers Act of 1990 and the Government 

Management Reform Act of 1994. The Consolidated Balance Sheet was prepared from the 

books and records of the Department, in accordance with Generally Accepted Accounting 

Principles (GAAP) accepted in the United States for federal entities, issued by the Federal 

Accounting Standards Advisory Board (FASAB), and the Office of Management and 

Budget (OMB) Circular A-136, Financial Reporting Requirements, as revised. FSA also 

issues a stand-alone Consolidated Balance Sheet that is included in their annual report.

The accounting structure of federal agencies is designed to reflect both accrual and 

budgetary accounting transactions. Under the accrual method of accounting, revenues are 

recognized when earned and expenses are recognized when a liability is incurred, without 

regard to receipt or payment of cash. Budgetary accounting facilitates compliance with 

legal constraints and controls over the use of federal funds.

Intradepartmental transactions and balances have been eliminated from the consolidated 

Balance Sheet. 

Accounting standards require all reporting entities to disclose that accounting standards 

allow certain presentations and disclosures to be modified, if needed, to prevent the 

disclosure of classified information.

Accounting for Federal Credit Programs 

The Department’s accounting for its loan and loan guarantee programs is based on the 

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

is to record the lifetime subsidy cost (expense) of direct loans and loan guarantees, in 

present value terms, at the time the loan is disbursed (subsidy). Components of subsidy 

costs for loans and guarantees include defaults (net of recoveries); contractual payments to 

third-party, private loan collectors who receive a set percentage of amounts collected; and, 

as an offset, origination and other fees collected. For direct loans, the difference between 

interest rates incurred by the Department on its borrowings from the U.S. Department of 

Treasury (Treasury) and interest rates charged to particular borrowers is also subsidized (or 

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

The FCRA establishes the use of financing, program, and Treasury General Fund 

receipt accounts for loan guarantees committed and direct loans obligated after 

September 30, 1991. 

• Financing accounts borrow funds from Treasury, make direct loan disbursements, 

collect fees from lenders and borrowers, pay claims on guaranteed loans, collect 

principal and interest from borrowers, earn interest from Treasury on any uninvested 

funds, and transfer excess subsidy to Treasury General Fund receipt accounts. 

• Program accounts receive and obligate appropriations to cover the positive subsidy cost 

of a direct loan or loan guarantee when the loan is approved and disburses the subsidy 

cost to the financing account when the loan is issued. Program accounts also receive 

appropriations for administrative expenses.

• Treasury General Fund receipt accounts receive amounts paid from financing accounts 

when there are negative subsidies for new loan disbursements or downward reestimates of the subsidy cost of existing loans. 
FY 2023 AGENCY FINANCIAL REPORT 85 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

When a loan is placed in deferment or forbearance, loan repayment is temporarily 

suspended with the length of postponement different for each borrower. Interest accrues 

while a loan is in deferment or forbearance for all loan types except subsidized Direct Loans. 

Loans are canceled if a person dies, meets disability requirements, or occasionally through 

the bankruptcy courts. Loans are also canceled through the Public Service Loan Forgiveness 

(PSLF) program, which forgives the remaining balance on a direct loan after 120 qualifying 

monthly payments are made. These payments must be made under a qualifying repayment 

plan while working full-time for a qualifying employer. In addition, the Department offers 

income-driven repayment plans under which borrowers may receive forgiveness of the 

remaining balance of their loans after 10, 20 or 25 years under certain rules.

Entity and Non-Entity Assets

Assets are classified as either entity or non-entity assets. Entity assets are those that the 

Department has authority to use for its operations. Non-entity assets are those held by 

the Department but not available for use in its operations. Non-entity assets are offset by 

liabilities to third parties and have no impact on net position. The Department combines 

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

the notes. (See Note 2)

Fund Balance with Treasury

Fund Balance with Treasury includes amounts available to pay current liabilities and 

finance authorized purchases, as well as funds restricted until future appropriations are 

received. Treasury processes cash receipts and cash disbursements for the Department. The 

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

Accounts Receivable

Accounts receivable are amounts due to the Department from other federal agencies 

(intragovernmental) and the public (other than intragovernmental). Other than 

intragovernmental receivables result from overpayments to recipients of grants and other 

financial assistance programs, as well as disputed costs resulting from audits of educational 

assistance programs. Amounts due from federal agencies result from reimbursable 

agreements entered into by the Department with other agencies to provide various goods 

and services. Accounts receivable are reduced to net realizable value by an allowance for 

uncollectible amounts. The estimate of an allowance for loss on uncollectible accounts is 

based on the Department’s experience in the collection of receivables and an analysis of 

the outstanding balances. (See Note 4)

