Fiscal Year 2018 Annual Report
United States Department of Education 

Betsy DeVos 

Secretary

Federal Student Aid 

James F. Manning 

Acting Chief Operating Officer

Finance Office 

Alison L. Doone 

Chief Financial Officer

November 15, 2018

This report is in the public domain. Authorization to reproduce it, in whole, or in part, is 

granted. While permission to reprint this publication is not necessary, the citation should be: 

U.S. Department of Education, Federal Student Aid, FY 2018 Annual Report, Washington, 

D.C., 20002. 

This report is also available on the Federal Student Aid website at StudentAid.gov/FY 2018 

Annual Report

To connect to Federal Student Aid through social media, please visit the Federal Student Aid 

website at StudentAid.gov or on Twitter at @FAFSA.

Federal Student Aid strives to improve and enhance the content quality, report layout, and 

public accessibility of the Annual Report. Suggestions on how this report can be made more 

informative and useful are welcome. The public and other stakeholders are encouraged to 

submit all questions and comments to AFRComments@ed.gov.
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Fiscal Year 2018 Annual Report | Federal Student Aid 

Contents

Contents 

Letter From the Chief Operating Officer of Federal Student Aid ..... i

Letter From the Chief Operating Officer ...........................................................................................iii

Fiscal Year 2018 Federal Student Aid Highlights ......................... vii

Transforming Federal Student Aid: Next Gen FSA ........................................................................ viii

Significant Fiscal Year 2018 Federal Student Aid Accomplishments ............................................. x

Introduction ............................................................................... xiii

About This Report .............................................................................................................................xiv

Federal Student Aid at a Glance .......................................................................................................xv

Guide to Federal Student Aid Programs ......................................................................................... xvi

Overview of the Federal Student Aid Annual Report ................................................................... xviii

Management’s Discussion and Analysis (Unaudited).................... 1

Overview of the Management’s Discussion and Analysis ............................................................... 2

Fiscal Year 2018 Financial and Performance Highlights .................................................................. 3

Mission and Organizational Structure ................................................................................................ 4

Federal Student Financial Aid Programs ............................................................................................................ 8

Performance Management .................................................................................................................13

Fiscal Year 2018 Strategic Goals, Objectives, and Performance Metrics .........................................................15

Agency Priority Goal .........................................................................................................................................27

Quality of Performance Data ............................................................................................................................28

Financial Analysis ..............................................................................................................................29

Balance Sheet ..................................................................................................................................................31

Statement of Net Cost ......................................................................................................................................45

Statement of Changes in Net Position ..............................................................................................................46

Statement of Budgetary Resources ..................................................................................................................46

Financial Management Risks ............................................................................................................................47

Analysis of Systems, Controls, and Legal Compliance ................................................................. 50

Limitations of Financial Statements ................................................................................................. 54

Annual Performance Report (Unaudited) ................................... 55

Overview of the Annual Performance Report ..................................................................................56
Fiscal Year 2018 Annual Report| Federal Student Aid 

Contents

Fiscal Year 2018 Performance Summary .........................................................................................57

Introduction to the Annual Performance Report .............................................................................58

Performance Results by Strategic Goal ...........................................................................................61

Strategic Goal A: Improve quality of service for customers across the entire student aid life cycle.................62

Strategic Goal B: Proactively manage the student aid portfolio to mitigate risk...............................................68

Strategic Goal C: Improve operational efficiency and flexibility. ......................................................................71

Strategic Goal D: Foster trust and collaboration among stakeholders.............................................................73

Strategic Goal E: Invest in expanded workforce capability. .............................................................................76

Fiscal Year 2018 Accomplishments of Federal Student Aid ..........................................................77

Legislative and Regulatory Recommendations ..............................................................................81

Annual Bonus Awards .......................................................................................................................82

Report of the Federal Student Aid Ombudsman .............................................................................83

Financial Section ...................................................................... 103

Overview of the Financial Section ..................................................................................................104

Message from the Chief Financial Officer ......................................................................................105

Financial Statements ........................................................................................................................106

Notes to the Financial Statements ..................................................................................................112

Required Supplementary Stewardship Information (Unaudited) ................................................140

Required Supplementary Information (Unaudited) .......................................................................142

Independent Auditors’ Report.........................................................................................................149

Other Information (Unaudited) ................................................ 163

Other Information .............................................................................................................................165

Appendices ............................................................................... 167

Appendix A: Discontinued Strategic Goals and Performance Metrics ......................................169

Appendix B: Glossary of Acronyms and Terms ...........................................................................170

Appendix C: Availability of the Federal Student Aid Annual Report .........................................174

Acknowledgements .................................................................. 175
 

Fiscal Year 2018 Annual Report | Federal Student Aid i 

Letter From the Chief Operating Officer of Federal Student Aid

Letter From the Chief Operating Officer of 

Federal Student Aid 
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Letter From the Chief Operating Officer of Federal Student Aid

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Fiscal Year 2018 Annual Report | Federal Student Aid iii 

Letter From the Chief Operating Officer of Federal Student Aid

Letter From the Chief Operating Officer 

Dear Federal Student Aid Colleagues, Partners, and Customers: 

I am deeply honored to have the opportunity to return 

to Federal Student Aid (FSA) as the acting chief 

operating officer. It is my privilege to present this 

annual report documenting the tremendous efforts 

and achievements of the FSA team. 

FSA remains committed to providing the funding and 

technical assistance needed for making higher 

education accessible and affordable for millions of 

Americans. In Fiscal Year (FY) 2018, FSA provided 

more than $122.4 billion in federal grants, loans, and 

work-study funds to approximately 12.7 million 

students attending nearly 6,000 participating schools. 

However, providing federal financial aid is only one of 

many organizational accomplishments realized last 

year. 

While the FSA FY 2018 Annual Report

(Annual Report) offers a comprehensive record of 

organizational accomplishments and tracks progress towards goals, opportunities, and 

challenges, the Annual Report also offers a look at how FSA has launched recent efforts to 

transform the delivery of federal student aid. 

At FSA’s 2017 annual training conference for financial aid professionals, we announced that 

we will provide our 43 million customers a seamless, world-class experience through a bold 

initiative known as Next Gen FSA. In our announcement, we pledged to improve our 

customers’ experience throughout the entire student aid life cycle, and we committed to 

modernizing capabilities related to the Free Application for Federal Student Aid (FAFSA®) 

and the servicing and repayment of customer loans. 

Our important first steps to modernize and improve customers’ overall experience include 

developing the United States (U.S.) Department of Education’s first mobile app, 

myStudentAid. Through the mobile app, students and parents can fill out and submit a 

FAFSA, view their federal student loan history, compare information about schools, and link 

to other services. We redesigned the fafsa.gov website to make it responsive and easier to 

navigate on a mobile device. We also integrated the FAFSA site into StudentAid.gov, our 

primary portal for students, parents, and borrowers to provide a more seamless experience. 

We focused on providing students, parents, and borrowers the right message at the right 

time to help them meet critical deadlines related to applying for, receiving, and repaying 

federal student aid. In FY 2018, we sent more than 27 million messages to customers 

utilizing an enhanced digital communications tool. While these engagement-centric efforts 

illustrate how Next Gen FSA benefits students, parents, and borrowers; the initiative also will 

provide greater value to taxpayers by creating a more agile, flexible operating model that 

streamlines our existing operations. 

James F. Manning 

Acting Chief Operating Officer 
iv Fiscal Year 2018 Annual Report | Federal Student Aid 

Letter From the Chief Operating Officer of Federal Student Aid

We have improved the efficiency of our personnel security clearance process to pave the 

way for more efficient employee and contractor onboarding in the future. We enhanced our 

cybersecurity posture in a number of ways, including, migrating our business applications to 

the new, more secure Next Generation Data Center. Not only are our systems better 

protected, the migration also lowered operating costs and improved processes for financial 

aid administrators. Because safeguarding student data is a critical element in every 

program we manage, our work continues to help institutions improve the integrity of their 

data systems. 

While we focused on protecting systems data, we took important steps to share more data 

and information about our programs with stakeholders. In FY 2018, we regularly updated 

our library of application, disbursement, portfolio, institutional outcome, and financial 

oversight reports on the FSA Data Center. We also published new reports, including 

information about characteristics of William D. Ford Federal Direct Loan borrowers, the 

Public Service Loan Forgiveness (PSLF) Program, and borrower defense to repayment. 

Our efforts to proactively post reports support open government initiatives that help ensure 

consistency, increase transparency, and establish self-service opportunities for our 

stakeholders. 

While fall 2017 represented the first time borrowers could become eligible to apply for loan 

forgiveness under the PSLF Program, Congress created a new limited opportunity for 

borrowers denied loan forgiveness under PSLF to be reconsidered under specific criteria. 

Under tight time constraints, FSA implemented Temporary Expanded PSLF in FY 2018; we 

are committed to improving customer communications and operations related to this 

opportunity in FY 2019. 

During the last fiscal year, we enhanced several customer platforms, including the borrower 

defense processing and tracking system to make the claims process easier for customers to 

navigate. We integrated FSA's customer Feedback and Ombudsman systems to better 

track and manage customers’ disputes, concerns, and reports of suspicious activity. We 

partnered with the U. S. Department of Veterans Affairs to make it easier for disabled 

veterans to have their federal student loans discharged due to total and permanent 

disability. 

We made progress in improving the accuracy of credit reporting for student borrowers and 

look forward to continuing this important work. FSA took steps to raise awareness among 

customers about how to avoid student debt scams and joined with the Federal Trade 

Commission and state law enforcement partners to crack down on companies targeting 

student loan borrowers. We remain resolute in our efforts to reduce improper payments and 

have implemented a new verification model that will more efficiently and effectively select 

applicants for verification. The new model also will reduce the burden associated with 

verification for students and institutions.

To ensure the integrity of the federal student aid programs, we oversee the work of 

approximately 6,000 participating schools, which includes providing technical assistance, 

training, and information and other resources. In FY 2019, we look forward to continuing our 

support to all schools, including minority-serving and under-resourced institutions.
 

Fiscal Year 2018 Annual Report | Federal Student Aid v 

Letter From the Chief Operating Officer of Federal Student Aid

We achieved a great deal in FY 2018, but our work on behalf of the customers we serve and 

American taxpayers continues. In FY 2019, we will award contracts that support major 

elements of Next Gen FSA and will continue to do so using a sequenced approach 

throughout 2019, when we expect to implement additional customer-facing milestones. 

Further, we look forward to announcing the next significant Next Gen FSA initiative—the 

Next Generation Partnership Participation and Oversight (Next Gen PPO)—that will 

transform the way FSA interacts with the thousands of schools that participate in our 

programs. In FY 2019, we also will implement meaningful changes to the operations of the 

Teacher Education Assistance for College and Higher Education (TEACH) Grant Program. 

We discuss our transformational Next Gen FSA initiative and our significant FY 2018 

accomplishments in the following FY 2018 Federal Student Aid Highlights section. 

Our goals are ambitious, but they pale in comparison to the dedication of the nearly 1,300 

employees across FSA who work every day to make higher education possible for millions 

of Americans. It is our goal that FY 2019 will be our most-successful year yet.

Sincerely, 

James F. Manning 

Acting Chief Operating Officer 

Federal Student Aid 

United States Department of Education 

November 15, 2018 
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Fiscal Year 2018 Annual Report | Federal Student Aid vii 

Fiscal Year 2018 Federal Student Aid Highlights 

Fiscal Year 2018 Federal Student Aid 

Highlights
viii Fiscal Year 2018 Annual Report | Federal Student Aid 

Transforming Federal Student Aid: Next Gen FSA

Transforming Federal Student Aid: Next Gen FSA 

About FSA 

As the nation's largest provider of financial aid for education beyond high school, Federal 

Student Aid (FSA) delivers more than $122.4 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 colleges or career schools. 

FSA also oversees the approximately 6,000 postsecondary institutions that participate in the 

federal student aid programs. In every interaction with students and their families, FSA 

strives to be the most trusted and reliable source of student financial aid information and 

services in the nation. 

The Vision 

FSA has one of the largest consumer loan portfolios in the country at $1.4 trillion1. It is 

critical that we provide a customer experience that is on par with world-class financial 

services firms and establish our organization as one of the most trusted brands in the 

student aid industry. The Next Generation Financial Services Environment (Next Gen FSA) 

will enable FSA to realize this vision by modernizing the way we connect with our 

customers, while streamlining our student aid systems and processes. This broad effort will 

deliver an exceptional customer experience for millions of Americans across the entire 

student aid life cycle, from fostering greater awareness about the availability of financial aid 

to successfully repaying loans. 

Today’s Environment

In the current federal financial aid process, students and families must negotiate a complex 

and fragmented landscape, interacting with multiple systems, vendors, processes, and 

interfaces across a multitude of brands and user experiences. Too often, this poor customer 

experience creates confusion, resulting in borrowers failing to understand their repayment 

options and the financial implications of their student debt, borrower indifference, and, 

ultimately, higher loan delinquency and default rates. Additionally, operational complexities 

and inefficiencies result in higher administrative costs and hinder effective oversight. 

Next Gen FSA Environment 

Next Gen FSA will create an ideal customer experience. Multiple websites, mobile 

applications, contact centers, and other customer interfaces will be combined into a 

simplified, consistent, and engaging experience, which will be further enhanced by 

standardized training and tools across vendors and partners. With a focus on mobile 

engagement, Next Gen FSA will meet customers where they are, letting them connect with 

FSA on the device of their choice. Customers will access a modernized, online portal with 

personalized information that helps them quickly understand their options and make 

informed decisions throughout the financial aid life cycle, including borrowing and loan 

repayment. By establishing a closer and more effective relationship between the customer 

and their servicer earlier in the loan life cycle, FSA expects to reduce the number of 

borrowers who enter delinquency, and ultimately, default. While Next Gen FSA will cut 

through the information clutter and provide robust self-service, it will also seamlessly 

connect customers with additional support when needed. 

In addition to an improved customer experience, Next Gen FSA will completely modernize 

FSA's back-end systems and infrastructure. This transformation will pave the way for 

improved processing and customer management at lower costs. Vendor and partner 

 

1

The amounts provided for the Total Federal Student Aid Portfolio include federal student loan amounts 

managed by Federal Student Aid and those held by lenders or schools.
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Fiscal Year 2018 Annual Report | Federal Student Aid ix

Transforming Federal Student Aid: Next Gen FSA 

performance standards as well as accountability measures will be built into Next Gen FSA to 

ensure customers receive world-class service while protecting taxpayer dollars. Next Gen 

FSA will integrate state-of-the-art cybersecurity protections across every aspect of the 

student aid experience. 

Enterprise-wide data analytics will drive improved customer service, particularly for at-risk 

students and borrowers, while also enhancing our oversight of participating postsecondary 

schools and supporting vendors. 

Solicitation and Procurement Process 

The Next Gen FSA implementation plan is based, in part, on extensive market research with 

several industry leaders. This research-based approach enabled FSA to identify best-inindustry standards and technical benchmarks that continue to inform the procurement 

process. On February 20, 2018, FSA initiated a multi-stage procurement process designed 

to identify the vendors most capable of supporting the implementation of Next Gen FSA; 

FSA intends to select a pool of vendors to deliver the Next Gen FSA environment. Final 

awards will be made with the goal of new systems and processes coming online beginning 

in Fiscal Year (FY) 2019.
x Fiscal Year 2018 Annual Report| Federal Student Aid 

Significant Fiscal Year 2018 Federal Student Aid Accomplishments

Significant Fiscal Year 2018 Federal Student Aid 

Accomplishments 

In FY 2018, FSA completed a number of initiatives that laid the foundation for the next 

stages of Next Gen FSA. The most significant of these accomplishments are described 

below. A full discussion of FY 2018 FSA accomplishments is provided in the Annual 

Performance Report section of this document. 

Mobile Engagement

FSA made significant progress in moving toward greater mobile engagement with its 

customers, highlighted by the launch of a redesigned fafsa.gov website and a new mobile 

app, myStudentAid. 

During the past year, FSA redesigned fafsa.gov so the pages and forms fit the screen size 

and shape of any device, including desktop or laptop computers and mobile devices such as 

smartphones or tablets. Through the redesigned fafsa.gov, students and parents can now 

complete the Free Application for Federal Student Aid (FAFSA®) on a mobile device with the 

same ease as on a desktop or laptop computer. 

In addition to the mobile-optimized fafsa.gov, students and parents can now complete the 

using the myStudentAid app. Students and parents may download the myStudentAid app in 

both the Apple App Store (iOS) and Google Play (Android). In addition to completing the 

FAFSA, the myStudentAid app will ultimately include several features and functions to assist 

students and parents in managing all aspects of the financial aid experience. 

Next Generation Data Center 

In FY 2018, FSA enhanced its cybersecurity posture in a number of ways, including, 

migrating its business applications to the new, more secure Next Generation Data Center. 

Because of the migration, FSA systems are better protected; operating costs are lower; and

operational processes are improved for financial aid administrators. 

Next Gen Vision and Procurement 

Throughout FY 2018, FSA focused on the development of the Next Gen FSA strategy and 

vision. To create the vision, FSA conducted extensive market research and learned from 

over 50 world-class providers. FSA released the initial solicitation for the Next Gen 

Financial Services Environment and reviewed responses to identify the most promising 

potential solutions. The next phase of the solicitation was released on September 24, 2018, 

with awards anticipated in FY 2019. 

In addition, FSA released a solicitation for the Enterprise-wide Digital and Customer Care 

Platforms and Services, with an award expected in early FY 2019. FSA also began work on 

enhancements to FSA ID, which is currently used by all FSA customers. Enhancements are 

scheduled to be rolled out in calendar year 2019 and will move toward a single sign-on for 

all student-facing applications.

The Public Service Loan Forgiveness Program and Temporary Expanded Public 

Service Loan Forgiveness 

The Public Service Loan Forgiveness (PSLF) Program was created under the College Cost 

Reduction and Access Act of 2007 by Congress to offer indebted professionals a path out of 

their federal student loan debt burden by working full-time in public service. The PSLF 

Program forgives the remaining balance on a borrower’s William D. Ford Federal Direct 

Loan (Direct Loan) Program loans after the borrower has made 120 qualifying monthly 

payments under a qualifying repayment plan while working full-time for a qualifying 
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Fiscal Year 2018 Annual Report | Federal Student Aid xi

Significant Fiscal Year 2018 Federal Student Aid Accomplishments

employer. FSA began processing applications for loan forgiveness in 2018, the first year in 

which a borrower could complete the programs’ 10-year repayment eligibility criteria. 

The Consolidated Appropriations Act, 2018 provided limited, additional conditions under 

which borrowers could become eligible for loan forgiveness if some or all of the borrower’s 

Direct Loan Program payments were under a non-qualifying repayment plan for PSLF. FSA 

termed this reconsideration as the Temporary Expanded Public Service Loan Forgiveness 

(TEPSLF) opportunity. During FY 2018, FSA successfully launched a process for federal 

student loan borrowers to be reconsidered for loan forgiveness through TEPSLF on a firstcome, first-served basis until the $350 million appropriated for TEPSLF has been allocated 

or other criteria are met. 

Assisting Those Impacted By Natural Disasters 

FSA provided ongoing support, information, technical assistance, and other resources to 

students, borrowers, and institutions impacted by a series of natural disasters across the 

southern United States, California, Hawaii, and the Caribbean. FSA proactively 

communicated with institutions before and after the disasters, as well as provided 

operational assistance, regulatory and administrative relief, and reporting flexibilities. FSA's 

disaster assistance supported the recovery efforts of nearly 1,700 institutions that enrolled 

more than two million students. 