Cash and Other Monetary Assets

Cash and other monetary assets are the federal government’s interest in the program assets 

held by state and nonprofit FFEL Program guaranty agencies (guaranty agencies’ federal 

funds). Section 422A of the HEA required FFEL guaranty agencies to establish federal 

student loan reserve funds. Guaranty agencies’ federal funds include initial federal start-up 

funds, receipts of federal reinsurance payments, insurance premiums, guaranty agency 

share of collections on defaulted loans, investment income, administrative cost allowances, 

and other assets.
FY 2023 AGENCY FINANCIAL REPORT 86 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

The balance of guaranty agencies’ federal funds represents consolidated reserve balances of 

the 15 guaranty agencies based on the guaranty agency financial reports that each agency 

submits annually to the Department. Although the Department and the guaranty agencies 

operate on different fiscal years, all guaranty agencies are subject to an annual audit. A 

year-end valuation adjustment is made to adjust the Department’s balances to comply with 

federal accounting principles and disclose funds held outside of Treasury.

Guaranty agencies’ federal funds are classified as other than intragovernmental non-entity 

assets and are offset by a corresponding liability due to Treasury on the Department’s 

balance sheets. The funds are held by the guaranty agencies but can only be used for 

certain specific purposes listed in the Department’s regulations. The guaranty agencies’ 

federal funds are the property of the United States and are reflected in the President’s 

Budget. Payments made to the Department from guaranty agencies’ federal funds 

through a statutory recall or agency closures represent capital transfers and are returned to 

Treasury’s General Fund. (See Note 2)

Loan Receivables, Net and Loan Guarantee Liabilities 

The financial statements reflect the Department’s estimate of the long-term subsidy cost of 

direct and guaranteed loans in accordance with the FCRA. Loans and interest receivable 

are valued at their gross amounts less an allowance for the present value of amounts 

not expected to be recovered, and thus having to be subsidized—called an “allowance 

for subsidy.” The difference between the gross amount and the allowance for subsidy 

is the present value of the cash flows to, and from, the Department that are expected 

from receivables over their projected lives. Similarly, liabilities for loan guarantees are 

valued at the present value of the cash outflows from the Department less the present 

value of related inflows. The estimated present value of net long-term cash outflows 

of the Department for subsidized costs is net of recoveries, interest supplements, and 

offsetting fees.

The loan guarantee liabilities represent the net present value of all future cash flows from 

currently insured FFEL loans, including claim payments, interest assistance, allowance 

payments, and recoveries from assigned loans. Guaranteed loans that default are initially 

turned over to guaranty agencies for collection. Defaulted FFEL loans are accounted for 

as assets and reported at their net present value, similar to direct loans, although they are 

legally not direct student loans. Credit program receivables, net includes defaulted FFEL 

loans owned by the Department and held by the Department or guaranty agencies. In 

most cases, after approximately four years, defaulted guaranteed loans not in repayment 

are turned over by the guaranty agencies to the Department for collection.

FFEL Program receivables include purchased loans and other interests acquired under 

an expired program. The cash flows related to these receivables include collections on 

purchased loans and other activities, including transfers of re-estimated subsidy. The cash 

flows of these authorities also include inflows and outflows associated with the underlying 

or purchased loans and other related activities, including any positive or negative 

subsidy transfers. 

Capitalization of interest occurs as a result of various initiatives, such as loan 

consolidations. As a result, interest receivable is reduced, and loan principal is increased. 

(See Note 5)
FY 2023 AGENCY FINANCIAL REPORT 87 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Property and Equipment, Net and Leases

The Department has very limited acquisition costs associated with buildings, furniture, 

and equipment as all Department and contractor staff are housed in leased buildings. The 

Department does not own real property for the use of its staff. The Department leases 

office space from the General Services Administration (GSA). The lease contracts with 

GSA for privately and publicly owned buildings are operating leases.

The Department also leases information technology and telecommunications equipment, 

as part of a contractor-owned, contractor-operated services contract. Lease payments 

associated with this equipment have been determined to be operating leases and, as such, 

are expensed as incurred. The noncancellable lease term is one year, with the Department 

holding the right to extend the lease term by exercising additional one-year options. (See 

Notes 4 and 10)

Liabilities

Liabilities represent actual and estimated amounts to be paid as a result of transactions or 

events that have already occurred. Liabilities are classified as covered by budgetary resources 

if budgetary resources are available to pay them. Credit program liabilities funded by 

permanent indefinite appropriations are also considered covered by budgetary resources. 