United States Department of Veterans Affairs Total and Permanent Disability Match 

The data sharing agreement between FSA and the United States (U.S.) Department of 

Veterans Affairs (VA) was signed in November 2016. FSA and VA have an interagency 

agreement to conduct a matching process on a quarterly basis. The VA sends FSA a list of 

veterans who VA designates as having a service-connected disability that is 100 percent 

disabling or being totally disabled based on an individual employability rating. FSA then 

conducts a match against its student loan data system and makes contact with these 

veterans to inform them that they are eligible for Total and Permanent Disability (TPD) and 

guides them through the discharge process. Since the initial match in March 2018, FSA has 

discharged approximately 34,000 loans for more than 7,000 borrowers for a total amount of 

approximately $260 million. 

Digital Communications Tool 

The Digital Communications Tool was launched in March and greatly increases FSA’s ability 

to provide direct-to-consumer outreach through email and text in an engaging and costeffective manner. Since it was launched, FSA has sent over 28 million emails to its 

customers on a range of topics from aid application to TEPSLF to school closures. This tool 

will be foundational to FSA’s future outreach efforts. 

Program Transparency 

FSA published a series of new and updated data sets, reports, and other information to the 

FSA Data Center during FY 2018. New reports highlighted the characteristics of all Direct 

Loan borrowers; Direct Loan borrowers in a ‘Repayment’ loan status; and borrowers 

enrolled in income-driven repayment plans. Additional new reports segmented federal 

student loan borrowers by two demographic levels. New reports also provided snapshots of 

the number of applications and resulting loan discharges processed because of the 

borrower defense to repayment and the PSLF Program
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Significant Fiscal Year 2018 Federal Student Aid Accomplishments

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Fiscal Year 2018 Annual Report | Federal Student Aid xiii 

Introduction

Introduction
xiv Fiscal Year 2018 Annual Report| Federal Student Aid 

About This Report

About This Report

FSA, a principal office of the U.S. Department of Education (the Department), is required by 

legislation to produce an Annual Report, which details the organization’s financial and 

program performance. This Federal Student Aid FY 2018 Annual Report (Annual Report) is a 

comprehensive document that provides an analysis of FSA’s financial and program 

performance results for FY 2018 and exhibits the organization’s effectiveness in 

accomplishing its mission. The Annual Report enables the President of the United States, the 

U.S. Congress, and the public to assess the organization’s performance relative to its mission, 

and determine whether FSA has demonstrated accountability for the resources entrusted to it. 

This report presents information about FSA’s performance as a Performance-Based 

Organization, its initiatives, accomplishments, and challenges, as required by Office of 

Management and Budget Circular A-11, Preparation, Submission and Execution of the 

Budget, Part 6, Section 260, and Circular A-136, Financial Reporting Requirements. The 

report also satisfies the requirements included in the following federal statutes: 

 Federal Managers’ Financial Integrity Act of 1982

 Chief Financial Officers Act of 1990

 Government Performance and Results Act of 1993

 Government Management Reform Act of 1994

 Federal Financial Management Improvement Act of 1996

 Higher Education Act of 1965, as amended 

 Reports Consolidation Act of 2000

 Improper Payments Information Act of 2002, amended 

 Government Performance and Results Modernization Act of 2010 

 Digital Accountability and Transparency Act of 2014 

 Federal Information Security Modernization Act of 2014 

The Department produces the U.S. Department of Education FY 2018 Agency Financial 

Report. That report provides a comprehensive view of the Department’s stewardship over 

its resources and includes a summary of the information contained in the Annual Report. 

The Annual Report is available at StudentAid.gov/strategic-planning-and-reporting.
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Fiscal Year 2018 Annual Report | Federal Student Aid xv

Federal Student Aid at a Glance

Federal Student Aid at a Glance

(As of September 30, 2018) 

History 

Federal Student Aid is a principal office of 

the United States Department of 

Education, which seeks to ensure that all 

eligible individuals can benefit from 

federal financial assistance for education 

beyond high school. Designated as a 

Performance-Based Organization in 

1998, Federal Student Aid is the nation’s 

largest provider of student financial aid 

and is responsible for implementing and 

managing the federal student financial 

assistance programs authorized under 

the Higher Education Act of 1965, as 

amended. These programs provide 

grants, loans, and work-study funds to 

students attending colleges or career 

schools. 

Mission 

Funding America’s Future, 

One Student at a Time 

FY 2018 Administrative Budget 

$1.5 billion 

Regional Offices 

10

Total Employees 

1,257 

Location 

830 First Street, NE 

Washington, DC 20002 

Strategic Goals 

Strategic Goal A 

Improve quality of service for customers 

across the entire student aid life cycle.

Strategic Goal B 

Proactively manage the student aid 

portfolio to mitigate risk. 

Strategic Goal C 

Improve operational efficiency and 

flexibility. 

Strategic Goal D 

Foster trust and collaboration among 

stakeholders. 

Strategic Goal E 

Invest in expanded workforce capability. 

Total Applications Processed 

18.6 million 

Total Postsecondary Student Aid 

Recipients 

12.7 million 

Total Federal Student Aid Delivered 

$122.4 billion 

Website: 

StudentAid.gov
xvi Fiscal Year 2018 Annual Report| Federal Student Aid 

Guide to Federal Student Aid Programs

Guide to Federal Student Aid Programs

FSA delivers billions of dollars in federal financial aid to students. This aid covers expenses, 

such as tuition and fees, room and board, books and supplies, and transportation. The 

three main categories of federal student aid are: 

 Loans

o Student aid funds that are borrowed to help pay for eligible education programs 

and must be repaid with interest; 

 Grants 

o Student aid funds that do not have to be repaid (unless other conditions apply); 

and 

 Work-Study 

o A part-time employment program that allows students enrolled in college to earn 

money to help pay for school. 

The information below presents a brief overview of the various aid types included in each 

category. 

Loans

 Direct Subsidized Loans 

o Federal loans based on financial need made to undergraduate students for which 

the federal government generally does not charge interest while the borrower is in 

school, in grace, or in deferment status. For Direct Subsidized Loans first 

disbursed between July 1, 2012, and July 1, 2014, the borrower is responsible for 

paying any interest that accrues during the grace period. If the interest is not paid 

during the grace period, the interest will be added to the loan’s principal balance.

 Direct Unsubsidized Loans 

o Federal loans made to undergraduate students and graduate students for which 

the borrower is fully responsible for paying the interest regardless of the loan 

status. Interest on unsubsidized loans accrues from the date of disbursement and 

continues throughout the life of the loan.

 Direct PLUS Loans

o Federal loans made to graduate or professional students and parents of dependent 

undergraduate students for which the borrower is fully responsible for paying the 

interest regardless of the loan status. 

 Direct Consolidation Loans 

o Federal loans that allow the borrower to combine multiple existing federal student 

loans into one new loan. The borrower will only have to make one monthly 

payment on the consolidation loan and the repayment term of the loan may be 

longer than the terms on the original loans, which may result in a lower monthly 

payment.
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Fiscal Year 2018 Annual Report | Federal Student Aid xvii 

Guide to Federal Student Aid Programs

 Federal Perkins Loans 

o Federal loans made by schools to undergraduate and graduate students who 

demonstrate financial need. Historically, participating schools received a certain 

amount of funds each year from FSA for distribution under this program, which 

supplement funds in a school’s revolving fund, from which new disbursements are 

made. Once the full amount of the school’s funds has been awarded to students, 

no more loans can be made under this program for the year. This loan program 

officially expired on September 30, 2017, but final Perkins Loan disbursements 

were permitted through June 30, 2018. 

Grants

 Federal Pell Grants 

o Federal financial aid awarded to undergraduate students with demonstrated 

financial need. This form of aid does not require repayment. 

 Federal Supplemental Educational Opportunity Grants 

o Federal grants distributed under this program are administered directly by the 

financial aid office at each participating school. Each participating school receives 

a certain amount of Federal Supplemental Educational Opportunity Grant funds 

each year from FSA. Once the full amount of the school’s grant funds has been 

awarded to students, no more awards can be made under this program for the 

year. This form of aid does not require repayment. 

 Teacher Education Assistance for College and Higher Education Grants 

o Federal grants awarded annually to eligible undergraduate or graduate students 

who agree to teach mathematics, science, or other specialized subjects in highneed schools for at least four years, within eight years of their graduation. Eligible 

students may be awarded grants totaling up to $4,000 annually. If students fail to 

fulfill the service requirements, the grants will convert to Direct Unsubsidized 

Loans, with interest accrued from the time of the award. 

 Iraq and Afghanistan Service Grants 

o Federal grants awarded to students who are not eligible for a Federal Pell Grant on 

the basis of financial need, but meet the remaining Federal Pell Grant eligibility 

requirements, and: 

 Have a parent or guardian who was a member of the U.S. Armed Forces 

and died as a result of military service performed in Iraq or Afghanistan 

after the 9/11 events; and 

 Were under 24 years old or enrolled in college at least part-time at the time 

of the parent or guardian’s death.

Federal Work-Study 

 Federal program that provides part-time jobs for undergraduate, graduate, and 

professional students with financial need, allowing them to earn money to help pay 

education expenses. The program is available to full-time or part-time students and 

encourages community service work. The work is often related to the student’s course 

of study. This program is administered by the schools that participate in the Federal 

Work-Study program. 

To obtain federal financial aid, prospective aid recipients must complete the FAFSA. For 

more information on obtaining federal student aid, visit StudentAid.gov.
xviii Fiscal Year 2018 Annual Report| Federal Student Aid 

Overview of the Federal Student Aid Annual Report 

Overview of the Federal Student Aid Annual Report

The Annual Report is organized into five major sections. 

Management’s Discussion and Analysis

This section provides an overview of the entire Annual Report. It 

includes a synopsis of the FSA mission, its organizational structure, 

and the fiscal year financial and performance highlights. The 

section concludes with a discussion of the organization’s systems, 

controls, and compliance with laws and regulations and the 

Limitations of Financial Statements. 

Annual Performance Report 

This section presents the strategic goals included in the Federal 

Student Aid: Strategic Plan, Fiscal Years 2015–19 and a 

discussion of the results of the various performance metrics as 

related to each strategic goal. The section also includes FSA’s 

fiscal year accomplishments; its legislative and regulatory 

recommendations to the Department; the Annual Bonus Awards; 

and the Report of the Federal Student Aid Ombudsman. 

Financial Section

This section provides a detailed view of FSA’s stewardship and 

accountability for its resources. The Message from the Chief 

Financial Officer begins the section, followed by the audited 

financial statements, the accompanying Notes to the Financial 

Statements, Required Supplementary Stewardship Information, 

Required Supplementary Information, and the Independent 

Auditors’ Report. 

Other Information

This section provides links to the U.S. Department of Education 

FY 2018 Agency Financial Report, which includes a discussion of 

FSA’s improper payments, the Summary of Financial Statement 

Audit and Management Assurances, and FSA’s Management 

Challenges. 

Appendices

This section includes Appendix A, which provides the discontinued 

strategic goals and performance metrics; Appendix B, which lists 

the acronyms cited throughout the report; and Appendix C, which 

provides the information on the availability of the Annual Report. 
Fiscal Year 2018 Annual Report | Federal Student Aid 1 

Management’s Discussion and Analysis

Management’s Discussion and Analysis

(Unaudited) 
2 Fiscal Year 2018 Annual Report | Federal Student Aid

Overview of the Management’s Discussion and Analysis

Overview of the Management’s Discussion and Analysis

The Management’s Discussion and Analysis section is a required supplementary section that 

provides an overview of the Federal Student Aid FY 2018 Annual Report (Annual Report). It 

includes a synopsis of Federal Student Aid’s (FSA) mission and its organizational structure, as 

well as the organization’s fiscal year financial and performance highlights, which are discussed 

in more detail within the subsequent sections of this report. This section concludes with a 

discussion of the organization’s systems, controls, and compliance with laws and regulations 

and the Limitations of Financial Statements. 

Mission and Organizational Structure 

The Mission and Organizational Structure subsection provides the history of FSA, along with a 

discussion of its federal student aid programs. It also highlights the mission, vision, and values 

of FSA as presented in the Federal Student Aid: Strategic Plan, FY 2015-19 (FSA FY 2015–19 

Strategic Plan). 

Performance Management

The Performance Management subsection presents an overview of FSA’s strategic and 

performance-planning framework, an overview of the FSA FY 2015–19 Strategic Plan, and the 

results of the FY 2018 performance metrics. 

Financial Analysis

The Financial Analysis subsection provides an overview of FSA’s financial data, which includes 

an analysis of the financial data presented in the audited financial statements and a discussion 

of the financial management risks faced by FSA. 

Analysis of Systems, Controls, and Legal Compliance

The Analysis of Systems, Controls, and Legal Compliance subsection provides FSA’s 

management assessment in conjunction with the Department’s assessment on FSA’s internal 

controls related to the Federal Manager’s Financial Integrity Act of 1982. This subsection 

discusses the organization’s compliance with the Federal Financial Management Improvement 

Act of 1996, Federal Information Security Modernization Act of 2014, and other laws and 

regulations related to the compliance of financial systems with federal requirements. 

Limitations of Financial Statements

The Limitations of Financial Statements subsection is a required subsection that details the 

limitations of the financial statements and recommends that the financial statements be read 

and reviewed in conjunction with the Notes to the Financial Statements. 
Fiscal Year 2018 Annual Report | Federal Student Aid 3 

Fiscal Year 2018 Financial and Performance Highlights 

Fiscal Year 2018 Financial and Performance Highlights 

Table 1: Operational Highlights 

Item FY 2018 FY 2017 Difference Percentage 

Change 

Total Student Aid Loan Portfolio2$ 1,439 billion $ 1,367 billion $ 72 billion 5.3% 

Total Borrowers with Federal Student Loans Outstanding 43 million 43 million – 0.0% 

Total Number of Postsecondary Education Institutions 5,856 5,963 (107) (1.8%) 

Audit Opinion Unmodified Unmodified Not applicable Not applicable%

Table 2: Financial Highlights 

(Dollars in millions)

Item FY 2018 FY 2017 Difference Percentage 

Change 

Total Assets $ 1,285,265 $ 1,221,694 $ 63,571 5.2% 

Total Liabilities $ 1,276,206 $ 1,198,486 $ 77,720 6.5% 

Net Position $ 9,059 $ 23,208 $ (14,149) (61.0%) 

Net Cost of Operations $ 35,008 $ 37,946 $ (2,938) (7.7%) 

Total Budgetary Resources Available for Spending 

(Budgetary) $ 61,035 $ 103,422 $ (42,387) (41.0%) 

Total Budgetary Resources Available for Spending 

(Non-Budgetary Credit Reform Financing Accounts) $ 244,841 $ 245,720 $ (879) (0.4%) 

Agency Outlays, Net 

(Budgetary) $ 18,597 $ 65,548 $ (46,951) (71.6%) 

Agency Outlays, Net 

(Non-Budgetary Credit Reform Financing Accounts) $ 83,059 $ 40,490 $ 42,569 105.1% 

Table 3: Performance Highlights 

Performance Measures FY 2018

Target

FY 2018

Actual

Performance 

Results

A.1: Percent of First-Time FAFSA Filers Among High School Seniors 66.4%–68.4% 67.4% 

B.1: Improper Payment Rate 4.97% 4.95% 

D.3: Collection Rate $59.24 $62.15 

 

2

The amounts provided for the Total Federal Student Aid Portfolio include federal student loan amounts managed by 

Federal Student Aid and those held by lenders or schools.
4 Fiscal Year 2018 Annual Report | Federal Student Aid

Mission and Organizational Structure 

Mission and Organizational Structure

FSA, a principal office of the United States (U.S.) Department of Education (the Department), 

seeks to ensure that all eligible individuals can benefit from federal financial assistance for 

education beyond high school. As the nation’s largest provider of student financial aid, FSA is 

responsible for implementing and managing federal student financial assistance programs 

authorized under the Higher Education Act of 1965, as amended (HEA). Specifically, Title IV of 

the HEA (Title IV) authorizes the federal student assistance programs for which FSA is 

responsible. These programs provide grants, loans, and work-study funds to students attending 

colleges or career schools. 

In order to execute the Title IV programs, FSA is responsible for a range of functions across the 

student aid lifecycle, which include: 

 Educating students and families about the process of obtaining financial aid; 

 Processing millions of student financial aid applications; 

 Disbursing billions of dollars in student financial aid; 

 Insuring billions of dollars in guaranteed student loans previously issued by financial 

institutions; 

 Enforcing financial aid rules and regulations; 

 Servicing millions of student loans and helping borrowers avoid default; 

 Securing repayment from borrowers who have defaulted on their loans; and 

 Partnering with schools, financial institutions, and guaranty agencies (GAs) to prevent 

program fraud, waste, and abuse. 

This complex, multifaceted mission calls on a range of staff skills and demands coordination by 

all levels of management. Designated a Performance-Based Organization (PBO) by Congress 

in 1998, FSA emphasizes tangible results and efficient performance, as well as the continuous 

improvement of the processes and systems that support its mission. 
Fiscal Year 2018 Annual Report | Federal Student Aid 5 

Mission and Organizational Structure 

Significant Legislation that Directs the Federal Student Aid Mission 

Historically, there have been several legislative acts that have significantly impacted FSA’s 

mission. The Higher Education Amendments of 1998 established FSA as a PBO, to administer 

the Title IV programs at the Department. The table below, while not all-inclusive, details 

additional significant pieces of legislation that have influenced FSA’s mission. 

Overview of Legislative Authority 

Legislation Purpose 

Higher Education Act of 1965, as amended Created the federal student financial assistance 

programs known as the Title IV programs.

Higher Education Amendments of 1992 Initially authorized the William D. Ford Federal 

Direct Loan Program as a demonstration pilot.

Student Loan Reform Act of 1993 Authorized a multi-year phased implementation of 

the William D. Ford Federal Direct Loan Program.

Higher Education Amendments of 1998 Amended the HEA and authorized the designation 

of FSA as the first PBO in the federal government.

Higher Education Reconciliation Act of 2005 Allowed graduate and professional students to 

utilize the PLUS Loan Program. 

College Cost Reduction and Access Act of 2007 

Authorized the Teacher Education Assistance for 

College and Higher Education Grant Program, 

created the Public Service Loan Forgiveness 

Program, and established Income Based 

Repayment plans.

Ensuring Continued Access to Student Loans Act of 2008 

Provided the Department with the authority to 

implement programs to ensure that eligible 

students and parents were not denied access to 

federal student loans during the credit market 

disruptions of 2008.

SAFRA Act of 2009 Provided that beginning July 1, 2010, no new loans 

would be originated under the Federal Family 

Education Loan Program. 

Bipartisan Student Loan Certainty Act of 2013 Established that federal student loan interest rates 

will be tied to financial markets and that each loan 

will have a fixed interest rate for the life of the loan. 

Consolidated Appropriations Act, 2014 

Transferred all Health Education Assistance Loan 

program loans as of July 1, 2014 from the U.S. 

Department of Health and Human Services to the 

Department. 
6 Fiscal Year 2018 Annual Report | Federal Student Aid

Mission and Organizational Structure 

FSA Stakeholders 

The community of stakeholders in the student aid delivery system includes students and 

parents, lenders, guaranty agencies, postsecondary institutions, contracted servicers and 

collection agencies, as well as taxpayers and other federal entities, such as Congress and the 

U.S. Office of Management and Budget (OMB). 

Role of FSA and Participants in the Federal Student Aid System

Participants Participants’ Role FSA’s Engagement with Participants

Guaranty Agencies  Insure Federal Family Education Loan 

Program loans and service their 

defaulted loan portfolio. 

 Monitoring compliance; 

 Assisting Guaranty Agencies in meeting 

requirements; 

 Providing education regarding policy; and 

 Paying default claims. 

Federal Family Education 

Loan Program Lenders 

 Hold and service outstanding Federal 

Family Education Loan Program loans 

to students. 

 Monitoring compliance; 

 Paying interest and Special Allowance 

Payments; and 

 Providing education regarding policy. 

FSA-Contracted Loan 

Servicers 

 Service William D. Ford Federal Direct 

Loan Program portfolio and portions of 

Federal Family Education Loan

Program portfolio; 

 Provide systems and services to 

support FSA’s core operations (e.g. 

applications, disbursements); and 

 Recover funds from defaulted loans 

 Acquiring services; 

 Setting performance standards; and 

 Overseeing operations. 

Postsecondary Institutions  Determine students’ aid packages and 

disburses funds. 

 Monitoring compliance; 

 Providing education regarding policy; and 

 Assisting institutions in meeting 

requirements. 

Congress  Sets statutory standards on student aid 

funding and appropriate budgets. 

 Providing data and information for decision 

making; and 

 Providing updates on operational 

performance. 

The President, the 

Department and Others in 

the Executive Branch 

 Set regulatory standards and policy on 

student aid funding. 

 Providing data and information for decision 

making; and 

 Providing recommendations for 

implementation. 

Students  Receive student aid and repay student 

aid loans used to finance postsecondary 

education. 

 Increasing awareness of federal student 

aid;

 Providing products, services, and tools to 

ensure consistent, accurate, messaging 

about the importance of pursuing 

postsecondary education; 

 Identifying students for whom financial 

assistance can make a difference; and 

 Protecting students from unfair, deceptive, 

or fraudulent practices in the student aid 

marketplace. 

One of FSA’s responsibilities is to coordinate and monitor the activity of the large number of 

federal, state, nonprofit, and private entities involved in federal student aid delivery, within a 

statutory framework established by Congress, and a regulatory framework established by the 

Department. 
Fiscal Year 2018 Annual Report | Federal Student Aid 7 

Mission and Organizational Structure 

FSA Organizational Structure 

FSA currently operates under a functional organizational structure that aligns the organization 

closely with its strategic drivers, business objectives, and mission goals. A Chief Operating 

Officer (COO), who is appointed to a five-year term by the Secretary of Education (Secretary), 

leads FSA. In January 2018, James F. Manning, the Acting Under Secretary of Education for 

the Department, was delegated the duties of the COO of FSA. The following graphic illustrates 

the functional organizations within FSA. 

During Fiscal Year (FY) 2018, the organization operated on an annual administrative budget of 

approximately $1.5 billion. FSA is staffed by 1,257 full-time employees and is augmented by 

contractors who provide outsourced business operations. The workforce is primarily based in

Washington, DC, with ten regional offices located throughout the country as reflected in the 

following graphic. The number of full-time employees at each location is shown in parentheses 

immediately following the location name. 
8 Fiscal Year 2018 Annual Report | Federal Student Aid

Mission and Organizational Structure 

Federal Student Financial Aid Programs 

The federal student financial aid programs collectively represent the nation’s largest source of 

federal financial aid for students in postsecondary education. In FY 2018, FSA processed more 

than 18.6 million Free Applications for Federal Student Aid (FAFSA®

), resulting in the delivery of 

approximately $122.4 billion in Title IV aid to over 12.7 million postsecondary students and their 

families. These students attend approximately 6,000 active institutions of postsecondary 

education that participate in student aid programs and are accredited by dozens of agencies. 

On August 2, 2011, Congress passed the Budget Control Act of 2011 (Pub. L. 112-25), which 

put into place automatic federal budget cuts, known as “sequestration”, to take effect if 

Congress did not enact legislation to reduce the federal deficit by March 1, 2013. Because 

Congress did not act, these budget cuts went into effect. The impact of sequestration reduced 

the aid available to students for various programs and forced increases in origination fees. 

These reductions, along with numerous other factors, including economic conditions and 

decreases in student aid applicants, affected the student aid disbursement amounts presented 

in the following table. The table below presents a comparison of the amounts of Title IV aid 

disbursed to students by program in 2018 and 20172. A summary of each of the Title IV student 

assistance programs is presented in the paragraphs that follow the table. 

Table 4: Summary of Federal Aid Disbursed to Students by Program3

 (Dollars in Millions) 

Programs 

2018 

Aid Disbursed 

to Students

2017 

Aid Disbursed 

to Students

Difference Percentage 

Change 

Federal Loan Programs

William D. Ford Federal Direct Loan Program $ 91,485 $ 92,957 $ (1,472) (1.6%) 

Federal Perkins Loan Program 886 885 1 0.1%

Subtotal Loan Programs $ 92,371 $ 93,842 $ (1,471) (1.6%) 

Federal Grant Programs 

Federal Pell Grant Program $ 28,250 $ 26,915 $ 1,335 5.0% 

Federal Supplemental Educational Opportunity 

Grant Program 750 712 38 5.3%

The Teacher Education Assistance for College 

and Higher Education Grant Program 84 85 (1) (1.2)%

Subtotal Grant Programs $ 29,084 $ 27,712 $ 1,372 5.0% 

Federal Work-Study Program

Federal Work-Study Program $ 983 $ 949 $ 34 3.6% 

Grand Total $ 122,438 $ 122,503 $ (65) (0.1%) 

 

3

Aid disbursed to students as cited in the table above, and in the following sections concerning the Federal Loan 

Programs, the Federal Grant Programs and the Federal Work-Study Program in the Management’s Discussion and 

Analysis section, excluding the Federal Perkins Loan Program amounts, are derived from amounts from FSA’s and 

the Department’s financial systems. All amounts are fiscal year-to-date amounts, except for the Federal Perkins 

Loan Program, which is reported as an award year amount. The number of awards or recipients reported in the 

Management’s Discussion and Analysis section is derived from a variety of sources including FSA’s Common 

Origination and Disbursement System and data used to support the President’s Budget. Recipient counts are based 

on award year.
Fiscal Year 2018 Annual Report | Federal Student Aid 9 

Mission and Organizational Structure 

Federal Loan Programs 

In fulfilling its program responsibilities, FSA directly manages or oversees a loan portfolio of 

almost $1.4 trillion—representing more than 207 million student loans to approximately 

43 million borrowers. These loans were made primarily through the first two federal student 

loan programs described below. 

The William D. Ford Federal Direct Loan (Direct Loan) Program lends funds directly to 

students and parents through participating schools. Created in 1993, this program is funded 

primarily by borrowings from the U.S. Department of the Treasury (Treasury), as well as an 

appropriation for subsidy costs. As of September 30, 2018, FSA’s portfolio of Direct Loans 

included $1,115.1 billion in credit program receivables, net. In FY 2018, the Department made 

$91.5 billion4 in net loans to 9.1 million recipients. 

Under the Federal Family Education Loan (FFEL) Program, students and parents obtained 

federal loans through private lenders. Guaranty agencies insure lenders against borrower 

default; the federal government, in turn, reinsures guaranty agencies. Federal subsidies ensure 

private lenders earn a certain yield on the loans they made. 

The passage of the SAFRA Act, which was included as part of the Health Care and Education 

Reconciliation Act of 2010 (HCERA) (Pub. L. 111-152), ended the origination of new FFEL 

Program loans as of July 1, 2010. Nevertheless, FSA, lenders, and guaranty agencies continue 

to service and collect outstanding FFEL Program loans. FSA, FFEL lenders, and guaranty 

agencies held a FFEL Program loan portfolio of approximately $281.8 billion, as of 

September 30, 2018. Of this portfolio, $92.9 billion represented FSA’s credit program 

receivables, net. In FY 2018, FSA made gross payments of approximately $1.1 billion to 

lenders for interest and special allowance subsidies and $5.8 billion to guaranty agencies for 

reinsurance claims and fees paid for account maintenance, default aversion, and collection 

activities. In addition, in FY 2017, under authority granted in the Budget Reconciliation Act of 

2014, guaranty agencies began assigning rehabilitated loans to FSA that they were 

unsuccessful in selling to lenders. 

The Ensuring Continued Access to Student Loans Act of 2008 (ECASLA) authorized the 

Department to implement a number of programs to ensure that credit market disruptions did not 

deny eligible students and parents access to federal student loans for the 2008–09 and 2009-10 

academic years. Under this authorization, the Department implemented three activities, two of 

which allowed for loan purchase commitments and purchases of loan participation 

interests. The authority to make these purchases expired after September 30, 2010. The third 

program that the Department implemented under the authority of ECASLA was the AssetBacked Commercial Paper (ABCP) Conduit Program (Conduit). This program, under which the 

Department entered into forward purchase commitments with a Conduit, ended in 

January 2014. 

As of September 30, 2018, FSA-held FFEL credit program receivables, net totaled $92.9 billion, 

comprising $28.1 billion acquired under the "traditional" (Non-ECASLA) guaranteed loan 

program, and $64.8 billion in loans acquired under the ECASLA authorization. 

 

4

 Excludes consolidation loans of $41.6 billion. 
10 Fiscal Year 2018 Annual Report | Federal Student Aid

Mission and Organizational Structure 

The Federal Perkins Loan Program is one of three campus-based student aid 

programs. While no new funding to the program was provided in FY 2018, historically, the 

Department had provided funds directly to eligible institutions. These funds enabled eligible 

institutions to offer low-interest loans to students based on financial need. Under federal law, 

the authority for schools to make new Perkins Loans ended on Sept. 30, 2017, and final 

disbursements were permitted through June 30, 2018. As a result, students can no longer 

receive Perkins Loans. In FY 2018, approximately $886.3 million of funds previously provided 

by the Department were disbursed to eligible students through approximately 356,000 Perkins 

awards. 

The Health Education Assistance Loan (HEAL) Program was transferred to the Department 

from the U.S. Department of Health and Human Services (HHS) in FY 2014 under the 

Consolidated Appropriations Act, 2014 (Pub. L. 113-76). This program enabled graduate 

students in schools of medicine, osteopathy, dentistry, veterinary medicine, optometry, podiatry, 

public health, pharmacy, chiropracty, or programs in health administration and clinical 

psychology to obtain federally insured loans through participating lenders. Since September 30, 

1998, no new loans have originated through this program; however, borrowers are still obligated 

to repay any outstanding loans obtained through the program.

The Department assumed responsibility for the program and the authority to administer, service, 

collect, and enforce the loans. In addition, the functions, assets, and liabilities of the Secretary 

of Health and Human Services that are associated with the HEAL program were permanently 

transferred to the Secretary of Education. Credit program receivables, net of allowance for 

subsidy, were $360.0 million for FY 2018. 

Federal Grant Programs

In its responsibility for administering Title IV aid, FSA oversaw the disbursement of $29.1 billion 

in grants to 8.3 million recipients. The following provides a summary for each grant program, 

including aid disbursed for FY 2018. 

The Federal Pell Grant (Pell Grant) Program helps ensure financial access to postsecondary 

education by providing grant aid to low-income and middle-income undergraduate students. 

Considered the foundation of a student’s financial aid package, Pell Grants vary according to 

the financial circumstances of students and their families. In FY 2018, the Department 

disbursed $28.3 billion in Pell Grants averaging approximately $4,052 to more than 8.2 million 

students. The maximum Pell Grant award was $5,920 for the 2017–18 award year and 

increased to $6,095 for the 2018–19 award year. 

The Federal Supplemental Educational Opportunity Grant Program is one of three campusbased programs through which the Department provides funds directly to eligible institutions. 

Funds provided through this program enable eligible institutions to offer grants to students 

based on need. In FY 2018, approximately $750.1 million were disbursed through 

approximately 1.5 million campus-based awards. 
Fiscal Year 2018 Annual Report | Federal Student Aid 11

Mission and Organizational Structure 

The Teacher Education Assistance for College and Higher Education (TEACH) Grant

Program provides up to $4,000 per year to students agreeing to teach mathematics, science, or 

other specialized subjects in a high-poverty school for at least four years within eight years of 

their graduation. Under sequestration, award amounts for any TEACH Grant first disbursed on 

or after October 1, 2017, and before October 1, 2018, were reduced by 6.6 percent from the 

award amount for which a recipient would otherwise have been eligible. The maximum award 

of $4,000 was reduced by approximately $264, resulting in a maximum award amount of 

$3,736. If students fail to fulfill the service requirements specific to the program, their TEACH 

Grants convert to Direct Unsubsidized Loans, with interest accrued from the time of the award. 

This grant program began in the 2008–09 school year, starting July 1, 2008. In FY 2018, the 

Department disbursed approximately 37,000 grants totaling $84.0 million under the TEACH 

Grant Program. 

The Iraq and Afghanistan Service Grant Program, which became effective July 1, 2010, 

provides non-need-based grants to students whose parent or guardian was a member of the 

Armed Forces and died in Iraq or Afghanistan as a result of performing military service after 

September 11, 2001. These grants are equal to the maximum Pell Grant for a given award 

year. Under sequestration, award amounts for any Iraq and Afghanistan Service Grant first 

disbursed on or after October 1, 2017 and before October 1, 2018 were reduced by 6.6 percent 

from the award amount for which a recipient would otherwise have been entitled. For example, 

the 2017–18 maximum award of $5,920 was reduced by approximately $391, resulting in a 

maximum award amount of $5,529. The Department disbursed approximately $351,000 to 

support fewer than 100 awards in FY 2018. 

Federal Work-Study Program

The Federal Work-Study Program is one of three campus-based programs through which the 

Department provides funds directly to eligible institutions. Funds provided through this program 

enable eligible institutions to offer employment to students based on financial need. In FY 2018, 

approximately $983.3 million were disbursed through approximately 631,000 campus-based 

awards. 
12 Fiscal Year 2018 Annual Report | Federal Student Aid

Mission and Organizational Structure 

Mission, Vision, and Core Values 

FSA’s mission is student-focused. This mission drives the organization’s vision to be a reliable 

provider of federal student aid and services and to be a trusted source of postsecondary 

education information to students and their families. As part of its vision, FSA strives to assist 

students and families in making better decisions about their postsecondary education funding 

options. The core values reflect a culture of integrity, excellence, and collaboration: key 

components in building a high-performing organization. 

FSA Mission, Vision, and Core Values

MISSION DESCRIPTION 

MISSION Funding America’s Future, One Student at a Time

VISION DESCRIPTION 

VISION To be the most trusted and reliable source of student 

financial aid, information, and services in the nation. 

VALUES DESCRIPTION 

Integrity Do the right thing above other interests and hold everyone 

accountable. 

Customer Service Know what our customers want and ensure we meet their 

expectations. 

Excellence Strive to be the very best in all we do by embracing a 

culture of continuous improvement.

Respect Value individuals by acknowledging the diversity of their 

contributions, ideas, and beliefs.

Stewardship Uphold the sacred trust of taxpayers as we work to support 

the goals of Congress and the Administration.

Teamwork Work in collaboration with our colleagues and partners to 

produce the best possible results.

As discussed in detail in the next section, FSA has translated this vision into a set of clearly 

defined strategic goals and objectives, with related measurable performance metrics. The 

realization of these goals will enable the organization to accomplish its mission successfully. 
Fiscal Year 2018 Annual Report | Federal Student Aid 13

Performance Management 

Performance Management

The FSA Annual Report provides a detailed view of the past year’s goals, challenges, and 

accomplishments in the context of the FSA FY 2015–19 Strategic Plan. In the near future, the 

strategic planning process will be reviewed to ensure it aligns with FSA’s goals and vision. 

This section of the Annual Report provides a general overview of the performance management 

processes at FSA. It includes a summary of FSA’s FY 2018 performance metrics, objectives, and 

results; discussion of FSA’s Agency Priority Goal (APG); and discussion of FSA’s efforts to validate 

the quality of performance data reported. 

Performance Management Processes at Federal Student Aid

During FY 2018, FSA used three tools to establish goals and to communicate, measure, and report 

performance: 

 FSA FY 2015–19 Strategic Plan; 

 Annual Performance Report; and 

 Annual Organizational Performance Review (OPR). 

FSA FY 2015‒19 Strategic Plan

As part of the strategic planning process, FSA continuously identifies and evaluates key drivers that 

significantly influence FSA’s long-term goals and objectives. FSA analyzes these drivers to identify 

long-term core strategic goals that will serve as the foundation of FSA’s strategic planning. These 

strategic goals collectively provide the framework for continuous improvement at FSA, guiding the 

organization in managing its programs more effectively, and providing clear strategic direction to all of 

FSA’s internal and external constituencies. The five-year strategic goals developed must be: 

 appropriate to the mission of the organization; 

 realistic and measurable; 

 achievable in the time frame established and challenging in their targets; and 

 understandable to the layperson (i.e., language is unambiguous and terminology is 

adequately defined). 

Each strategic goal encompasses objectives and identifies performance metrics to measure FSA’s 

level of success in meeting the strategic goal. For each performance metric, FSA identifies a target 

level of performance for each fiscal year. FSA sets the target level of performance at a challenging, 

but realistic level that is achievable within the timeframe. Meeting or exceeding the target indicates 

that FSA succeeded in attaining the established performance metric, while falling short of the target 

indicates that FSA did not attain the performance metric. The following table summarizes the key 

components of the FSA FY 2015–19 Strategic Plan. 
14 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Management 

Key Components of the FSA FY 2015–19 Strategic Plan

Key Component Description 

Strategic Goals 

Statements of long-term purpose outlined in the 

FSA FY 2015–19 Strategic Plan that define how 

FSA will accomplish its mission. These goals 

are aligned to FSA’s responsibilities as a PBO. 

Objectives 

Statements that describe the tactical activities 

FSA will perform to achieve the associated 

strategic goal. 

Performance Metrics 

Levels of performance over a certain timeframe 

used to gauge FSA’s success in reaching its 

strategic goals. These metrics include targets 

and timeframes. 

Targets 

Indicators of the desired performance levels or 

specific desired results targeted for a given 

fiscal year. Targets are expressed in 

quantifiable terms and are compared to the 

actual result to determine level of performance. 

Throughout the fiscal year, FSA measures and analyzes performance based upon performance 

metric results. For any performance metrics not on track, FSA’s analysis includes identifying the root 

cause of the unexpected result and determining the appropriate corrective actions necessary to 

improve performance. 

Annual Performance Report 

To report progress on meeting the strategic goals, FSA prepares and publishes an Annual

Performance Report, which is included in FSA’s Annual Report. In addition to the Annual 

Performance Report, the Annual Report includes FSA management’s discussion and analysis of 

financial and performance results, its audited financial statements and notes, and the report of the 

independent auditors. 