Liabilities are classified as not covered by budgetary resources when congressional action is 

needed before they can be paid. Although future appropriations to fund these liabilities are 

likely, it is not certain that appropriations will be enacted to fund these liabilities. Liabilities 

not requiring appropriated budgetary resources include those related to deposit funds, 

Subsidy Due to Treasury General Fund for future liquidating account collections (pre-1992 

loan guarantee programs), and Federal Perkins Loan program balances due to be repaid to 

the Treasury General Fund. (See Note 6) 

Debt Associated with Loans

The Department borrows from Treasury to provide funding for the Direct Loan, FFEL, 

and other credit programs for higher education. The liability to Treasury from borrowings 

represents unpaid principal at year-end. The Department repays the principal based on 

available fund balances. Interest rates are based on the corresponding rate for 10-year 

Treasury securities and are set for those borrowings supporting each cohort of loans 

once the loans for that cohort are substantially disbursed. Interest is paid to Treasury on 

September 30. In addition, the Federal Financing Bank (FFB) holds bonds issued by 

a designated bonding authority, on behalf of the Department, for the HBCU Capital 

Financing program. The debt for other credit programs for higher education includes the 

liability for full payment of principal and accrued interest for the FFB-financed HBCU 

Capital Financing program. (See Note 7) 

Subsidy Due to Treasury

The Department must transfer to the Treasury General Fund all excess funding 

resulting from downward re-estimates of credit program loans that are subject to FCRA 

requirements. This excess funding is included in the liability for subsidy due to Treasury 

and will be transferred to Treasury in the succeeding fiscal year upon receipt of authority 

from OMB. Subsidy due to Treasury also includes future liquidating account collections 

(estimated collections in excess of estimated outlays) for the Department’s pre-1992 FFEL 
FY 2023 AGENCY FINANCIAL REPORT 88 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

and HEAL loans that, when collected, will also be transferred to the Treasury General 

Fund. (See Note 8)

Accounts Payable

Accounts payable include amounts owed by the Department for goods and services 

received from other entities, as well as payments not yet processed. Other than 

intragovernmental accounts payable include in-process grant and loan disbursements. 

Accrued Grant Liabilities

The Department records grant expenses as grantees drawdown funding on their available 

grant balances. Some grant recipients incur allowable expenditures as of the end of an 

accounting period but have not yet drawn on their available balances to be reimbursed 

by the Department. The Department accrues liabilities for these allowable expenditures. 

The liability amounts are estimated using a combination of historical data and a statistical 

sample survey of current unliquidated balances. Some grantees drawdown funding in 

advance of incurring grant expenditures. A statistical estimate is made for these advance 

drawdowns and is recorded as other than intragovernmental advances (see Note 4).

Personnel Compensation and Other Employee Benefits

Annual, Sick, and Other Leave. The liability for annual leave, compensatory time off, 

and other vested leave is accrued when earned and reduced when taken. Each year, the 

accrued annual leave account balance is adjusted to reflect current pay rates. Sick leave and 

other types of nonvested leave are expensed as taken. Annual leave earned but not taken, 

within established limits, is funded from future financing sources. (See Notes 6 and 9)

Retirement Plans and Other Retirement Benefits. Employees participate in either the 

Civil Service Retirement System (CSRS), a defined benefit plan, or the Federal Employees 

Retirement System (FERS), a defined benefit and contribution plan. For CSRS 

employees, the Department contributes a fixed percentage of pay.

FERS consists of Social Security, a basic annuity plan, and the Thrift Savings Plan. The 

Department and the employee contribute to Social Security and the basic annuity plan at 

rates prescribed by law. In addition, the Department is required to contribute to the Thrift 

Savings Plan a minimum of 1 percent per year of the basic pay of employees covered by 

this system, match voluntary employee contributions up to 3 percent of the employee’s 

basic pay, and match one-half of contributions between 3 percent and 5 percent of 

the employee’s basic pay. For FERS employees, the Department also contributes the 

employer’s share of Medicare.

Contributions for CSRS, FERS, and other retirement benefits are insufficient to fund the 

programs fully and are subsidized by the Office of Personnel Management (OPM). The 

Department imputes its share of the OPM subsidy, using cost factors provided by OPM, 

and reports the full cost of the programs related to its employees in the Department’s 

Statements of Net Cost. These OPM imputed costs are offset by imputed financing 

sources from costs absorbed by others in the Department’s Statements of Changes in 

Net Position.
FY 2023 AGENCY FINANCIAL REPORT 89 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Federal Employees’ Compensation Act. The Federal Employees’ Compensation Act

(FECA) (Pub. L. 103-3) provides income and medical cost protection to covered federal 

civilian employees injured on the job, to employees who have incurred work-related 

occupational diseases, and to beneficiaries of employees whose deaths are attributable 

to job-related injuries or occupational diseases. The FECA program is administered by 

the U.S. Department of Labor (DOL), which pays valid claims and subsequently seeks 

reimbursement from the Department for these paid claims.

The FECA liability consists of two elements. The first element, accrued FECA liability, 

is based on claims paid by DOL but not yet reimbursed by the Department. The 

Department reimburses DOL for claims as funds are appropriated for this purpose. 

In general, there is a two- to three-year period between payment by DOL and 

reimbursement to DOL by the Department. As a result, the Department recognizes an 

intragovernmental liability, not covered by budgetary resources, for the claims paid by 

DOL that will be reimbursed by the Department.

The second element, actuarial FECA liability, is the estimated liability for future benefit 

payments and is recorded as an other than intragovernmental liability, not covered by 

budgetary resources. The actuarial FECA liability includes the expected liability for 

death, disability, medical, and miscellaneous costs for approved compensation cases. 

DOL determines the actuarial FECA liability annually, as of September 30, using an 

actuarial method that considers historical benefit payment patterns, wage inflation factors, 

medical inflation factors, and other variables. The projected annual benefit payments are 

discounted to present value. (See Notes 6 and 9)

Net Position

The components of net position are classified on the Department’s Consolidated Balance 

Sheet as follows:

Unexpended Appropriations. Unexpended Appropriations is the portion of the 

Department’s appropriations received that are represented by undelivered orders or 

are unobligated.

Cumulative Results of Operations. Cumulative Results of Operations represents the 

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

financing sources.

Allocation Transfers

The Department is a party to allocation transfers with other federal agencies as both a 

transferring (parent) entity and a receiving (child) entity. Allocation transfers are legal 

delegations by one entity of its authority to obligate budget authority and outlay funds 

to another entity. A separate fund account (allocation account) is created in the Treasury 

as a subset of the parent fund account for tracking and reporting purposes. All allocation 

transfers of balances are credited to this account, and subsequent activity (e.g. movement 

of unexpended appropriations which affect cumulative results of operations) performed by 

the child entity are charged to this allocation account as they execute the delegated activity 

on behalf of the parent entity. 

The Department is a party to allocation transfers as a parent entity to the Department 

of the Interior and receives allocation transfers as a child entity from the Department of 

Health and Human Services.
FY 2023 AGENCY FINANCIAL REPORT 90 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Taxes

The Department is a federal entity and is not subject to federal, state, or local taxes. 

Therefore, no provision for income taxes is recorded.

Use of Estimates

Department management is required to make certain estimates while preparing the 

Consolidated Balance Sheet in conformity with GAAP. These estimates are reflected in the 

assets, liabilities, and net position of the Consolidated Balance Sheets and may differ from 

actual results. The Department’s estimates are based on management’s best knowledge 

of current events, best available data, economic assumptions, historical experiences, and 

other assumptions that are believed to be reasonable under the circumstances. Significant 

estimates reported on the Consolidated Balance Sheet include: allowance for subsidy for 

direct, defaulted guaranteed, and acquired loans; the liability for loan guarantees; and 

grant liability and advance accruals. (See Notes 4 and 5)

The Department’s estimates for credit programs are calculated using a series of assumption 

models that are updated using a statistically valid sample of National Student Loan 

Data System (NSLDS®) data, data from the Debt Management and Collection System, 

and economic assumptions provided by OMB. Actual results may differ from those 

assumptions and estimates. Differences between actual results and these estimates may 

occur in the valuation of credit program receivables and liabilities for loan guarantees 

under guidelines in the FCRA. The Department recognizes the sensitivity of credit reform 

modeling. Slight changes in modeling methodology or data used to derive assumptions 

can produce largely varied results. The Department therefore continually reviews its model 

factors and statistical modeling techniques to reflect the most accurate credit program 

costs possible in its annual financial statements. The Department updates its assumption 

models in accordance with its model update plan, which takes into consideration statutory 

or new program requirements, major changes to the model structure or methodology, 

and data updates. This level of granularity in the modeling methodology is essential to the 

financial reporting and budgeting processes so that the Department can forecast the costs 

of various program options when making policy decisions. (See Note 5)
FY 2023 AGENCY FINANCIAL REPORT 91 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

NOTE 2. Non-Entity Assets

(Dollars in Millions)

2023 (Unaudited)

Intragovernmental

 Other than 

Intragovernmental 

Non-Entity Assets

Fund Balance with Treasury $ 862 $ - 

Loans Receivable, Net - 1,386 

Cash and Other Monetary Assets - 564 

Accounts Receivable, Net - 36 

Total Non-Entity Assets 862 1,986 

Entity Assets 243,320 1,071,881 

Total Assets $ 244,182 $ 1,073,867 

The Department’s FY 2023 assets are predominantly entity assets (99.8 percent), leaving 

a small portion of assets remaining as non-entity assets. Non-entity intragovernmental 

assets primarily consist of balances in deposit and clearing accounts. Non-entity other 

than intragovernmental assets primarily consist of guaranty agency reserves (28.4 percent), 

reported as cash and other monetary assets, and Federal Perkins Loan program loan 

receivables (69.8 percent), reported as loan receivables, net. Federal Perkins Loan program 

receivables are a non-entity asset because the assets are held by the Department but are not 

available for use by the Department. The corresponding liabilities for non-entity assets are 

reflected in various accounts, including intragovernmental accounts payable, Guaranty 