Annual Organizational Performance Review 

The annual OPR is part of the Department-wide performance management system. It operates at the 

principal office level and is designed to integrate and align all of the Department’s performance 

management elements, including the U.S. Department of Education Strategic Plan for Fiscal Years 

2018–22, APGs, the priorities of the principal offices, and other requirements of law and of the 

President. The OPR framework primarily focuses on process improvements and capacity building, 

providing principal offices an opportunity to establish specific milestones. FSA tracks the status of its 

OPR metrics and reports on its progress to the Department. 
Fiscal Year 2018 Annual Report | Federal Student Aid 15

Performance Management 

Fiscal Year 2018 Strategic Goals, Objectives, and Performance Metrics 

In its earlier strategic plans, FSA focused primarily on achieving operational efficiency and system 

integration, both of which are vital to its designation as a PBO. As part of the initial update to its 

earlier plans, FSA developed and implemented a strategic plan that would improve the overall system 

of funding for postsecondary education. The strategic plan outlined steps that would improve the 

system by (1) equipping students and their families with better information to make improved 

decisions about postsecondary education; and (2) actively shaping the behavior of participants in 

education funding, by using FSA’s knowledge, data, oversight authority, and relationships to improve 

the coordination of all participants in the system. 

FSA’s current strategic plan, the FSA FY 2015–19 Strategic Plan reflects the organization’s increased 

focus on quality of service as well as increasing analytical and research capabilities. Key strategic 

drivers, listed below, influenced the development and implementation of FSA’s strategic plan, as well 

as the development and tracking of performance measures. 

Key Strategic Drivers Relevant to FSA Strategic Planning 

Key Strategic Driver Relevance to FSA’s Strategic Planning Process 

The Higher Education Act of 1965 legislation Prescribes Title IV program and PBO requirements 

(i.e., improve service, reduce costs, improve and 

integrate support systems, develop delivery and 

information systems, and enhance staff development 

and talent). 

Student and borrower needs Students and borrowers are key customers of FSA 

services and products. 

Key trends and conditions for the financial 

aid environment 

Indicates student aid environment within which FSA 

must operate. Listed below are key trends that may 

affect the financial aid environment. 

 Changing demand for Federal Student Aid. 

 Continuing growth of student debt and focus 

on delinquency and default. 

 Increasing pressure to improve student 

interaction within the aid system. 

 Increasing demand for accountability in the 

use of federal funds. 

 Increasing attention to availability and uses of 

data. 

 Continuing focus on data security. 

The Department’s Five-Year Strategic Plan Requires FSA’s support of the Department’s strategic 

goals related to postsecondary education. 
16 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Management 

Key Strategic Driver Relevance to FSA’s Strategic Planning Process 

The Office of Inspector General’s (OIG) 

Management Challenges 

Requires the Department and FSA senior 

management’s consideration for establishing 

priorities. The Office of Inspector General’s 

Management Challenges for FY 2018 include: 

 Improper Payments; 

 Information Technology Security; 

 Oversight and Monitoring; and

 Data Quality and Reporting. 

The Office of Inspector General and 

Government Accountability Office audits 

Requires FSA senior management’s consideration for 

establishing priorities to address findings and 

recommendations. 

Federal financial management laws and 

regulations 

Prescribes financial management requirements. 

Federal performance reporting legislation 

and requirements 

Prescribes performance and reporting requirements. 

Federal budget deficits Requires FSA to look for opportunities to reduce 

operating costs through improved efficiency. 

FSA’s five Strategic Goals, based upon analysis of the above key strategic drivers, are: 

 Strategic Goal A: Improve quality of service for customers across the entire student aid life 

cycle. 

 Strategic Goal B: Proactively manage the student aid portfolio to mitigate risk.

 Strategic Goal C: Improve operational efficiency and flexibility.

 Strategic Goal D: Foster trust and collaboration among stakeholders.

 Strategic Goal E: Invest in expanded workforce capability.

The remainder of this section provides a discussion of each strategic goal, including the associated 

objectives and a summary of performance metric results. For a more detailed discussion, refer to the 

Annual Performance Report section of this document.
Fiscal Year 2018 Annual Report | Federal Student Aid 17

Performance Management 

How the Remainder of this Section is Organized. This section is organized by the five strategic 

goals. For each strategic goal, this section provides an overview of the goal, lists the associated 

objectives that support the strategic goal, and details the performance metrics used to measure 

performance. Specifically, the following information is included for each strategic goal: 

 Strategic Goal: States the strategic goal and provides a discussion of the relevance of 

the goal to FSA’s mission. 

 Objective: Includes a brief discussion of the objectives identified for the strategic 

goal. 

 Performance Metrics: Includes a brief summary of FSA’s performance as measured by the 

performance metrics for the strategic goal. This brief summary is 

followed by a performance metric table that details, the prior years’

actual results; the current reporting period target; the current year actual 

result; and the page reference to the detailed discussion located in the 

Annual Performance Report section of this document. The following is 

the legend for the performance result indicator included in the table. 

Performance Result Indicator Legend 

Performance Result Indicator 

Performance result met or exceeded the 

target. 

Met



Performance result did not meet the 

target. 

Not met



Performance result is not applicable 

because the performance metric was not 

developed, the performance metric was 

not implemented, or the required data 

were not available in time for inclusion. 

N/A 

–

The performance metric results reported are as of fiscal year-end (i.e., September 30, 2018) unless 

otherwise noted. If the required data are not available as of fiscal year-end in sufficient time for 

inclusion, data as of the most recent period available is used. Data as of fiscal year-end may not be 

available in some instances, where the required data are obtained from external sources (i.e., state 

and private nonprofit guaranty agencies, lenders and loan servicers, grant and loan recipients, etc.). 
18 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Management 

Strategic Goal A: Improve quality of service for customers across the entire student 

aid life cycle.

FSA recognizes the importance of continuing to strive for improvements in quality of service. 

Connecting customers with the appropriate resources is a cornerstone of FSA’s mission. To achieve 

this goal, FSA continues to work on providing increased outreach and information on all aspects of 

the student aid environment. These efforts allow students and families to make decisions in the most 

well informed manner. FSA also takes great care to ascertain that high quality service does not begin 

and end with aid disbursement and ensures that customers remain connected to the best resources 

available at every stage of the student aid lifecycle. 

Strategic Goal A focuses directly on student/aid recipient awareness and giving individuals and 

families the best resources to ensure sound financial decisions while also working to identify patterns 

and trends to deliver information to customers proactively rather than reactively. 

Objectives supported: To support this strategic goal, FSA identified a set of objectives, which 

includes detailed initiatives designed to assist with meeting each objective. Meeting each objective 

will result in accomplishing the strategic goal. The objectives that support this strategic goal include: 

 Objective 1: Improve outreach and awareness efforts to support aid recipients and their 

families in making sound financial decisions. 

 Objective 2: Optimize the borrower service model to improve the customer experience. 

 Objective 3: Predict, identify, and understand existing and emerging customer trends and 

patterns. 

 Objective 4: Enhance outreach, training, and tools to improve institutional performance and 

help postsecondary institutions understand responsibilities and requirements 

under the Higher Education Act. 

Performance Metrics measured: To determine the success of FSA’s efforts to meet this strategic 

goal, FSA identified a set of performance metrics, including a target level of performance. For this 

strategic goal, the following table lists the performance metrics, prior year actual results, FY 2018

target and actual performance levels, result (i.e., met, not met, etc.), and reference to supporting 

detail in the Annual Performance Report section of this document. In summary, FSA met or 

exceeded the target for all the performance metrics under this strategic goal.
Fiscal Year 2018 Annual Report | Federal Student Aid 19

Performance Management 

Performance Summary for Strategic Goal A 

Table 5: Performance Metric A.1* 

Percent of First-Time FAFSA Filers Among High School Seniors 

2016 2017 2018 Reference page

Target – – 66.4%–68.4% 

Actual – – 67.4% 62

Result N/A N/A 

*Note: This performance metric was revised in FY 2018; prior-year data not available under revised method. 

Table 6: Performance Metric A.2 

Persistence Among First-Time Filing Aid Recipients 

2016 2017 2018 Reference page 

Target 78.5%–80.5% 78.7%–80.7% 81.6%–83.6% 

Actual 79.7% 82.6% 82.5% 64

Result   

Table 7: Performance Metric A.3 

Customer Visits to StudentAid.gov 

2016 2017 2018 Reference page 

Target >=43.4 million >=43.3 million >=43.3 million

Actual 47.2 million 44.3 million 44.5 million 65

Result   

Table 8: Performance Metric A.4 

Social Media Channel Subscribership

2016 2017 2018 Reference page 

Target >=454,000 >=500,000 >=590,000

Actual 528,251 584,241 607,241 66

Result   

Table 9: Performance Metric A.5* 

ACSI Aid Life Cycle Surveys 

2016 2017 2018 Reference page 

Target – 68.9-70.9 69.4–71.4

Actual – 70.6 69.9 67

Result N/A  

*Note: This performance metric was revised in FY 2017; prior-year data not available under revised method
20 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Management 

Strategic Goal B: Proactively manage the student aid portfolio to mitigate risk. 

FSA has committed to an increased effort in the expansion and enhancement of analytical and datadriven processes. These efforts play a vital role in the mitigation of risk by identifying and resolving 

problematic elements. FSA’s risk mitigation effort also extends to students and families potentially 

affected by misleading practices within the student aid environment. Using increased analytical tools 

and data-driven resources, FSA continues its leadership role in the universe of postsecondary 

education funding to ensure that all system participants effectively serve the interests of students. 

Strategic Goal B aims to increase operational effectiveness and strengthen FSA’s role in working to 

ensure protection of customers and holding stakeholders accountable for their actions. FSA strives to 

provide the opportunity of postsecondary education to all Americans, and a critical element of this 

task is ensuring effective identification and mitigation of risks to ensure a safe and accountable 

environment surrounding the student aid lifecycle. 

Objectives supported: To support this strategic goal, FSA identified a set of objectives, which 

includes detailed initiatives designed to assist FSA with meeting each objective. Meeting each 

objective will result in accomplishing the strategic goal. The objectives that support this strategic goal 

include: 

 Objective 1: Enhance analytical and research capabilities to proactively identify operational 

and reputational risk. 

 Objective 2: Develop robust, data-driven processes to manage identified risks. 

 Objective 3: Provide access to resources to protect students and families from unfair, 

deceptive, or fraudulent practices in the student aid marketplace. 

Performance Metrics measured: To determine the success of FSA’s efforts to meet this strategic 

goal, FSA identified a set of performance metrics, including a target level of performance. For this 

strategic goal, the following table lists the performance metrics, prior year actual results, FY 2018

target and actual performance levels, result (i.e., met, not met, etc.), and reference to supporting 

detail in the Annual Performance Report section of this document. In summary, FSA met or 

exceeded the target for both performance metrics under this strategic goal. 
Fiscal Year 2018 Annual Report | Federal Student Aid 21

Performance Management 

Performance Summary for Strategic Goal B 

Table 10: Performance Metric B.1

Improper Payment Rate

2016 2017 2018 Reference page 

Target N/A5

4.85% 4.97%

Actual 4.85% 4.97% 4.95% 68

Result -  

Table 11: Performance Metric B.2 

Percent of Borrowers > 90 Days Delinquent

2016 2017 2018 Reference page 

Target 9.9% 7.4% 8.2% 

Actual 8.8% 8.3% 7.4% 70

Result   

 

5

At the time FY 2016 targets were set, it was known that the estimation methodology would change to address improper 

payment risks not previously incorporated, but not the impact. Accordingly, no target was set for this measure for FY 2016.
22 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Management 

Strategic Goal C: Improve operational efficiency and flexibility.

FSA continues to recognize the need for flexibility relating to changes in the environment of 

postsecondary education as well as the world itself. As part of the federal government push to 

migrate to more cost-effective operating models, FSA began implementation of new efficient 

governance processes that will enable the organization to more readily adapt to changing policies 

and needs, while continuing to effectively manage and deliver student aid programs. 

FSA has implemented a number of initiatives focused on developing mechanisms to facilitate 

collaboration and information sharing across the organization that will help the organization 

accurately and effectively analyze its data. FSA has also refined acquisition strategies to ensure the 

most efficient and economic acquisition of products and services. 

Recent technological improvements in processing and analyzing data have greatly increased FSA’s 

ability to serve its customers. However, the rising sophistication of external network threats 

necessitates a proactive approach to identify and prevent unauthorized access and accidental or 

deliberate data loss. FSA places a high priority on strengthening its Information Technology (IT) 

systems’ security in order to ensure appropriate identification and management of potential threats.

Strategic Goal C aims to pursue further efficiencies and flexibilities on an enterprise level at FSA. 

These efforts will increase collaboration between business units and reduce waste resulting from 

outdated and inefficient processes. 

Objectives supported: To support this strategic goal, FSA identified a set of objectives, which 

includes detailed initiatives designed to assist FSA with meeting each objective. Meeting each 

objective will result in accomplishing the strategic goal. The objectives that support this strategic goal 

include: 

 Objective 1: Link disparate data sources to improve cross-organizational information 

exchange. 

 Objective 2: Refine acquisition management to ensure that services and products are 

consistent with business objectives. 

 Objective 3: Enhance governance processes to support enterprise decision-making. 

 Objective 4: Strengthen FSA’s information technology (IT) systems’ security. 

Performance Metrics measured: To determine the success of FSA’s efforts to meet this strategic 

goal, FSA identified a set of performance metrics, including a target level of performance. For this 

strategic goal, the following table lists the performance metrics, prior year actual results, FY 2018

target and actual performance levels, result (i.e., met, not met, etc.), and reference to supporting 

detail in the Annual Performance Report section of this document. In summary, FSA met or 

exceeded the target for both performance metrics under this strategic goal. 
Fiscal Year 2018 Annual Report | Federal Student Aid 23

Performance Management 

Performance Summary for Strategic Goal C 

Table 12: Performance Metric C.1

Aid Delivery Costs Per Application 

2016 2017 2018 Reference page 

Target $13.11 $11.46 $12.16

Actual $11.53 $10.68 $8.83 71

Result   

Table 13: Performance Metric C.2 

Outstanding Direct Loan Portfolio in Current Repayment Status 

2016 2017 2018 Reference page 

Target 85.3% 84.9%–85.9% 85.0%–86.0%

Actual 85.4% 85.7% 86.5% 72

Result   
24 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Management 

Strategic Goal D: Foster trust and collaboration among stakeholders.

As the nation’s largest provider of federal student assistance, FSA’s role requires the organization to 

provide careful oversight of taxpayer dollars. FSA annually disburses more than $122.4 billion in aid 

and administers a loan portfolio valued at over $1.4 trillion. FSA has increased collaboration with all 

stakeholders in the Title IV process and worked to promote its commitment to transparency and 

accountability. 

The education environment includes a significant number of stakeholders with a variety of needs, 

objectives, and priorities. This diversity presents opportunities for FSA to strengthen effective 

partnerships with internal partners in the federal government and external stakeholders in the field of 

higher education to address priorities that serve the best interest of students. FSA also understands 

that different stakeholders have different communication needs, interests, and familiarity with federal 

financial aid programs. This has resulted in the expansion of available resources as well as the use 

of an increasing number of outreach methods. 

Strategic Goal D aims to build trust between FSA and stakeholders through collaborative efforts and 

a continuous dialogue. Transparent operations allow stakeholders vastly improved accessibility to 

data and information from the student aid universe and help to foster well-informed discussions and 

partnerships. 

Objectives supported: To support this strategic goal, FSA identified a set of objectives, which 

includes detailed initiatives designed to assist FSA with meeting each objective. Meeting each 

objective will result in accomplishing the strategic goal. The objectives that support this strategic goal 

include: 

 Objective 1: Engage with stakeholders to be the most trusted and reliable source of 

information on federal student aid. 

 Objective 2: Provide timely and proactive communication to promote accurate, consistent 

messaging on federal funding of postsecondary education.

 Objective 3: Promote transparency and accountability within FSA and across the higher 

education environment. 

Performance Metrics measured: To determine the success of FSA’s efforts to meet this strategic 

goal, FSA identified a set of performance metrics, including a target level of performance. For this 

strategic goal, the following table lists the performance metrics, prior year actual results, FY 2018

target and actual performance levels, result (i.e., met, not met, etc.), and reference to supporting 

detail in the Annual Performance Report section of this document. In summary, FSA met or 

exceeded the target for all the performance metrics under this strategic goal. 
Fiscal Year 2018 Annual Report | Federal Student Aid 25

Performance Management 

Performance Summary for Strategic Goal D 

Table 14: Performance Metric D.1

Ease of Doing Business with FSA 

2016 2017 2018 Reference page 

Target 74.3–77.3 71.3–73.3 71.9–74.9

Actual 72.3 73.4 74.5 73

Result   

Table 15: Performance Metric D.2 

Percentage of Contract Dollars Competed by FSA 

2016 2017 2018 Reference page 

Target 89.3%-91.3% 89.3%-91.3% 89.3%–91.3% 

Actual 92.9% 95.2% 96.8% 74

Result   

Table 16: Performance Metric D.3 

Collection Rate

2016 2017 2018 Reference page 

Target $51.79 $51.68 $59.24 

Actual $53.07 $59.69 $62.15 75

Result   
26 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Management 

Strategic Goal E: Invest in expanded workforce capability.

As the environment of postsecondary education and student aid continues to evolve, FSA must 

ensure that its workforce has the capabilities to adapt to changing business needs and priorities, 

which reflect the needs of FSA’s customers. Acquiring talent and maintaining a skilled workforce 

remain priority areas for FSA. FSA has launched a number of initiatives to increase the capability of 

its workforce ranging from a streamlined hiring process to coaching and competency based training 

programs. 

Strategic Goal E aims to maintain a diverse workforce that is well-versed in the specialty skill sets 

necessary to address evolving models of higher education delivery. 

Objectives supported: To support this strategic goal, FSA identified a set of objectives, which 

includes detailed initiatives designed to assist FSA with meeting each objective. Meeting each 

objective will result in accomplishing the strategic goal. The objectives that support this strategic goal 

include: 

 Objective 1: Create an enterprise-wide workforce plan to attract, develop, and retain 

employees with the skills required to meet evolving business needs. 

 Objective 2: Develop a succession planning strategy to identify and create opportunities for 

future leadership talent. 

Performance Metric measured: To determine the success of FSA’s efforts to meet this strategic 

goal, FSA identified a performance metric, including a target level of performance. For this strategic 

goal, the following table lists the performance metric, prior year actual results, FY 2018 target and 

actual performance levels, result (i.e., met, not met, etc.), and reference to supporting detail in the 

Annual Performance Report section of this document. In summary, FSA did not meet the target for 

the performance metric under this strategic goal. 

Performance Summary for Strategic Goal E 

Table 17: Performance Metric E.1 

Employee Engagement Index 

2016 2017 2018 Reference page 

Target 66.9%–68.9% 65.4%–69.4% 68.7–70.7%

Actual 67.4% 69.7% 62.0% 76

Result   
Fiscal Year 2018 Annual Report | Federal Student Aid 27

Performance Management 

Agency Priority Goal 

Agency Priority Goals are a performance accountability structure of the Government Performance 

and Results Modernization Act of 2010 (Pub. L. 111-352) that provides agencies a mechanism to 

focus on leadership priorities, set outcomes, and measure results, bringing focus to mission areas 

where agencies need to drive significant progress and change. 

APG statements are outcome-oriented, ambitious, and measurable with specific targets set that 

reflect a near-term result or achievement agency leadership wants to accomplish within 

approximately 24 months. 