Agencies’ Federal Funds Due to Treasury, and other liabilities. (See Note 9)

NOTE 3. Fund Balance with Treasury 

(Dollars in Millions)

2023 (Unaudited)

Appropriated Funds $ 102,088 

Revolving Funds 65,913 

Special Funds 9 

Non-Budgetary: Trust Funds 1 

COVID-19 Funds 75,263 

All Other Funds 755 

Total Fund Balance with Treasury $ 244,029 

In FY 2023, $523 million of unused funds from canceled appropriations was returned 

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

Treasury in accordance with Treasury guidelines.
FY 2023 AGENCY FINANCIAL REPORT 92 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

NOTE 4. Other Assets 

(Dollars in Millions)

2023 (Unaudited)

Intragovernmental

 Other than 

Intragovernmental 

Accounts Receivable, Net $ 6 $ 307 

Advances to Others and Prepayments 145 2 

Property and Equipment, Net - 2 

Other 2 - 

Total Other Assets $ 153 $ 311 

Included in the other than intragovernmental accounts receivable are amounts owed 

because of criminal restitution orders that are to be collected by the Department of 

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

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

the allowance for uncollectible amounts as of September 30, 2023, related to criminal 

restitutions totaled $138 million, and $127 million, respectively.

NOTE 5. Loan Receivables, Net and Loan Guarantee Liabilities

Loans Receivables

(Dollars in Millions)

2023 (Unaudited)

Principal Accrued Interest Allowance for Subsidy Net

Direct Loan Program $ 1,336,158 $ 83,439 $ (388,685) $ 1,030,912 

FFEL Program 78,991 20,840 (60,517) 39,314 

Other Credit Programs for Higher Education 2,874 562 (670) 2,766 

Total Loans Receivable $ 1,418,023 $ 104,841 $ (449,872) $ 1,072,992 

The federal student loan programs provide students and their families with the funds to 

help meet postsecondary education costs. Funding for these programs is provided through 

permanent indefinite budget authority. The emergency relief measures provided by 

Congress and the administration in response to the COVID-19 pandemic were recorded 

as loan modifications. Per OMB guidance, loan modifications were calculated using the 

President’s Budget formulation discount rates.

As the net loans receivable represents the net present value of future cash flows, it is not 

necessarily representative of the proceeds that might be expected if these loans were sold 

on the open market. 

What follows is additional analysis for each of the loan programs. 

DIRECT LOAN PROGRAM 

The federal government makes loans directly to students and parents through participating 

IHEs under the Direct Loan Program. Direct loans are originated and serviced through 

contracts with private vendors.

Direct Loan Program loan receivables include defaulted and nondefaulted loans owned 

by the Department. Of the $1,419.6 billion in gross loan receivables, as of September 30, 

2023, $76.5 billion (5.4 percent) in loan principal was in default and had been transferred 

to the Department’s defaulted loan servicer.
FY 2023 AGENCY FINANCIAL REPORT 93 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Direct Loan Program Loan Disbursements by Loan Type

(Dollars in Millions)

2023 (Unaudited)

Stafford $ 15,671 

Unsubsidized Stafford 44,878 

PLUS 23,928 

Consolidation 37,792 

Total Disbursements $ 122,269 

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

trend information.

Student and parent borrowers may prepay existing loans without penalty through a new 

consolidation loan. Under the FCRA and requirements provided by OMB regulations, 

the retirement of direct loans being consolidated is considered a collection of principal and 

interest. This receipt is offset by the disbursement related to the newly created consolidation 

loan. Underlying direct or guaranteed loans, performing or nonperforming, are paid off 

in their original cohort; new consolidation loans are originated in the cohort in which the 

new consolidation loan was obligated. Consolidation activity is taken into consideration in 

establishing subsidy rates for defaults and other cash flows. The cost of new consolidations 

is included in subsidy expense for the current-year cohort; the effect of prepayments 

on existing loans could contribute to re-estimates of prior cohort subsidy costs. The net 

receivables include estimates of future prepayments of existing loans through consolidations; 

they do not reflect subsidy costs associated with anticipated future consolidation loans.

Direct loan consolidations were $37.8 billion during FY 2023. The effect of the early payoff 

of the existing loans—those being consolidated—is recognized in the future projected cash 

flows associated with that cohort.

Direct Loan Subsidy Rates—Cohort 2023 (Unaudited)

Interest 

 Differential Defaults Fees Other* Total

Stafford 24.63% 1.99% -1.06% -11.39% 14.17%

Unsubsidized Stafford 26.89% 1.81% -1.06% -16.16% 11.48%

PLUS 12.91% 1.20% -4.23% -16.56% -6.68%

Consolidation 26.33% 0.20% 0.00% 7.01% 33.54%

Weighted Average Total 23.89% 1.21% -1.29% -8.19% 15.62%

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

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

applied to the direct loans disbursed during the current reporting year to yield the subsidy 

expense. The subsidy expense for new loans reported in the current year could result from 

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

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

The subsidy costs of the Department’s student loan programs, especially the Direct 

Loan Program, are highly sensitive to changes in actual and forecasted interest rates. The 

formulas for determining program interest rates are established by statute; the existing 

loan portfolio has a mixture of borrower and lender rate formulas. Interest rate projections 

are based on probabilistic interest rate scenario inputs developed and provided by OMB.
FY 2023 AGENCY FINANCIAL REPORT 94 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Federal Family Education Loan Program

FFEL was established in FY 1965 and is a guaranteed loan program. As a result of the

SAFRA Act, no new FFEL loans have been made since July 1, 2010. Federal guarantees 

on FFEL Program loans and commitments remain in effect for loans made before 

July 1, 2010, unless they were sold to the Department through an ECASLA authority 

(acquired FFEL loans), consolidated into a direct loan, or otherwise satisfied, discharged, 

or canceled.

FFEL Guaranteed Loans Outstanding

(Dollars in Billions)

2023 (Unaudited)

Outstanding Principal of Guaranteed Loans, Face Value $ 80.6 

Amount of Outstanding Principal Guaranteed $ 80.6 

As of September 30, 2023, the total principal value of guaranteed loans outstanding 

and the amount of that principal which is guaranteed is approximately $80.6 billion. 

Additionally, the FFEL Program guarantees outstanding interest balances. As of 

September 30, 2023, the interest balances outstanding for guaranteed loans held by 

lenders was approximately $3.8 billion. The Department’s total FFEL Program guarantees 

(principal and interest) are approximately $84.4 billion as of September 30, 2023. Of 

the total guaranteed amount, the Department would expect to pay a smaller amount to 

the guaranty agencies. The guarantee rates range from 75 to 100 percent of the principal 

and interest balance depending on the type of claim, when the loan was made, and the 

guaranty agency’s claim experience. For purposes of disclosing the Department’s total risk 

exposure for FFEL guarantees, the highest reimbursement rate of 100 percent is assumed.

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

following table.

FFEL Program Loan Receivables 

(Dollars in Millions)

2023 (Unaudited)

Principal Accrued Interest

Allowance 

for Subsidy 

(Present Value)

Net

DEFAULTED FFEL GUARANTEED LOANS

FFEL GSL Program (Pre-1992) $ 3,208 $ 5,029 $ (8,014) $ 223 

FFEL GSL Program (Post-1991) 37,829 8,044 (34,253) 11,620 

Total Defaulted FFEL Guaranteed Loans 41,037 13,073 (42,267) 11,843 

ACQUIRED FFEL LOANS

Loan Purchase Commitment 13,083 2,490 (8,204) 7,369 

Loan Participation Purchase 23,673 4,939 (9,879) 18,733 

ABCP Conduit 1,198 338 (167) 1,369 

Total Acquired FFEL Loans 37,954 7,767 (18,250) 27,471 

FFEL Program Loan Receivables $ 78,991 $ 20,840 $ (60,517) $ 39,314 
FY 2023 AGENCY FINANCIAL REPORT 95 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Liabilities for Loan Guarantees 

(Dollars in Millions)

2023 (Unaudited)

Post-1991 FFEL Loan Guarantee Liability $ 11,084 

Pre-1992 FFEL Liquidating Account Liability for Loan Guarantees (138)

FFEL Liabilities for Loan Guarantees 10,946 

HEAL Liabilities for Loan Guarantees 251 

Total Ending Balance for Liabilities for Loan Guarantees $ 11,197 

Other Credit Programs for Higher Education

Loans Receivables, Other Credit Programs for Higher Education 

(Dollars in Millions)

2023 (Unaudited)

Principal Accrued Interest Allowance for Subsidy 

(Present Value) Net

Federal Perkins Loans $ 1,313 $ 467 $ (394) $ 1,386 

TEACH Program Loans 809 67 (322) 554 

HEAL Program Loans 368 25 (5) 388 

Facilities Loan Programs 384 3 51 438 

Total $ 2,874 $ 562 $ (670) $ 2,766 

Federal Perkins Loan Program. Loans made through the Federal Perkins Loan program 

were low-interest federal student loans for undergraduate and graduate students with 

exceptional financial needs. Schools made these Perkins loans to their students and are 

responsible for servicing the loans throughout the repayment term. Borrowers who 

undertake certain public, military, or teaching service employment are eligible to have all or 

part of their loans canceled. 