For the 24 months commencing October 1, 2017, the Department established four APGs in support of 

its broader mission to promote student achievement and preparation for global competitiveness by 

fostering educational excellence and ensuring equal access. Of the four APGs, three were closely 

tied to FSA’s mission and were supported by FSA during FY 2018. They are:

 Improve Borrowers’ Access to Quality Customer Service; 

 Improve Student Privacy and Data Security at Institutions of Higher Education through 

Outreach and Compliance Efforts; and 

 Provide Regulatory Relief to Education Stakeholders

Each quarter, the Department analyzes the progress toward accomplishing the four Departmental 

APGs, with the objective of successfully accomplishing the current four APGs by September 30, 

2019. The current APGs were established prior to the launch of FSA’s Next Generation Financial 

Services Environment (Next Gen FSA) and it is anticipated that the Next Gen FSA effort will have a 

profound impact on both the means to achieve the above APGs and the timing for doing so. 

During FY 2019, FSA and the Department will examine the 24-month APG effort and publish the 

individual APG results. The results will be made available both on Performance.gov and in FSA’s 

FY 2019 Annual Report. 
28 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Management 

Quality of Performance Data 

Ensuring the integrity of the data required to determine performance results is a critical step in 

reporting performance. For this step, FSA developed and implemented a Validation and Verification 

Matrix. Specifically, FSA uses this matrix as a tool to validate the completeness and reliability of the 

underlying data gathered and used to calculate each performance metric for the reporting period, 

including the performance results reported in this Annual Report. 

For each performance metric, this matrix is used to document the following: measurement definition 

and owner; data source, availability, security procedures, and known limitations; whether data are 

subject to FSA’s A-123 Internal Control Review process; and procedures for accessing the data, 

calculating the performance metric, and validating and verifying the data gathered. 

For a discussion of data quality and limitations for each performance metric, please see the section 

Performance Results by Strategic Goal, contained in the Annual Performance Report section. 
Fiscal Year 2018 Annual Report | Federal Student Aid 29

Financial Analysis 

Financial Analysis

Introduction

The Financial Analysis section provides an overview of FSA’s financial results for FY 2018. 

This section assists readers in understanding FSA’s financial results, position, and condition as 

portrayed in the financial statements and notes located in the Financial Section of this report. 

The financial analysis explains major changes in assets, liabilities, costs, and budgetary 

resources. It also includes comparisons of the current year to the four prior years and 

discusses the relevance of significant balances, amounts, and trends reflected in the financial 

statements and notes. 

FSA is committed to providing sound management, financial systems, and controls to ensure 

that students receive aid and repay loans according to applicable laws and regulations. FSA’s 

financial statements are prepared in accordance with established federal accounting standards. 

The financial statements are subject to an annual independent audit to ensure that FSA’s 

financial position has been presented fairly. In FY 2018, FSA achieved an unmodified audit 

opinion on its financial statements for the seventeenth consecutive year. 

FSA presents its financial statements and notes in the format required by the OMB Circular 

A-136, Financial Reporting Requirements. For the fiscal years, FY 2018 and FY 2017, the 

Balance Sheet, Statement of Net Cost, and Statement of Changes in Net Position were 

prepared on a consolidated basis, whereas the Statement of Budgetary Resources was 

prepared on a combined basis. These financial statements, along with the Independent 

Auditors’ Report on these statements, can be found in the Financial Section of this Annual 

Report. 

FSA has oversight responsibilities for over $1.4 trillion in federal student loans, of which it 

directly owns and manages nearly $1.3 trillion. As described in Note 1 and Note 5, FSA reports 

this portfolio on its Balance Sheet as the line item Credit Program Receivables, net of 

allowances for loss, loan guaranty liability and subsidy cost that adjust the portfolio amount to its 

present value. The subsidy cost represents an estimate in present value terms of the cost to 

the government of direct loans and loan guarantees that is recorded at the time the loan is 

disbursed. Components include default costs (net of recoveries), contractual payments paid to 

private third party collectors, and net borrowing costs, less any origination or other fees 

collected. If the net cost to the government is greater than zero, then the subsidy cost is said to 

be positive. However, the subsidy cost may also be zero (break-even) or even negative, if the 

estimated cost of providing loans to borrowers is less than the value of collections received as 

interest and fees. As of September 30, 2018, FSA reported $1.2 trillion in Credit Program 

Receivables, Net including an allowance for subsidy cost of approximately $64.5 billion. FSA’s 

portfolio of Credit Program Receivables, Net has seen significant growth, increasing by 

5.6 percent over the FY 2017 net portfolio balance. Operationally, FSA must manage the 

resources it has available to ensure that this portfolio is serviced efficiently and effectively, and 

that quality customer service is provided to its borrowers. FSA must mitigate several risks to 

ensure this portfolio is managed effectively. These risks are discussed at the conclusion of the 

analysis of the financial statements. 
30 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

The FY 2018 FSA Financial Highlights tables presented below provide a condensed summary 

of the significant balances in FSA’s financial statements over a five year period, beginning with 

FY 2014. It also shows the percentage change between the prior and current fiscal years as of 

September 30, 2017 and 2018 respectively. Some charts and tables presented in this section 

include rounding adjustments to ensure that the component line items sum to the corresponding 

total. As a result, there may be small discrepancies between the amounts shown in a particular 

chart or table when compared to similar items discussed in the text or presented in other areas 

of the Annual Report. 

Table 18: FSA Financial Highlights 

Condensed Balance Sheet 

Fiscal Years 2014–18

(Dollars in millions) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 

Percentage 

Change6

Fund Balance with Treasury $ 61,506 $ 67,985 $ 60,358 $ 74,032 $ 73,405 (0.8%) 

Credit Program Receivables, Net 922,418 1,016,425 1,075,227 1,145,406 1,209,495 5.6% 

Remaining Assets 1,596 1,648 1,334 2,256 2,365 4.8% 

Total Assets $ 985,520 $ 1,086,058 $ 1,136,919 $ 1,221,694 $ 1,285,265 5.2% 

Debt $ 965,362 $ 1,050,344 $ 1,126,345 $ 1,178,473 $ 1,258,481 6.8% 

Subsidy due to Treasury General Fund7 5,958 8,237 2,642 7,013 7,528 7.3% 

Remaining Liabilities 7,530 7,169 9,614 13,000 10,197 (21.6)%

Total Liabilities $ 978,850 $ 1,065,750 $ 1,138,601 $ 1,198,486 $ 1,276,206 6.5% 

Unexpended Appropriations $ 30,485 $ 28,325 $ 26,531 $ 28,524 $ 32,487 13.9% 

Cumulative Results of Operations (23,815) (8,017) (28,213) (5,316) (23,428) 340.7% 

 Net Position $ 6,670 $ 20,308 $ (1,682) $ 23,208 $ 9,059 (61.0%) 

Total Liabilities & Net Position $ 985,520 $ 1,086,058 $ 1,136,919 $ 1,221,694 $ 1,285,265 5.2% 

Table 19: Statement of Net Cost Summary 

Fiscal Years 2014–18

(Dollars in millions) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Percentage 

Change5

Gross Cost $ 65,470 $ 59,500 $ 93,032 $ 73,771 $ 71,232 (3.4%) 

Less: Earned Revenue (28,979) (31,547) (34,260) (35,825) (36,224) 1.1%

Net Cost of Operations $ 36,491 $ 27,953 $ 58,772 $ 37,946 $ 35,008 (7.7%) 

 

6

Note that the percentage change is calculated as the difference between FY 2017 and FY 2018, divided by the 

FY 2017 amount. In some instances, where the current year amount has an opposite sign to the prior year amount, 

the percentage change may be negative even though the annual change is positive (and vice versa). Similarly, if the 

current year negative amount has a larger negative value than the prior year negative amount, the difference will be 

negative but the percentage change will be positive.

7

Prior to FY 2016, Subsidy due to Treasury General Fund was included in the Condensed Balance Sheet line item, 

Other Intragovernmental Liabilities. Beginning in FY 2016, Subsidy due to Treasury General Fund is reported 

separately, while Other Intragovernmental Liabilities is now included in the category Remaining Liabilities. Data for 

the years FY 2014–15 have been restated using the FY 2016 format.
Fiscal Year 2018 Annual Report | Federal Student Aid 31

Financial Analysis 

Balance Sheet

The Balance Sheet presents the recorded value of assets and liabilities retained or managed by 

FSA as of a specific point in time. The assets represent resources available for use by FSA to pay 

its liabilities or to satisfy its future service needs. The liabilities are amounts FSA owes, the 

probable and measurable future outflows of its resources arising from past transactions or events. 

The difference between the assets and the liabilities represents FSA’s net position. 

Composition of FSA Assets. The consolidated Balance Sheet shows that FSA had total 

assets of $1,285.3 billion as of September 30, 2018, an increase of $63.6 billion, or 5.2 percent 

over the September 30, 2017 total assets balance of $1,221.7 billion. The difference resulted 

primarily from a 5.6 percent increase in net Credit Program Receivables ($64.1 billion), offset by 

a 0.8 percent reduction in Fund Balance with Treasury ($0.6 billion). Together, FSA’s Fund 

Balance with Treasury and its net Credit Program Receivables accounted for approximately 

99.8 percent of Total Assets as of September 30, 2018, as illustrated in the Composition of 

Assets chart (Chart 1). The Comparison of Assets chart (Chart 2) presents the growth of these 

two principal Balance Sheet line items over the past five fiscal years. 

Chart 1: Composition of Federal Student Aid Assets* 

Fiscal Years 2014–18

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported.
32 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

Chart 2: Comparison of Federal Student Aid Assets* 

Fiscal Years 2014–18 

(Dollars in Billions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported. 

Credit Program Receivables, Net. With a $1,209.5 billion balance as of September 30, 2018, 

Credit Program Receivables, Net represent FSA’s most important asset category and 

accounted for over 94 percent of Total Assets. This balance included $1,274.0 billion in 

principal, interest, and fees, less an allowance for subsidy cost of approximately $64.5 billion 

that adjusted the loan portfolio to its estimated present value. FSA reports the total amount 

under the three major program categories Direct Loan, FFEL, and Other, as illustrated in 

Chart 3 below and discussed more fully in the following sections. 

Chart 3: Total Federal Student Aid Loan Portfolio* 

Fiscal Years 2014–18 

(Dollars in Billions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported. 
Fiscal Year 2018 Annual Report | Federal Student Aid 33

Financial Analysis 

Chart 3 also shows that over the five-year period FY 2014–18, FSA’s portfolio of Federal 

Student Aid net credit program receivables increased by $287.1 billion or 31.1 percent, with the 

Direct Loan program accounting for most of this change. In fact, the Direct Loan portfolio 

increased by $336.5 billion or 43.2 percent, but the increase was offset by the $49.9 billion 

(34.9 percent) reduction of the FFEL Portfolio over the same period. 

The changes observed in both the Direct Loan and FFEL portfolios are principally related to the 

impact of the SAFRA Act, which as of June 30, 2010, eliminated all new loan disbursements 

under the FFEL Program in favor of direct lending. Loan consolidation has also played a role. 

Consolidation is the process of combining one or more federal student loans into one loan. 

Consolidation allows borrowers to potentially take advantage of features such as simplified 

repayment with only a single monthly bill to pay; an extended repayment period to reduce 

monthly payments; and access to alternative repayment plans such as income based or income 

contingent repayment plans. For more information about which federal loans may be eligible for 

consolidation and other requirements please visit studentaid.ed.gov/consolidation.

Direct Loan Credit Program Receivables, Net. Direct Loan Credit Program receivables 

continue to be the major component of FSA’s credit program receivable portfolio in FY 2018. As 

of September 30 the $1,115.1 billion Direct Loan portfolio ending balance comprises 

92.2 percent of FSA's total credit program receivables net, compared to the prior year ending 

balance of $1,041.6 that represented only 90.9 percent. The FY 2018 Direct Loan ending 

balance total includes $1,155.7 billion in principal, interest, and fees, with an allowance for 

subsidy cost to the government of $40.7 billion. In other words, the cost to the government of 

making the direct loans and loan guarantees included in its portfolio as of the fiscal year end 

was expected to exceed the value of interest and fees it would receive (in present value terms) 

by $40.7 billion. This contrasts to the prior year where the subsidy costs were projected at only 

$16.8 billion on Direct Loan principal, interest and fees of $1,058.4 billion. The factors that 

contributed to the variance in subsidy cost at a time when the underlying loan balances 

increased by 9.2 percent are addressed in Note 5. 

The FY 2018 $97.3 billion increase in Direct Loan Receivables (before subsidy costs) was 

mainly driven by the growth in the outstanding amount owed by borrowers, principally resulting 

from new loan originations ($91.5 billion), consolidation disbursements net of consolidation 

payoffs ($41.6 billion), interest capitalization ($18.5 billion) and the net increase in interest and 

fees payable ($12.5 billion). This was offset by reductions to principal due to loan payments by 

borrowers ($63.5 billion), loan discharge ($3.9 billion) and other adjustments. 

The growth in principal outstanding has accounted for virtually all of the growth of the Direct 

Loan portfolio over the past five years in dollar terms, as seen in Chart 4. Over the same 

period, Table 21 shows that accrued interest increased at a higher average annual rate than 

did principal outstanding (18.0 percent versus 11.8 percent), although, as illustrated by Table 

20, accrued interest only increased from 4.8 percent to 6.5 percent of the net receivable 

amount, while principal outstanding increased from 89.1 percent to 97.2 percent of the total. By 

comparison, Table 20 indicates that as a result of increased subsidy costs, the allowance for 

subsidy as a percentage of the Direct Loan Credit Program Receivable net value, changed from 

a 6.1 percent “contribution” (i.e. the estimated interest rate and fees charged to borrowers 

exceeded the anticipated costs of the risk of default) of negative subsidy cost, to a 3.7 percent 

subsidy cost by the end of FY 2017. See Note 5 for more details. 
34 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

Chart 4: Components of Direct Loan Receivables, Net* 

Fiscal Years 2014–188 

(Dollars in billions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported. 

Chart 4 also includes the number of recipients corresponding to the outstanding loan portfolio at 

each fiscal year end. Recipients are the students that benefit from the federal student loans. In 

most cases, the recipient is the borrower; but in Parent PLUS loans, the parent is the borrower 

and the student is the recipient. The chart shows that Direct Loan recipients grew from 

27.9 million to 34.2 million over the five-year period, reflecting, as reported in Table 21, an 

average annual increase of 5.2 percent, well below the rate of increase of principal and interest 

described earlier. As a result, the average debt (principal and interest) balance outstanding per 

Direct Loan recipient increased by 28.9 percent during this time, from $26,206 to $33,793, the 

higher debt burden per student is likely an indication of increasing postsecondary education 

costs.

Table 20: Components of Direct Loan Credit Program Receivables, Net by Percentage* 

Fiscal Years 2014–18

Direct Loan Component FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

Principal* 89.1% 91.0% 94.1% 95.9% 97.2% 

Accrued Interest 4.8% 5.0% 5.3% 5.7% 6.5% 

Subsidy 6.1% 4.0% 0.6% (1.6%) (3.7%)

Total Receivable 100.0% 100.0% 100.0% 100.0% 100.0% 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported.
Fiscal Year 2018 Annual Report | Federal Student Aid 35

Financial Analysis 

Table 21: Increase in Principal, Interest and Subsidy Components of Direct Loan Credit 

Program Receivables, Net and Recipient Counts* 

Direct Loan Component FY 2014–15 FY 2015–16 FY 2016–17 FY 2017–18 

FY 2014–18 

Average Year-to-Year 

change 

Principal 15.4% 12.7% 10.6% 8.5% 11.8% 

Accrued Interest 19.1% 14.7% 17.7% 21.0% 18.0% 

Subsidy (24.9%) (85.1%) (415.1%) (143.1%) (95.5%) 

Total Receivable 13.1% 8.9% 8.6% 7.1% 9.4% 

Total Recipients 7.2% 5.4% 4.8% 3.6% 5.2% 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported. 

While the Direct Loan portfolio has grown rapidly in recent years, it has also changed in 

character as an increasing proportion of students enter into the repayment phase of their loans. 

Under Title IV, each loan may pass through several distinct statuses as the student progresses 

from school through the loan life cycle. 

Repayment on most federal student loans is not required while the student recipient is “In 

School” unless they drop below half-time enrollment. However, PLUS loans enter repayment as 

soon as the loan is fully disbursed (paid out). Then, after the student graduates, leaves school, 

or drops below half-time enrollment, student borrowers are frequently entitled to a “Grace” 

period. During this period, repayment is not required to begin on the loan. Not all federal 

student loans have a grace period and for most loans, interest will accrue during the grace 

period. At the end of the grace period, the loan will enter “Repayment” status and regular 

monthly payments will be required according to an agreed payment schedule. If the borrower 

continues to make timely payments such that no more than 30 days elapse after the due date 

without payment, then the loan is classified as “Current.” If more than 30 days elapse, then the 

loan will be reclassified as “Delinquent.” Under Title IV, if more than 270 days pass without 

payment being received to satisfy the oldest payment due, Direct Student Loans are technically 

considered “In Default”8. The status continues to be tracked through the life of the loan until the 

loan is paid in full or otherwise closed out. 

Chart 59divides FSA’s portfolio of direct loans into two main categories, based on whether or 

not payments have been temporarily suspended. The first of these, “not in repayment” includes 

not only loans “In School” or “In Grace”, but also loans where a deferment or forbearance has 

been granted. The loan status “Deferment” includes loans in which payments have been 

postponed due to certain circumstances, such as returning to school, military service, or 

economic hardship. Similarly, “Forbearance” includes loans in which payments have been 

temporarily suspended or reduced because of certain types of financial hardships. The second 

major category, “In Repayment” includes not only loans identified as Current or Delinquent, but 

also those that have defaulted, are in non-defaulted bankruptcy, in a disability status or not 

otherwise categorized. For both categories, Chart 5 reports the portfolio balance as the sum of 

 

8

FSA’s policy is to not transfer such loans to the defaulted debt servicer until more than 360 days pass without 

payment being received, in order to ensure parity of Direct Loan borrower treatment with that of FFEL borrowers by 

lenders and guaranty agencies.

9

FY 2014–17 based on data published by the FSA Data Center, studentaid.ed.gov/portfolio. FY 2018 data are 

taken directly from the National Student Loan Data System (NSLDS). 
36 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

principal and interest balances owed by the borrower, and excludes any subsidy cost or 

allowance that would adjust the outstanding balance to its net present value. 

Chart 5: Direct Loan Portfolio by Repayment Status* 

Principal and Interest Only 

Fiscal Years 2014–18 

(Dollars in Billions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported.

As can be seen in Chart 5, although both segments grew during the past five years, the “In 

Repayment” segment has grown more rapidly and has become the larger portfolio segment. It 

now comprises 63.9 percent of the total principal and interest amount outstanding, increasing 

the need for FSA to facilitate the ability of Direct Loan borrowers to meet their repayment 

obligations timely. 

In Charts 6A and 6B10, the Direct Loan portfolio of “In Repayment” principal and interest has 

been subdivided into three categories, “Current”, “Delinquent”, and “Default/Bankruptcy/Other”, 

as those terms are defined above. The charts reveal that, with a September 2018 balance of 

$531.5 billion, the current portion of the “In Repayment” segment is its largest component and 

has grown the fastest in dollar terms over the past five years, FY 2014–18. However, in 

percentage terms it declined slightly over the past three years from almost 73 percent of the 

segment at the end of FY 2016 to only 72 percent at the end of FY 2018. At the same time, 

while both the Delinquent and Default/Bankruptcy/Other segments also increased in dollar 

terms, there was a continuing trend of debt moving from the Delinquent to the 

Default/Bankruptcy/Other segment, with the latter increasing from 14.2 percent to 15.5 percent 

of the segment, a trend that FSA hopes to reverse with the customer-focused servicing 

innovations that will be introduced by the implementation of Next Gen FSA in the coming years. 