The Perkins Loan program was a revolving loan program where the loan repayments 

collected from former students were used to make new loans to current students. The 

Department provided most of the capital used by schools to make these loans to eligible 

students. Participating schools provided the remaining program funding. In some 

statutorily defined cases, funds were provided by the Department to reimburse schools for 

loan cancellations. The above schedule includes only Perkins loans that were assigned to 

the Department when schools discontinued their participation in the program. For these 

assigned Perkins loans, collections of principal, interest, and fees, net of amounts paid to 

cover contract collection costs totaled $343 million in FY 2023.

The Federal Perkins Loan Program Extension Act of 2015 (Extension Act) eliminated 

the authorization for schools to make new Perkins loan disbursements as of 

September 30, 2017, and ended all Perkins loan disbursements by June 30, 2018. 

Before the authority for new Perkins loans ended, collections made by the schools 

would go back into each school’s Perkins fund to be used to make more loans. Schools 

are required to return to the Department the federal share of any excess beyond what is 

needed (excess liquid capital). 

Schools are not required to liquidate and close out their programs now that no new Perkins 

loans are being made. Schools continue to take in collections and are required to return the 

federal share of the capital that is collected to the Department on an annual basis. Schools 

returned $521 million to the Department in FY 2023 for the federal share of collected cash. 
FY 2023 AGENCY FINANCIAL REPORT 96 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

Beginning with the 2023 reporting year, as part of the wind-down of the Federal Perkins 

Loan Program, the Secretary began requiring schools to assign to the Department all 

Perkins Loans that have been in default for more than two years for which there have 

been no current collections. While the mandatory assignment policy has driven more 

schools to liquidate, the majority of schools are continuing to service existing portfolios to 

recover the money they contributed to their Perkins funds and will do so for as long as it 

is feasible or until the eventual wind-down of their portfolios. Schools that liquidate and 

close out their programs must transfer any outstanding portfolio to the Department and 

liquidate any final cash. Most recent data from the 2024-25 FISAP shows a $1.6 billion 

outstanding principal balance on Perkins loans held by schools and the Department’s 

equity interest on this portfolio is $1.4 billion.

The amounts collected by the Department annually for defaulted Perkins loans and for 

the return of the federal share of schools’ Perkins capital contributions are returned to the 

Treasury General Fund. 

TEACH Grant Program. The Department awards annual grants of up to $4,000 to 

eligible undergraduate and graduate students who agree to serve as full-time mathematics, 

science, foreign language, bilingual education, special education, or reading teachers at 

high-need schools for four years within eight years of graduation. The maximum lifetime 

grant for students is $16,000 for undergraduate programs and $8,000 for graduate 

programs. For students failing to fulfill the service requirement, the grants are converted 

to direct unsubsidized Stafford loans. The program is operated as a loan program 

under the FCRA for budget and accounting purposes since grants can be converted to 

direct loans. 

TEACH Subsidy Rates—Cohort 2023 (Unaudited)

Interest Differential Defaults Fees Other Total

Subsidy Rates 76.72% 1.56% 0.00% -32.63% 45.65%

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

HEAL Program. The Department assumed responsibility in FY 2014 for the HEAL 

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

HEAL program is structured as required by the FCRA. A liquidating account is used 

to record all cash flows to and from the government resulting from guaranteed HEAL 

loans committed before 1992. All loan activity for 1992 and beyond is recorded in 

corresponding financing accounts.

Facilities Loan Programs. The Department also administers the HBCU Capital 

Financing program. Since 1992, this program has given HBCUs access to financing for 

the repair, renovation, and in exceptional circumstances, the construction or acquisition of 

facilities, equipment, and infrastructure through federally insured bonds. The Department 

has authorized a designated bonding authority to make loans to eligible institutions, 

charge interest, and collect principal and interest payments. In compliance with HEA, as 

amended, the bonding authority maintains an escrow account to pay the principal and 

interest on bonds for loans in default. 

The total amount of support for HBCU programs, along with any accrued interest and 

unpaid servicing fees, will be capitalized to principal and be reamortized through the 

original maturity date of June 1, 2037. The Department has approximately $378 million 

in outstanding borrowing from the FFB to support loans made to HBCU institutions and 

$951 million obligated to support near term lending as of September 30, 2023.
FY 2023 AGENCY FINANCIAL REPORT 97 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

The Department administers the College Housing and Academic Facilities Loan 

program, the College Housing Loan program, and the Higher Education Facilities Loan 

program. From 1952 to 1993, these programs provided low-interest financing to IHEs 

for the construction, reconstruction, and renovation of housing, academic, and other 

educational facilities.

NOTE 6. Liabilities Not Covered by Budgetary Resources

(Dollars in Millions)

2023 (Unaudited)

Intragovernmental

 Other than 

Intragovernmental 

Liabilities Not Covered By Budgetary Resources

Unfunded Leave $ - $ 55 

FECA Liabilities 4 14 

Total Liabilities Not Covered By Budgetary Resources 4 69 

Liabilities Not Requiring Budgetary Resources

Subsidy Due to Treasury General Fund 529 - 

Federal Perkins Loan Program 1,377 - 

Miscellaneous Receipt, Deposit Funds and Clearing 

Accounts (68) 865 

Custodial Liabilities 1 - 

Total Liabilities Not Requiring Budgetary Resources 1,839 865 

Total Liabilities Covered By Budgetary Resources 1,190,647 20,259 

Total Liabilities $ 1,192,490 $ 21,193 

NOTE 7. Debt Associated with Loans

(Dollars in Millions)

2023 (Unaudited)

Debt to the Bureau of Public Debt

Direct Loan Program $ 1,127,011 

FFEL Program 60,896 

Other Credit Programs for Higher Education 678 

Total Debt to the Bureau of Public Debt 1,188,585 

Debt to the Federal Financing Bank

Other Credit Programs for Higher Education 378 

Total Debt Associated with Loans $ 1,188,963 

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

fund the disbursement of new loans and the payment of credit program outlays and 

related costs. The Department makes periodic principal payments after considering the 

cash position and liability for future outflows in each cohort of loans, as mandated by 

the FCRA. 

Approximately 94.8 percent of the Department’s debt, as of September 30, 2023, is 

attributable to the Direct Loan Program. 
FY 2023 AGENCY FINANCIAL REPORT 98 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

NOTE 8. Subsidy Due to Treasury 

(Dollars in Millions)

2023 (Unaudited)

Credit Program Downward Subsidy Re-estimates

Direct Loan Program $ 585 

FFEL Program 516 

Total Credit Program Downward Subsidy Re-estimates 1,101 

Future Liquidating Account Collections

FFEL Program 529 

Total Future Liquidating Account Collections 529 

Total Subsidy Due to Treasury General Fund $ 1,630 

NOTE 9. Other Liabilities

(Dollars in Millions)

2023 (Unaudited)

Intragovernmental

 Other than 

Intragovernmental 

Federal Perkins Loan Program $ 1,377 $ - 

Miscellaneous Receipt, Deposit Funds and Clearing Accounts (68) 865 

Liability for Advances and Prepayments 2 - 

Accrued Funded Payroll and Leave - 28 

Accrued Unfunded Annual Leave - 55 

Employer Contributions and Payroll Taxes Payable 16 2 

FECA Liabilities 4 14 

Custodial Liabilities 1 - 

Total Other Liabilities $ 1,332 $ 964 
FY 2023 AGENCY FINANCIAL REPORT 99 U.S. DEPARTMENT OF EDUCATION

Financial Section (Unaudited)

NOTE 10. Commitments and Contingencies

The Department discloses contingencies where any of the conditions for liability 

recognition are not met and there is at least a reasonable possibility that a loss or an 

additional loss may have been incurred in accordance with FASAB Standard No. 5, 

Accounting for Liabilities of the Federal Government. The following commitments are 

amounts for contractual arrangements that may require future financial obligations.

Future Minimum Lease Payments

(Dollars in Millions)

2023 (Unaudited)

2024 $ 54 

2025 47 

2026 48 

2027 49 

2028 50 

After 2028 51 

Total $ 299 

The Department leases from the GSA all or a portion of 15 privately owned and 10 

publicly owned buildings in 20 cities. The table above presents the estimated future 

minimum lease payments for these privately and publicly owned buildings. The decrease 

in the estimated future minimum lease payments is due to anticipated releases of building 

and floor rentals.

Guaranty Agencies

The Department may assist guaranty agencies experiencing financial difficulties. The 

Department has not done so in FY 2023 and does not expect to in future years. No 

provision has been made in the financial statements for potential liabilities.

Litigation and Other Claims

The Department is involved in various lawsuits incidental to its operations. In the opinion 

of management, the ultimate resolution of pending litigation will not have a material 

impact on the Department’s financial position. As appropriate, the Department would 

seek recovery from Treasury’s Judgment Fund for any loss in litigation that may occur. 

The Judgment Fund is a permanent, indefinite appropriation available to pay judgments 

against the government if appropriated funds cannot be used. 

The cost of loan forgiveness related to borrower defense claims reflected in the accompanying 

financial statements is limited to loans originated through September 30, 2023. The final 

disposition of claims filed and those yet to be filed from loans originated before September 

30, 2023, is not expected to have a material impact on these financial statements.