 

10 ibid.
Fiscal Year 2018 Annual Report | Federal Student Aid 37

Financial Analysis 

Chart 6A: Direct Loan Portfolio Segment in Repayment by Status* 

Principal and Interest only 

Fiscal Years 2014–18 

(Dollars in Billions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported.

Chart 6B: Direct Loan Portfolio Segment in Repayment by Status*

Principal and Interest only 

Fiscal Years 2014–18

(Percentage of Total)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported.
38 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

In addition, of the total $1,155.7 billion in Direct Loan principal and interest at the current fiscal 

year end, $84.9 billion (7.3 percent of total receivables) in loan principal was in default and had 

been transferred to the Department’s defaulted loan servicer, compared to $70.7 billion 

(6.7 percent of total receivables) as of September 30, 2017. For related performance 

information about the percentage of borrowers more than 90 days delinquent, please see 

Performance Metric B.2 located in the Annual Performance section of this Annual Report. 

The portfolio of Direct Loan principal and interest receivables “Not in Repayment” can also be 

further subdivided based on the reason why the debt is not currently subject to repayment. 

Charts 7A and 7B11 subdivide this segment into two such categories, “In School/Grace” and “In 

Deferment/Forbearance”, as defined earlier.

Chart 7A shows that the amount of Direct Loan principal and interest categorized as “In 

School/Grace” has declined steadily from $203.8 billion in FY 2014 to $181.6 billion at the end 

of the current year. This reflects both the decline in new Direct Loan disbursements over the 

period, and the aging of the Direct Loan portfolio of principal and interest receivable, as a 

greater proportion of debt moved from “In School/Grace” category to the “In Repayment” 

segment. Over the same five-year period, the “In Deferment/Forbearance” segment has grown 

from $175.8 billion to $235.4 billion, increasing from 46.3 percent to 56.5 percent of the Not in 

Repayment segment. However, as a percentage of the total portfolio of Direct Loan principal 

and interest receivable, the “In Deferment/Forbearance” portion has actually declined from 

24 percent to 20 percent.

Chart 7A: Direct Loan Portfolio Segment not in Repayment by Status* 

Principal and Interest only 

Fiscal Years 2014–18 

(Dollars in Billions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported.

 

11 ibid.
Fiscal Year 2018 Annual Report | Federal Student Aid 39

Financial Analysis 

Chart 7B: Direct Loan Portfolio Segment not in Repayment by Status 

Principal and Interest only 

Fiscal Years 2014–18 

(Percentage of Total)

 

Note: Line items may include rounding adjustments to reconcile to the total amount being reported.

FFEL Credit Program Receivables, Net. FSA’s portfolio of FFEL loans includes debt acquired 

under the Conduit, Loan Participation Purchase, and Loan Purchase Commitment programs 

established through the 2008 ECASLA authorization and referred to collectively as the FFEL 

ECASLA Loan Programs. It also includes debt acquired under “traditional” (Non-ECASLA) 

defaulted guaranteed loan programs, known collectively as the “FFEL Guaranteed” portfolio 

segment. Changes in these FFEL loan portfolio segments over the past five fiscal years are 

shown in Chart 8. 

Chart 8: Total FFEL Loan Portfolio 

Fiscal Years 2014–18

(Dollars in Billions)

 

**FFEL, Guaranteed (Non-ECASLA) Program 

**FFEL, ECASLA Acquired Loan Program 

 *Note: Line items may include rounding adjustments to reconcile to the total amount being reported.
40 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

Chart 8 illustrates that the ECASLA FFEL portfolio segment remains the major component of 

the FFEL portfolio of credit program receivables, net, but declined by 37.1 percent during the 

five-year period shown. This $38.2 billion decrease reduced the proportion of ECASLA FFEL 

loans from 72.1 percent to 69.7 percent of the total $92.9 billion of FFEL loans outstanding as of 

the current year-end. This trend was mainly due to reductions in the principal balance 

outstanding as borrowers consolidated their loans to take advantage of features such as 

simplified repayment with a single bill to repay monthly, an extended repayment period to 

reduce monthly payments and access to alternative repayment plans. In addition, revised 

estimates of increased subsidy costs resulted in a further $13.3 billion reduction in the net credit 

program receivable balance outstanding over the FY 2014 to FY 2018 period. The latter is 

discussed more fully in the Statement of Net Cost section, and in Note 5.

 

Over the same five-year period, the smaller FFEL Guaranteed portfolio segment first increased 

slightly from FY 2014 to FY 2015 and then declined over the next four years, resulting in an 

$11.8 billion reduction over the five years to $28.1 billion as of September 30, 2018. The overall 

decrease was mainly due the changes in subsidy cost estimates and the elimination the 

negative liability for Loan Guarantee that together reduced the net credit program receivable 

balance by $13.1 billion. This decrease was offset by a $1.4 billion increase in principal and 

interest outstanding. The overall impact of changes in the principal, accrued interest and 

subsidy components of the FFEL portfolio are shown in Chart 912. The concurrent reduction in 

FFEL recipients during the period FY 2014–18 also demonstrates the impact of debt 

consolidations and refinancing on the outstanding portfolio balance. 

 

12 Recipients in Millions for FY 2013–17 are based on data published by the FSA Data Center, at: 

studentaid.ed.gov/portfolio. FY 2018 data are taken directly from NSLDS.

Chart 9: Components of FFEL Receivables, Net 

Fiscal Years 2014–18

(Dollars in Billions) 

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported.
Fiscal Year 2018 Annual Report | Federal Student Aid 41

Financial Analysis 

Other Credit Program Receivables, Net. TEACH Grants, Perkins Loans, and HEAL Loans 

make up the third and final segment of Credit Programs Receivable, net that FSA reports on its 

balance sheet. 

Chart 10: Federal Student Aid Other Loan Portfolio 

Fiscal Years 2014–18

(Dollars in Millions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported. 

This segment increased by 44.0 percent during the past five years, but still accounted for only 

0.1 percent of FSA’s total loan portfolio throughout that period and ended FY 2018 with a 

balance of $1.5 billion, a $53 million increase compared to the prior year-end. 

The TEACH program comprised $584 million of the “Other” loan portfolio, representing 

39.1 percent of the September 2018 “Other” credit program receivables balance, a reduction of 

$10 million compared to the prior year end but still $48 million or 10.5 percent of the increase in 

the “Other” category over the past five years. 

Offsetting the reduction in the TEACH portfolio, the Perkins credit receivables increased by 

$56 million in FY 2018 to account for $551 million or 36.9 percent of the September 2018 

“Other” loan portfolio balance. The Perkins Loan program was responsible for 35.9 percent of 

the increase in the “Other” category over the FY 2014–18 period. Authority to make new 

Perkins Loans ended on September 30, 2017 and final disbursements on existing loans only 

were permitted through June 30, 2018. Although no new Perkins loan disbursements are 

permitted after June 30, 2018, schools will continue to assign defaulted Perkins Loans to the 

Department, so this segment of the portfolio may continue to grow in the coming years. For 

additional details, please refer to Note 13. 
42 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

The HEAL program, transferred to the Department and FSA from HHS in FY 2014, reported a 

September 2018 ending balance of $360 million, $7 million or 2.0 percent above the prior yearend, and equal to about 24.1 percent of the “Other” ending balance.

Fund Balance with Treasury. FSA’s Fund Balance with Treasury represents the funds it has 

available to pay its current liabilities, make purchases and finance authorized loans to 

borrowers. Treasury processes cash receipts from borrowers and cash disbursements for 

FSA’s loan and grant programs. As shown in Chart 11, as of September 30, 2018, FSA 

reported a Fund Balance with Treasury amount of $73.4 billion, $0.6 billion below the prior fiscal 

year end amount. 

Chart 11: Fund Balance with Treasury 

Fiscal Year 2018

(Dollars in Billions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported. 

The relatively small net change (less than 1.0 percent) during FY 2018 was mainly attributable 

to a $3.2 billion decrease in Direct Loan activity, partly offset by a $1.8 billion increase in 

combined Perkins Loan and Grant program activity. Direct Loan activities that reduced Fund 

Balance with Treasury included reduced subsidy appropriations compared to the prior year 

($31.9 billion), increased net interest payments to Treasury ($1.4 billion) and increased costs to 

maintain the Direct Loan program ($11.3 billion). These increased costs were offset by 

increased Treasury repayments net of new borrowings ($24.3 billion); decreased disbursements 

to borrowers ($8.1 billion); and increased collections ($2.9 billion). The account beginning 

balance was also higher by $6.1 billion, accounting for most of the remaining year-on-year 

variation. 

The combined Perkins Loan and Grant-related activities that increased Fund Balance with 

Treasury included pending grant disbursements ($13.3 billion) and a special collections cash 

transfer ($10.0 million) offset by cancelled appropriations authority and transfers to the General 

Fund ($11.5 billion). A further $0.8 billion increase in Fund Balance with Treasury was 

attributable to FFEL Programs. Please refer to Note 3 for more details. 
Fiscal Year 2018 Annual Report | Federal Student Aid 43

Financial Analysis 

Composition of FSA Liabilities. FSA’s liabilities represent probable and measurable future 

outflows of resources arising from past transactions or events. As of September 30, 2018, FSA 

had total liabilities of $1.3 trillion, an increase of $77.7 billion or 6.5 percent over the 

September 30, 2017 total, a higher rate of increase than the 5.2 percent growth in FSA’s total 

assets. 

Debt. With a September 30, 2018 balance of $1.2 trillion, FSA’s debt is the primary component 

of its liabilities, accounting for 98.6 percent of the total. FSA borrows funds from Treasury to 

support the disbursement of new loans, and for the payment of credit program outlays and 

related costs. FSA then makes repayments after considering its cash position and liability for 

future cash outflows, as mandated by the Federal Credit Reform Act of 1990. The net impact of 

these activities on the outstanding debt portfolio are illustrated for the Direct Loan and FFEL 

Programs in Charts 12 and 13, respectively........

Chart 12: Direct Loan Program Net Financing Activity 

Fiscal Years 2014–18

(Dollars in Billions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported. 
44 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

Chart 13: FFEL Loan Program Net Financing Activity 

Fiscal Years 2014–18

(Dollars in Billions)

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported. 

FSA’s FY 2018 ending debt balance was 6.8 percent above the prior-year amount, continuing 

the trend of increasing debt levels seen over the past five years. The Direct Loan program, as 

shown in Chart 14, was the principal debt component throughout the FY 2014–18 period, and 

ended FY 2018 with a $1,150.6 billion balance, 8.4 percent above the prior-year amount, 

representing 91.4 percent of total debt. Direct Loan net financing activity (Chart 12) also 

accounted for most of the overall increase in FSA’s outstanding debt level during the same five 

years. By comparison, in the absence of any borrowing for new loan disbursements, FFELrelated debt decreased consistently from FY 2014–18 (Chart 14). These changes in net 

financing activity for Direct Loan and FFEL programs reflect the impact of the SAFRA Act on 

disbursements, interest rate driven loan consolidations, and related changes in estimated 

subsidy costs. 

Chart 14: Comparison of Federal Student Aid Debt 

Fiscal Years 2014–18

(Dollars in Billions) 

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported.
Fiscal Year 2018 Annual Report | Federal Student Aid 45

Financial Analysis 

Statement of Net Cost 

The Statement of Net Cost is the federal financial statement that presents the net cost of 

operations for FSA programs. FSA net cost is the gross cost incurred during its operations less 

any exchange (i.e. earned) revenues earned from its activities. Gross cost is composed of the 

cost of credit programs, grant programs, and operating costs. Exchange revenues are primarily 

interest earned on credit program loans. 

Chart 15: Composition of FSA Net Cost 

Fiscal Years 2014–18 

(Dollars in Billions) 

 

*Note: Line items may include rounding adjustments to reconcile to the total amount being reported.

As shown in Chart 15, FSA reported net costs for the year ended September 30, FY 2018 of 

$35.0 billion, compared to $37.9 billion for the twelve months ended September 30, FY 2017. In 

other words, FSA’s total costs exceeded its earned revenues in both years, but the margin was 

smaller in FY 2018 by $2.9 billion. 

The overall change in net costs during the five year period illustrated was mainly the result of 

subsidy-related transactions. Both FFEL and Direct Loans are mandatory programs whose 

costs are largely driven by Federal borrowing costs, prevailing interest rates, in-school interest 

benefits for borrowers, the costs related to borrower defaults, and loan volume demand. The 

programs are funded by mandatory and indefinite budget authority and therefore do not receive 

annual appropriations. A loan subsidy, the portion of cost paid by the federal government, is 

calculated for groups of loans known as cohorts, based on the fiscal year in which the loan 

award is made or the funds are committed. Under the Federal Credit Reform Act of 1990, this 

subsidy cost reflects the Department’s estimate of the net present value of future cash flows 

associated with the Direct Loan or FFEL Programs, and must be recalculated for all outstanding 

loans by cohort group on an annual basis. Program changes, economic conditions and 

borrower repayment patterns all impact subsidy estimates and re-estimates, but the biggest 

factor is the changing relationship between the Government’s estimated cost of borrowing and 

the interest rate at which borrowers repay their loans. Even small changes in economic 

projections may produce substantial movement, up or down, in the subsidy rate, resulting in an 

upward or downward re-estimate of the subsidy cost relating to outstanding loans, which will in 

turn be reflected in an increase or decrease in FSA’s gross and net costs. For more details 

regarding the inherent difficulty of estimating the impact of these complex factors, please refer 

to Note 5. 
46 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

Statement of Changes in Net Position 

The Statement of Changes in Net Position presents those amounts that caused the net position 

section of the Balance Sheet to change from the beginning to the end of the reporting period 

and is affected by changes in its two components, cumulative results of operations and 

unexpended appropriations. 

FSA’s net position as of September 30, 2018 was $9.1 billion, a decrease of $14.1 billion 

compared to the previous September 30 net position of $23.2 billion. The difference reflects a 

decrease in the cumulative results of operations by the amount of $18.1 billion, from 

$(5.3) billion, to $(23.4) billion, of which $(16.4) billion related to the Direct Loan Program and a 

further $(1.7) billion was attributable to the FFEL program. In addition, unexpended 

appropriations also increased by $4.0 billion, of which $3.3 billion were attributable to the 

combined Perkins Loan and Grants programs, with the Direct Loan Program accounting for 

most of the remaining difference. 

Statement of Budgetary Resources 

The Statement of Budgetary Resources compares the budgetary resources provided with the 

status or execution of those resources. It also details the composition of the resources and 

shows the amount of net outlays. Appropriations are available to cover the subsidy cost of each 

loan program and administrative expenses. Subsidy expense represents the difference 

between the net present value of expected future cash flows and the face value of each loan 

portfolio. Appropriation authority is available as needed on a permanent basis to finance costs 

resulting from loans guaranteed in the years before FY 1992. The Pell Grant Program receives 

appropriations to cover actual grant disbursements. 

This statement shows that as of September 30, 2018, FSA had $305.9 billion in combined 

budgetary resources, of which $25.6 billion remained unobligated and not apportioned. This 

compared to $349.1 billion in budgetary resources twelve months earlier of which $25.0 billion 

were unobligated and not apportioned. The $43.3 billion reduction in budgetary resources 

represented a 12.4 percent decrease. The Direct Loan Program accounted for $34.0 billion of 

this decrease, mainly due to a $31.4 billion decrease in appropriation for upward subsidy reestimates. There was also another $8.0 billion decrease attributable to the FFEL Programs. 

FSA’s Net Outlays after Distributed Offsetting Receipts as of September 30, 2018 were 

$101.7 billion, a decrease of $4.4 billion or 4.1 percent compared to the prior September 30 

amount of $106.0 billion. The Direct Loan Program accounted for a $9.6 billion reduction, with 

offsetting increases of $4.2 billion and $1.1 billion attributable to the FFEL and to the combined 

Perkins Loan and Grants Programs respectively. Additional information is provided in Note 11. 
Fiscal Year 2018 Annual Report | Federal Student Aid 47

Financial Analysis 

Financial Management Risks 

FSA must mitigate several financial management risks to protect borrower and taxpayer 

interests. The risks described below are overarching risks that are not directly reflected on the 

financial statements. 

Administrative Budget. Many FSA costs are driven by volume activities, such as grant or loan 

origination and disbursement, and loan servicing. For example, the number of borrower 

accounts, the repayment status of a borrower’s loan, and the timing of the borrowers’ loan 

disbursements currently drive loan-servicing costs. The budget formulation process generally 

sets the initial administrative budget for a fiscal year 18 months before the start of that fiscal 

year, and subsequent variations in any of FSA’s volumes can significantly impact its budget

which could place other expenditures and plans associated with those expenditures at risk. 

This risk must be managed as long as the federal government pays for mandatory Direct Loan 

expenditures using discretionary administration funding. 

Next Generation Financial Services Environment Implementation. Over the next few years, 

FSA will be implementing Next Gen FSA, re-engineering most of its major business processes, 

including the application, origination, disbursement, and servicing processes. These reengineered business processes will drive major changes in the way FSA procures services for 

its integrated environment. Managing the business process re-engineering and procurements 

related to that re-engineering presents a risk to FSA operations. To mitigate risks of these large 

and complex implementations, FSA must: 

 Ensure that FSA has sufficient staff and contractor resources to properly plan and 

implement Next Gen FSA, while successfully operating the current complex, integrated 

student aid delivery environment. 

o The current TIVAS and NFP indefinite-delivery, indefinite-quantity contracts are 

set to expire in June and September 2019, respectively. Should FSA require 

continued servicing support beyond these dates, in order to ensure continued 

servicing capabilities, there are multiple options it can pursue. 

 Ensure that FSA staff have a common understanding of Next Gen FSA and can relate 

their work to achieving that future environment. 

 Ensure that knowledgeable staff have sufficient time and the skill sets to fully plan and 

execute on the plan to migrate to the new environment. 

 Ensure that project and portfolio management practices are in place to maintain effective 

management control over all of the changes required by the migration to the new 

environment. 

FSA continues to manage the risks associated with system/service implementations through 

robust and dynamic investment management and enterprise change management processes. 
48 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Analysis 

Payment Integrity. Based on OMB criteria, programs susceptible to significant improper 

payments that are administered by FSA include the Direct Loan Program and the Pell Grant 

Program, both of which were designated as “high-priority” by OMB. FY 2018 outlays for these 

programs were as follows: 

 Direct Loan Program: $94.1 billion 

 Pell Grant Program: $28.3 billion 

In FY 2018, FSA documented and assessed 343 improper payment related controls in its 

internal control framework and found that the risk of improper payments is effectively mitigated. 

The FY 2018 aggregate improper payment rate for the Direct Loan and Pell Grant programs is 

4.95 percent, based on the OMB-approved non-statistical sampling methodology. In FY 2018, 

recipients of Federal money made approximately 96.8 percent of estimated improper payments. 

FSA has plans to turn the non-statistically valid improper payment rate into one that is 

statistically valid in FY 2019. In addition, FSA is working to reduce the risk of incorrectly 

reported income on the FAFSA through improvements to the income verification process and 

through the implementation of an improved interface with the Internal Revenue Service, thereby 

reducing the improper payments associated with that root cause. For more information 

regarding FSA’s assessment of improper payment risk and planned strategies to mitigate this 

risk, please refer to the Payment Integrity narrative in the Other Information section located in 

the U.S. Department of Education FY 2018 Agency Financial Report (AFR).

Debt Collection. As of September 30, 2018, the Department managed a Net Credit Program 

Receivable portfolio of approximately $1,209.5 billion, an increase of 5.6 percent from FY 2017. 

This portfolio includes the Direct Loan Program, FFEL Program (guaranteed loans held by 

guaranty agencies or FSA), FFEL loans acquired via authorization of the ECASLA, Federal 

Perkins Loans Program receivables, HEAL loans, and TEACH Program receivables. FSA 

realizes that as the size of the loan portfolio grows so does the level of financial risk associated 

with the collections on these loans. 

FSA manages maximizing collections, while minimizing negative borrower impacts. During 

FY 2018, FSA saw a slight decrease in the portfolio’s three-year default rate, from 11.3 percent 

reported in FY 2016 and 11.5 percent reported in FY 2017, for the FY 2013 and FY 2014 threeyear cohorts, respectively, to 10.8 percent reported in FY 2018 for the FY 2015 three-year 

cohort default rate. FSA continued to increase its collection rate from $59.69 to $62.15. This 

demonstrates the continued maintenance of a relatively low default rate, while increasing the 

efficiency of funds spent on collections and maintaining customer satisfaction along the entire 

aid lifecycle. More information on FSA’s performance, as it relates to debt collection and the 

collection rate, is provided in the Annual Performance Report section, in Performance Metric 

D3, of this Annual Report. 

The very size of the Federal student loan portfolio presents a significant financial management 

risk to the Federal government. Therefore, FSA continuously seeks to improve on these results. 

For example, the potential legislation described above in the Payment Integrity section, also 

would allow FSA to automatically recertify income driven repayment loan borrowers. This 

change will reduce the number of borrowers who fail to re-certify their income, are switched 

back to standard repayment plans, and subsequently default on their loans.
Fiscal Year 2018 Annual Report | Federal Student Aid 49

Financial Analysis 

Guaranteed Loan Portfolio. As of September 30, 2018, the $217.0 billion guaranteed loan 

portfolio (non-ECASLA FFEL) included principal balances owned by private lenders and the 

guaranty agencies, and principal, interest and fees held by FSA (unassigned serviced by 

guaranty agencies or assigned serviced by FSA). This is an overall decrease of 8.1 percent in 

the guaranteed FFEL portfolio since the end of last fiscal year. Because the SAFRA Act ended 

the origination of new FFEL loans, FSA needs to ensure that the infrastructure (i.e., participating 

organizations processes, controls, and systems) continues to be sufficient to administer federal 

student loans consistent with relevant laws and regulations. FSA monitors the balances of 

Guaranty Agency Operating Funds and federal student loan reserve funds (Federal Funds) to 

identify risks associated with those funds. Specifically, these funds are monitored to protect 

federal assets, to ensure timely payment of lender claims, and to ensure that FFEL borrowers 

receive the service to which they are entitled. There have been no losses of federal funds, and 

FSA is not aware of any lender claims being paid untimely or any instance where an insufficient 

Operating Fund level has caused a FFEL borrower to not receive the services to which the 

borrower was entitled. 
50 Fiscal Year 2018 Annual Report | Federal Student Aid

Analysis of Systems, Controls, and Legal Compliance 

Analysis of Systems, Controls, and Legal Compliance 

FSA management adheres to the Government Accountability Office published guidance on 

internal control and recognizes that internal control is an integral part of managing an 

organization. Internal control includes the plans, methods, and procedures used to meet the 

organization’s missions, goals, and objectives. In carrying out these components of internal 

control, FSA supports an environment for performance-based management. Internal control 

also serves as the first line of defense in safeguarding assets, and preventing and detecting 

errors and fraud. Internal control helps government program managers achieve desired results 

through effective stewardship of public resources. 

Internal controls should provide reasonable assurance that the objectives of the agency are 

being achieved in the following categories: 

 Effective and efficient operations; 

 Reliability of reporting for internal and external use; and 

 Compliance with applicable laws and regulations.13

FSA management is responsible for establishing and maintaining effective internal control over 

reporting and financial management systems that meet the objectives of the Federal Managers’ 

Financial Integrity Act of 1982 (FMFIA) and annually assessing the effectiveness and efficiency 

of its internal controls over operations and compliance with applicable laws and regulations in 

accordance with OMB Circular A-123, Management’s Responsibility for Enterprise Risk 

Management and Internal Control (OMB Circular A-123). On June 6, 2018, OMB updated OMB 

Circular A-123 Appendix A to further align to the revised OMB Circular A-123 updated in 2016. 

FSA continues to coordinate with the Department and internally to execute these requirements. 

Based on the results of this year’s assessment, FSA reported to the Department’s management 

that its internal control over operations, including internal controls intended to prevent, detect 

and recover improper payments, and compliance with applicable laws and regulations, for the 

year ended September 30, 2018, was operating effectively, with the exception of two areas 

noted in the Legal Compliance section of the Department’s AFR. The two areas of noncompliance include the Improper Payments Information Act of 2002 and the Debt Collection 

Improvement Act of 1996. More details about these two issues and the efforts being taken to 

remediate the non-compliance can be found in the Department’s AFR. 

 

13 Government Accountability Office Standards for Internal Control in the Federal Government, GAO-14-704G, 

September 10, 2014, p.5.
Fiscal Year 2018 Annual Report | Federal Student Aid 51

Analysis of Systems, Controls, and Legal Compliance 

In addition, FSA, working with the Department’s management, conducted its current year 

assessment of the effectiveness of internal control in accordance with the requirements of 

Appendix A of OMB Circular A-123, Management of Reporting and Data Integrity Risk, updated 

on June 6, 2018. The scope of FSA’s assessment included, based on a rotation plan, the 

following processes and select sub-processes (notated in parentheses below), and systems that 

impact the Department's financial statements: 

 Debt Collection* 

 Financial Partner Invoicing (LaRS 799 and Monthly Consolidation Rebate Fees and GA 

Invoicing) 

 Student Eligibility Service Group (Institutional Eligibility, Program Reviews, and Method 

of Payment) 

 Financial Institution Oversight Service (Program Reviews) 

 Direct Loan Origination 

 Student Eligibility 

 Grant Program Operations (Pell Grants) 

 Campus Based Programs (Federal Supplemental Education Opportunity Grant and 

Federal Work Study) 

 Financial Reporting (Journal Entries, Monthly Reconciliation, Year-End Close, and 

Preparation of the FSA Annual Report) 

 Procurement Management (Contract Acquisition, Invoice Processing, and Purchase 

Cards) 

 Human Resource Management (Personnel Transactions and Personnel Security 

Management) 

 Servicing of Direct Loans and ECASLA-acquired Federal Family Education Loan 

Program Loans by four Title IV Additional Servicers (TIVAS)* and five Not-For-Profits 

(NFPs)* 

 Federal Perkins Loans* 

 Servicer Oversight 

 Health Education Assistance Loans Program 

 Borrower Defense 

 Public Sector Loan Forgiveness 

 Entity-Level Controls 

 Information Technology Controls over the following systems: Financial Management 

System, Central Processing System (CPS), National Student Loan Data System 

(NSLDS), Debt Management and Collections System (DMCS)*, Common Origination 

Disbursement*, the Virtual Data Center*, Next Generation Data Center, four TIVAS 

Servicing Systems*, five NFP Servicing Systems*, and the Federal Perkins Loan 

Servicing System*. 

In FY 2018, FSA continued to rely significantly on audits of loan servicers conducted by 

independent public accountants in accordance with Statement on Standards for Attestation 

Engagements (SSAE) Number 18, Reporting on Controls at a Service Organization. In the list 

above, an asterisk (*) indicates full or partial reliance on SSAE 18 Service Organization Control 

1 (SOC1) reports for relevant process and IT controls. 
52 Fiscal Year 2018 Annual Report | Federal Student Aid

Analysis of Systems, Controls, and Legal Compliance 

Through reliance on SSAE 18 SOC1s and by direct testing, FSA assessed 1,287 process and 

entity level controls in 2018. As illustrated in Chart 21, the breakdown of this total number of 

key process controls assessed includes 823 controls covered by SSAE 18 SOC1s and 464 

tested by the FSA self-assessment team. FSA utilizes a three-year rotation plan as part of its A123 framework to identify and test controls, which allows a focused approach on high-risk areas, 

while ensuring all controls are covered over a three-year period. As such, there are fluctuations 

in the number of controls assessed from year to year. The table below illustrates the total 

number of controls assessed and deficiencies identified over a three-year period. The number 

of deficiencies depicted below for FY 2018 (36) includes deficiencies identified from both 

SSAE18 SOC1 reports (19) and A-123A testing (17). These deficiencies individually and taken 

together do not materially affect financial reporting. Corrective actions are being finalized to 

prevent reoccurrence and ensure control objectives are achieved. 

Chart 16: FSA A-123A Process and Entity Level Controls and Deficiencies Analysis

Fiscal Years 2016–18

 

As illustrated in Chart 22, the total number of IT controls assessed was 1,361 that includes 

998 controls covered by SSAE18 SOC1s and 363 tested by the FSA self-assessment team. 

The number of deficiencies depicted below for FY 2018 (44) includes deficiencies identified from 

both SSAE18 SOC1 reports (18) and A-123A testing (26). These deficiencies individually and 

taken together do not materially affect financial reporting. Appropriate actions are being taken 

to address risks. 
Fiscal Year 2018 Annual Report | Federal Student Aid 53

Analysis of Systems, Controls, and Legal Compliance 

Chart 17: FSA A-123A IT Controls and Deficiency Analysis 

Fiscal Years 2016–18

 

FSA’s participation in the Department's implementation of the requirements of OMB Circular 

A-123, including Appendix A, enables it to continue to build upon its internal control framework. 

This framework will be used in continuing efforts to monitor and improve internal control. Please 

refer to the Analysis of Systems, Controls and Legal Compliance section of the Department’s 

AFR for additional information related to management’s assurances and disclosures. 

Please also refer to the Analysis of Systems, Controls and Legal Compliance section of the 

Department’s AFR for information related to the Department's compliance with the Federal 

Financial Management Improvement Act of 1996. 

FSA’s financial management systems strategy is formulated and managed as part of the 

Department’s strategy. For details on FSA’s financial management systems strategy, please 

refer to the Financial Management Systems Strategy narrative found in the Management’s 

Discussion and Analysis section of the Department’s AFR. 
54 Fiscal Year 2018 Annual Report | Federal Student Aid

Limitations of Financial Statements

Limitations of Financial Statements

Management has prepared the accompanying financial statements to report the financial 

position and operational results for FSA, for FY 2018 and FY 2017 pursuant to the requirements 

of Title 31 of the United States Code, Section 3515(b). 

While these statements have been prepared from the books and records of FSA in accordance 

with generally accepted accounting principles for federal entities and the formats prescribed by 

OMB, these statements are in addition to the financial reports used to monitor and control 

budgetary resources, which are prepared from the same books and records. 

The statements should be read with the realization that they are for FSA, a component of the 

U.S. Government, a sovereign entity. One implication of this is that the liabilities presented 

herein cannot be liquidated without the enactment of appropriations, and ongoing operations are 

subject to the enactment of future appropriations. 
Fiscal Year 2018 Annual Report | Federal Student Aid 55

Annual Performance Report 

Annual Performance Report (Unaudited) 
56 Fiscal Year 2018 Annual Report | Federal Student Aid

Overview of the Annual Performance Report

Overview of the Annual Performance Report 

This section highlights information on FSA’s performance, financial statements, systems and 

controls, compliance with laws and regulations, and actions taken or planned to address select 

challenges. 

The Annual Performance Report section of the FSA Annual Report provides information on FSA 

progress in achieving the goals and objectives described in the FSA FY 2015–19 Strategic Plan. 

It includes subsections listed below. 

Introduction to the Annual Performance Report

This subsection provides a summary of FSA performance metrics, the targets, and the actual 

performance results for the fiscal year. 

Performance Results by Strategic Goal

This subsection details the results of each overall strategic goal by performance metric. Each 

performance metric includes a table that presents five years of data results, where available, its 

current target and results. The performance metric section also includes a discussion of the 

metric’s target context, analysis of progress and data quality limitations. 

FY 2018 Accomplishments of Federal Student Aid

This subsection describes additional accomplishments that were not measured by the 

performance metrics included in the strategic plan, but were the result of initiatives that FSA 

undertook to support the implementation of the strategic plan or legislative changes. 

Legislative and Regulatory Recommendations

This subsection details legislative and regulatory recommendations that FSA provided to the 

Department in support of the Department’s regulatory activities. 

Annual Bonus Awards

This subsection discusses executive compensation at FSA in compliance with the legislative 

requirements under the PBO legislation that created FSA. 

Report of the Federal Student Aid Ombudsman

The Report of the Federal Student Aid Ombudsman is a required section that discusses its 

activities in accomplishing its statutory mission of addressing complaints about Title IV financial 

aid programs. 
Fiscal Year 2018 Annual Report | Federal Student Aid 57

Fiscal Year 2018 Performance Summary 

Fiscal Year 2018 Performance Summary 

Table 22: Performance Metrics and Results

Performance Metrics FY 2018

Target 

FY 2018

Actual 

Result Reference 

Page 

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

A.1 Percent of First-Time FAFSA Filers Among 

High School Seniors 66.4%–68.4% 67.4%  62

A.2 Persistence Among First-Time Filing Aid 

Recipients 81.6%–83.6% 82.5%  64

A.3 Customer Visits to StudentAid.gov >=43.3 million 44.5 million  65

A.4 Social Media Channel Subscribership >=590,000 607,241  66

A.5 ACSI Aid Life Cycle Surveys 68.9–70.9 70.6  67

Strategic Goal B: Proactively manage the student aid portfolio to mitigate risk. 

B.1 Improper Payment Rate 4.97% 4.95%  68

B.2 Percent of Borrowers > 90 Days Delinquent 8.2% 7.4%  70

Strategic Goal C: Improve operational efficiency and flexibility.

C.1 Aid Delivery Costs Per Application $12.16 $8.83  71

C.2 Outstanding Direct Loan Portfolio in Current 

Repayment Status 85.0%–86.0% 86.5%  72

Strategic Goal D: Foster trust and collaboration among stakeholders. 

D.1 Ease of Doing Business with FSA 71.9–74.9 74.5  73

D.2 Percentage of Contract Dollars Competed by 

FSA 89.3%–91.3% 96.8%  74

D.3 Collection Rate $59.24 $62.15  75

Strategic Goal E: Invest in expanded workforce capability. 

E.1 Employee Engagement Index 68.7%–70.7% 62.0%  76
58 Fiscal Year 2018 Annual Report | Federal Student Aid

Introduction to the Annual Performance Report

Introduction to the Annual Performance Report

To guide FSA towards achieving its vision “To be the most trusted and reliable source of student 

financial aid, information, and services in the nation,” the organization updated its five-year 

strategic plan to document the strategic goals, objectives, and performance metrics of the 

organization. FSA is required, by the PBO-enabling legislation, to report annually its level of 

performance. This section, the Annual Performance Report, satisfies this annual reporting 

requirement. 

For additional performance-related information—including a more complete discussion of FSA’s 

mission, organization, and performance management—refer to the Management’s Discussion 

and Analysis section of this document. 

The FSA FY 2018 Annual Report provides a detailed view of the past year’s goals, challenges, 

and accomplishments in the context of FSA’s FY 2015–19 Strategic Plan. In the near future, 

the strategic planning process will be reviewed to ensure it aligns with FSA’s goals and vision. 

The current strategic plan, FSA FY 2015–19 Strategic Plan, was implemented at the beginning 

of FY 2016. This plan builds on the previous strategic plan by clarifying FSA’s objectives and 

updating organizational performance standards to reflect more clearly its progress in meeting 

the stated objectives. The strategic goals are: 

 Strategic Goal A: Improve quality of service for customers across the entire student aid 

life cycle.

 Strategic Goal B: Proactively manage the student aid portfolio to mitigate risk. 

 Strategic Goal C: Improve operational efficiency and flexibility. 

 Strategic Goal D: Foster trust and collaboration among stakeholders.

 Strategic Goal E: Invest in expanded workforce capability.

The table on the following page presents the current strategic plan and the objectives linked to 

each strategic goal. To gauge its success in meeting these strategic goals, FSA identified 13 

performance metrics. For more information about FSA’s strategic goals and performance 

metrics, visit the FSA Data Center to view the FSA’s current strategic plan. 

StudentAid.gov/strategic-planning-and-reporting 
Fiscal Year 2018 Annual Report | Federal Student Aid 59

Introduction to the Annual Performance Report 

FSA FY 2015–19 Strategic Plan

Mission 

Funding America’s Future,

One Student at a Time 

Vision 

To be the most trusted and reliable source of student financial aid, information, and services in the nation

Strategic Goal A Objectives 

Improve quality of service for customers across the entire 

student aid life cycle. 

A.1: Improve outreach and awareness efforts to support 

aid recipients and their families in making sound 

financial decisions. 

A.2: Optimize the borrower service model to improve the 

customer experience. 

A.3: Predict, identify, and understand existing and 

emerging customer trends and patterns. 

A.4: Enhance outreach, training and tools to improve 

institutional performance and help postsecondary 

institutions understand responsibilities and 

requirements under the Higher Education Act. 

Strategic Goal B Objectives 

Proactively manage the student aid portfolio to mitigate 

risk. 

B.1: Enhance analytical and research capabilities to 

proactively identify operational and reputational risk.

B.2: Develop robust, data-driven processes to manage 

identified risks. 

B.3: Provide access to resources to protect students 

and families from unfair, deceptive or fraudulent 

practices in the student aid marketplace. 

Strategic Goal C Objectives 

Improve operational efficiency and flexibility.

C.1: Link disparate data sources to improve crossorganizational information exchange.

C.2: Refine acquisition management to ensure that 

services and products are consistent with business 

objectives. 

C.3: Enhance governance processes to support 

enterprise decision-making. 

C.4: Strengthen FSA’s information technology (IT) 

systems’ security. 

Strategic Goal D Objectives 

Foster trust and collaboration among stakeholders. 

D.1: Engage with stakeholders to be the most trusted 

and reliable source of information on federal 

student aid.

D.2: Provide timely and proactive communication to 

promote accurate, consistent messaging on federal 

funding of postsecondary education. 

D.3: Promote transparency and accountability within 

FSA and across the higher education environment. 

Strategic Goal E Objectives 

Invest in expanded workforce capability

E.1: Create an enterprise-wide workforce plan to attract, 

develop, and retain employees with the skills 

required to meet evolving business needs.

E.2: Develop a succession planning strategy to identify 

and create opportunities for future leadership talent. 
60 Fiscal Year 2018 Annual Report | Federal Student Aid

Introduction to the Annual Performance Report

The following table provides a summary of the performance metrics results by strategic goal 

over the past five years. 

Table 23: Summary of Performance Results by Strategic Goal for FY 2014-18* 

Strategic Goals Performance Result FY 

2014

FY 

2015

FY

2016

FY 

2017

FY 

2018

Goal A: 

Improve quality of service for 

customers across the entire 

student aid life cycle. 

Target Met/Exceeded 3 3 3 4 5 

Target Not Met - - - - -

Data Not Available 2* 2* 2* 1*

Goal B: 

Proactively manage the student 

aid portfolio to mitigate risk. 

Target Met/Exceeded 1 1 1 - 2

Target Not Met - 1 - 2 -

Data Not Available 1* - 1* - -

Goal C: 

Improve operational efficiency 

and flexibility. 

Target Met/Exceeded 1 1 2 2 2

Target Not Met - - - - -

Data Not Available 1* 1* - - -

Goal D: 

Foster trust and collaboration 

among stakeholders. 

Target Met/Exceeded 2 2 2 3 3 

Target Not Met 1 1 1 - -

Data Not Available - - - - -

Goal E: 

Invest in expanded workforce 

capability 

Target Met/Exceeded 1 1 1 1 -

Target Not Met - - - - 1

Data Not Available - - - - -

Total 

Target Met/Exceeded 8 8 9 10 12

Target Not Met 1 2 1 2 1

Data Not Available 4* 3* 3* 1* -

Total Measures 13 13 13 13 13

*These metrics were revised and the prior-year results were not restated under the revised method.
Fiscal Year 2018 Annual Report | Federal Student Aid 61

Performance Results by Strategic Goal 

Performance Results by Strategic Goal

This section presents detailed performance results including a discussion of progress made to 

date in achieving the strategic goal and the data used to assess performance. 

How this Section is Organized. This section is organized by the five strategic goals and the 

associated performance metric(s). The section contains the following information for each 

performance metric: 

 Table: Identifies the performance metric associated with the strategic goal and provides the 

historical actual results for the four previous fiscal years (if available); the target and actual 

result for the current fiscal year; and an indicator as to whether FSA met the performance 

metric for each fiscal year reported. The following is the legend for the performance result 

indicator included in the table. 

Performance Result Indicator Legend 

Performance Result Indicator 

Performance result met or exceeded the 

target. 

Met 



Performance result did not meet the 

target. 

Not met 



Performance result is not applicable 

because the performance metric was not 

developed, the performance metric was 

not implemented, or the required data 

were not available in time for inclusion. 

N/A 

–

The performance metric results reported are as of fiscal year-end (i.e., September 30, 2018) 

unless otherwise noted. If the required data are not available as of fiscal year-end in 

sufficient time for inclusion, data as of the most recent reporting period available are 

presented. Fiscal year-end data may not be available in instances where the required data 

are obtained from external sources (i.e., state and private nonprofit guaranty agencies, 

lenders and loan servicers, grant and loan recipients, etc.). 

 Target Context: Explains the parameters or rationale for targets, especially where 

anomalies exist. 

 Analysis of Progress: Provides a discussion of FSA’s progress in meeting its targets and 

includes explanations for unmet targets and actions being taken or planned. 

 Data Quality and Limitations: Describes the source of data required to calculate the 

actual result for the performance metric, any calculation required to determine the actual 

result, and any known data quality issues or limitations. For an overview of FSA’s business 

process to confirm the quality of performance data, please see Quality of Performance Data 

in the Management’s Discussion and Analysis section of this Annual Report. 
62 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Results by Strategic Goal 

Strategic Goal A: Improve quality of service for customers across the 

entire student aid life cycle. 

Table 24

Performance Metric A.1 

Percent of First-Time FAFSA Filers Among High School Seniors 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 66.4%–68.4% 67.4%  Met 

FY 2017

Performance metric revised in FY 2018. 

Prior-year data not available under revised method.

Met 

FY 2016 Not met 

FY 2015 Met 

FY 2014 Met 

Target Context: 

A major component of FSA’s mission is to ensure that all eligible individuals have access to 

federal student aid. In order to achieve this goal, FSA works diligently to increase awareness 

about the availability of student financial assistance. This performance indicator measures the 

largest and most visible outcome of FSA’s customer engagement efforts, the percent of 

graduating high school seniors who successfully file a FAFSA as a first step in furthering their 

education beyond the secondary level. 

The methodology for calculating this metric changed in FY 2018 to account for the fact that 

many high school seniors are 19 years of age. In the previous methodology, FSA was 

undercounting high school seniors, which was calculated based on high school seniors who 

were 18 years of age. 

Analysis of Progress: 

FSA met its target for this metric with a result of 67.4 percent. 

FSA provides a weekly update of total FAFSAs filed for every high school in the United States 

with five or more FAFSAs completed. Schools use this data to increase their FAFSA 

completion rates. Combined with awareness and outreach efforts, the result is an increase in 

the number of high school seniors who file a FAFSA. In FY 2018, FSA efforts were 

supplemented by a nationwide FAFSA Completion Contest sponsored by the National College 

Access Network and the Kresge Foundation and significant FAFSA completion efforts in 

populous states such as Florida and Texas. 

In FY 2018, FSA discovered that its previous definition of high school senior was outdated, 

causing the calculation of this metric to be flawed. FSA changed its methodology used to 

calculate this metric; however, for comparative purposes only, FSA simulated target would be 

60.2 percent and its simulated result, 60.8 percent using the previous methodology. 
Fiscal Year 2018 Annual Report | Federal Student Aid 63

Performance Results by Strategic Goal 

Data Quality and Limitations: 

The denominator is the number of graduating high school seniors according to the most recent 

projection by National Center for Education Statistics. The numerator is based on the number 

of applications for first-time filers during the first nine months of the application cycle that are, as 

of September 30 of the first year of the application cycle, complete (not rejected). First-time 

filers are defined as incoming freshmen, with or without previous college attendance; age 19 or 

less as of June 30 of the first year of the application cycle; reporting high school diploma 

attainment; and attended a high school in the 50 states or Washington, DC. Applicants are 

identified using several criteria to reflect likely high school seniors (first-time filing, entering 

college freshmen with high school diploma, who are no older than 19 years of age). Completed 

applications are a subset of submitted applications and represent all submitted applications that 

were not rejected. Data are based on last transaction on file as of September 30, 2018. Data 

include all applications submitted listing high schools in the 50 US states and DC. Applications 

from seniors at Department of Defense Education Activity schools in other geographic areas are 

excluded.”
64 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Results by Strategic Goal 

Table 25

Performance Metric A.2 

Persistence Among First-Time Filing Aid Recipients 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 81.6%–83.6% 82.5%  Met 

FY 2017 78.7%–80.7% 82.6%  Met 

FY 2016 78.5%–80.5% 79.7%  Met 

FY 2015 78.6%–80.6% 79.5%  Met 

FY 2014 77.5%–79.5% 79.6%  Met 

Target Context: 

This metric helps track performance across one of the desired outcomes of federal student aid 

and its impact on program completion. By following first-time filing aid recipients—such as 

college freshmen or first-time adult learners, into their second year—it is possible to see 

whether FSA is making improvements in how applicants are translating the aid that they receive 

into educational persistence. 

Analysis of Progress: 

FSA met its target for this metric with a result of 82.5 percent. 

Each year, FSA is concerned that students who have help filing the FAFSA as a high school 

senior will not receive the same assistance when they are college freshman and as a result, will 

not file the FAFSA. The fact that over 80 percent of students who filed a FAFSA for freshman 

year filed a FAFSA again the following year is a strong indication that FAFSA filers are receiving 

the message clearly that the FAFSA must be filed on an annual basis and that the vast majority 

of first-year filers are returning to the FAFSA to receive federal aid for their sophomore year. 

Data Quality and Limitations: 

The denominator is the number of first-time FAFSA filers in the previous cycle with a program or 

degree length greater than one year that received aid for that award year (grants and/or loans). 

The numerator is the number of 2016–17 return applicants (by September 30 of the first year of 

the application cycle) that were identified in the denominator. 
Fiscal Year 2018 Annual Report | Federal Student Aid 65

Performance Results by Strategic Goal 

Table 26

Performance Metric A.3

Customer Visits to StudentAid.gov 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 >=43.3 million 44.5 million  Met 

FY 2017 >=43.3 million 44.3 million  Met 

FY 2016 >=43.4 million 47.2 million  Met 

FY 2015 >=32.7 million 43.3 million  Met 

FY 2014 >=30.7 million 32.7 million  Met 

Target Context: 

By focusing on overall customer visits to FSA’s primary online portal for customers, this 

performance metric helps gauge the success of FSA’s efforts to become the most trusted 

source for accurate and accessible student aid information for Americans nationwide. 

Analysis of Progress: 

FSA met its target for this metric with a result of 44.5 million. 

FSA continued to exceed its target on this metric once again in FY 2018 with a result of 

44.5 million customer visits. FSA’s performance on this metric is a testament to the success of 

its effort on promoting the site as a trusted source and driving improvements to the student 

experience. Since its launch in 2012, StudentAid.gov has evolved into FSA’s primary 

information interface for federal student aid tools, resources, and services. 

Data Quality and Limitations: 

The metric value is based on the number of visits (as opposed to unique visitors and page 

views). 
66 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Results by Strategic Goal 

Table 27

Performance Metric A.4

Social Media Channel Subscribership 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 >=590,000 607,241  Met 

FY 2017 >=500,000 584,241  Met 

FY 2016 >=454,000 528,251  Met 

FY 2015 >=368,000 454,066  Met 

FY 2014 >=296,000 368,042  Met 

Target Context: 

By focusing on overall subscribership across FSA’s most prolific social media channels, this 

metric helps FSA measure the success of enterprise efforts to increasingly become the trusted 

source for accurate and accessible federal student aid information across the organization’s 

digitally engaged customer base. 

Analysis of Progress: 

FSA exceeded its target for this metric with a result of 607,241 subscribers. 

FSA exceeded its target for this metric for the fifth year in a row, with subscribers to FSA’s 

Facebook, Twitter, and YouTube social media channels. In today’s information age, digital 

media techniques are becoming increasingly critical for effective customer engagement. Within 

the past several years, FSA has aggressively leveraged social media tools to drive awareness, 

uncover insights, engage and interact with students and borrowers, and drive traffic to FSA’s 

websites. This metric helps track FSA’s progress in this domain

Data Quality and Limitations: 

The metric is calculated as the aggregate sum of likes, followers, and subscribers across 

Facebook, Twitter, and YouTube. The tool that tracks Social Media Channel Subscribership for 

YouTube, Facebook, and Twitter is dynamic. Depending on the moment in time that the 

subscribership result is captured, the total could be different. 
Fiscal Year 2018 Annual Report | Federal Student Aid 67

Performance Results by Strategic Goal 

Table 28

Performance Metric A.5

ACSI Aid Life Cycle Surveys 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 68.9-70.9 70.6  Met 

FY 2017 69.4–71.4 69.9  Met 

FY 2016

Performance metric revised in FY 2017. 

Prior-year data not available under revised method. 

N/A 

FY 2015 N/A 

FY 2014 N/A 

Target Context:

This metric measures how FSA is improving in terms of streamlined processes for customer 

interactions while applying for, receiving, and repaying federal student aid, and the metric 

measures the accessibility of information FSA provides to customers. Historically, to measure 

the overall customer satisfaction level throughout the student aid life cycle, FSA has calculated 

a weighted score for the American Customer Satisfaction Index (ACSI) surveys for applicants, 

students in school, and borrowers in repayment.

Analysis of Progress: 

FSA met its target for this metric with a result of 70.6. 

The FY 2018 score of 70.6 is higher than the FY 2017 score of 69.9 and indicates small 

improvements across three groups of borrowers that span the student aid lifecycle. The most 

heavily weighted of these measures is borrowers who are currently having their loans serviced –

this is the largest segment of the population served by FSA (FSA has over 42 million borrowers) 

and therefore accounts for 70 percent of the measure. Nearly 25 percent of this metric is made 

up of scores collected by FAFSA applicants (roughly 18 million FAFSAs are filed each year) and 

the smallest component of the metric is the 5 percent of the measure that accounts for students 

still in school who are receiving Title IV funds. Together, the three measures span the three 

major parts of the student aid lifecycle. 

Data Quality and Limitations: 

Traditionally, the ACSI survey has been conducted annually for FSA’s major programs. The 

index provides a national, cross-industry, cross-sector economic indicator, using widely 

accepted methodologies to obtain standardized customer satisfaction information. Survey 

scores are indexed on a 100-point scale. The ACSI scores for application, in-school 

experience, and servicing are weighted by the utilization of each process/service and the 

intensity of the service provided. 
68 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Results by Strategic Goal 

Strategic Goal B: Proactively manage the student aid portfolio to mitigate 

risk.

Table 29

Performance Metric B.1

Improper Payment Rate 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 4.97% 4.95%  Met 

FY 2017 4.85% 4.97%  Not met 

FY 2016 N/A14 4.85% N/A N/A 

FY 2015 1.65%15 2.38%  Not met

FY 2014 Performance metric revised in FY 2015. 

Prior-year data not available under revised method. N/A 

Target Context: 

FSA develops and reports annually in the Department’s AFR improper payment estimates for 

programs determined to be susceptible to significant improper payments. For FY 2015–2018, 

FSA’s risk-susceptible programs are the Pell Grant and Direct Loan programs. The Improper 

Payment Rate metric presented here is a single ‘blended’ rate for these two programs that 

divides aggregated estimated improper payments for both programs by aggregated estimated 

program outlays. 

Analysis of Progress: 

FSA met its target for this metric with a result of 4.95 percent. 

As noted below, the underlying improper payment estimates were calculated using a nonstatistical estimation methodology and the decline in the FY 2018 estimate may not be 

statistically significant. FSA continues to enhance its internal control framework to prevent and 

detect improper payments. For more information on FSA’s improper payment program, 

including improper payment related internal controls for the Pell Grant and Direct Loan 

programs, please see the Payment Integrity section of the Department’s AFR. 

Data Quality and Limitations: 

The OMB-approved FY 2018 improper payment estimation methodology is a non-statistical 

methodology. Accordingly, the estimates may lack the precision of other estimates developed 

using random, statistical methodologies. The non-statistical methodology is based on an 

analysis of data primarily obtained from program reviews conducted at schools identified 

through a risk-based (i.e., non-random) selection process. 

 

14 At the time FY 2016 targets were set, it was known that the estimation methodology would change to address 

improper payment risks not previously incorporated, but not the impact. Accordingly, no target was set for this 

measure for FY 2016. 

15 The FY 2015 improper payment Target and Actual rates reported in the table above reflect the corrected improper 

payment rates for FY 2015 as determined by the FY 2015 IPERA Compliance Audit Report published by OIG on 

May 10, 2016. The corrected improper payment rates are prepared in accordance with the alternative sampling and 

estimation methodology approved by OMB as of October 20, 2015. The rate reported in FSA’s FY 2015 Annual 

Report was 1.44 percent.
Fiscal Year 2018 Annual Report | Federal Student Aid 69

Performance Results by Strategic Goal 

Over the past several years, FSA made several updates to the non-statistical estimation 

methodology with the intent of mitigating known limitations of the methodology, specifically the 

relative imprecision and inherent volatility when compared to statistically valid methodologies. 

Despite these improvements, the estimates remain imprecise and volatile. The potential exists 

for a single school or student-level improper payment finding, particularly at lower-risk schools, 

to significantly influence the improper payment estimates. The Department is implementing a 

statistically valid methodology in FY 2019. 
70 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Results by Strategic Goal 

Table 30

Performance Metric B.2

Percent of Borrowers >90 Days Delinquent 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 8.2% 7.4%  Met 

FY 2017 7.4% 8.3%  Not met

FY 2016 9.9% 8.8%  Met 

FY 2015 10.4% 9.8%  Met 

FY 2014 Performance metric revised in FY 2015. 

Prior-year data not available under revised method. N/A 

Target Context: 

A focus on reducing the number of borrowers more than 90 days delinquent provides FSA with 

insight on how to communicate information about repayment options in a targeted and timely 

manner. 

Analysis of Progress: 

FSA met its target for this metric with a result of 7.4 percent. 

During FY 2018, FSA launched the Next Gen FSA. The vision of Next Gen FSA is to transform 

FSA to provide a world-class student aid customer experience, using industry best-in-class 

financial services technologies, to provide better outcomes for student and greater value to 

taxpayers. Borrowers, in particular, will benefit from fully designed, single contact center 

platform allowing them to easily contact FSA by phone, chat, and other channels, in order to 

receive accurate and consistent information that addresses their needs. Through direct 

engagement, seamless customer connections, single contact capability, and uniform data 

management, it is anticipated that fewer borrowers will experience periods of delinquency. 

Data Quality and Limitations: 

Borrower-based data are collected from TIVAS and NFP invoices. FSA calculates the average 

number of borrowers serviced by TIVAS and NFPs who are between 91 and 270 days 

delinquent in the year ending June 30 each year and divides this number by the average 

number of borrowers in active repayment for the year. This calculation was adjusted in FY 2015 

to better measure all pre-default accounts more than 90 days delinquent relative to all accounts 

where payments are anticipated. 
Fiscal Year 2018 Annual Report | Federal Student Aid 71

Performance Results by Strategic Goal 

Strategic Goal C: Improve operational efficiency and flexibility.

Table 31

Performance Metric C.1

Aid Delivery Costs Per Application 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 $12.16 $8.83  Met 

FY 2017 $11.46 $10.68  Met 

FY 2016 $13.11 $11.53  Met 

FY 2015 $12.28 $10.73  Met 

FY 2014 $11.94 $11.43  Met 

Target Context: 

FSA has developed two measures to gauge the efficiency of aid delivery. The first unit cost 

measure is the aid delivery cost per application. This unit cost tracks the direct cost to process 

FAFSAs and originate aid in the 12–month period, divided by the number of original FAFSAs 

processed in the period. The fiscal time period measured is July through June. Following the 

trends of prior fiscal years, the FY 2018 target expected FY 2018 costs to be somewhat higher 

than previous years. This rise is attributed to the Base Fixed Cost portion of the originations 

contract, which contains a four- to eight-percent annual increase built into the multi-year 

contract. 

Analysis of Progress: 

FSA met the target for this metric with a result of $8.83. 

FSA continues to focus on reducing costs and increasing efficiencies within the federal student 

aid process. During FY 2018, aid delivery cost per application was approximately 27 percent 

lower than the FY 2018 target, and approximately 17 percent below the FY 2017 result. 

Data Quality and Limitations: 

The cost data for this metric are derived from general ledger data uploaded to FSA’s ActivityBased Costing model, which is updated on a quarterly basis and reconciled to FSA’s Statement 

of Net Cost, ensuring all costs assigned to FSA are included in the cost model. The FAFSA 

volumes are derived from the CPS, FSA’s system for processing student aid applications.
72 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Results by Strategic Goal 

Table 32

Performance Metric C.2 

Outstanding Direct Loan Portfolio in Current Repayment Status 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 85.0%-86.0% 86.5%  Met 

FY 2017 84.9%–85.9% 85.7%  Met 

FY 2016 85.3% 85.4%  Met 

FY 2015 Performance metric revised in FY 2016 

Prior-year data not available under revised method

N/A 

FY 2014 N/A 

Target Context: 

This metric demonstrates an increase or decrease in the percentage of FSA loan portfolio 

dollars in a current repayment status. “Current” is defined as the percentage of Direct Loan 

principal and interest identified as being in an “active repayment” status. For this metric, loans 

are defined as being in “active repayment status” if they are being serviced by a non-default 

servicer, payments have not been temporarily suspended (in school/grace or 

deferment/forbearance), and if they have not been identified as being in non-defaulted 

bankruptcy, at the default servicer or otherwise excluded (e.g. due to a total and permanent 

disability determination). Direct Loans are further categorized as being “current” if no more than 

30 days have passed since the next payment date. 

Analysis of Progress: 

FSA met its target for this metric with a result of 86.5 percent. 

FSA continues to reap benefits from the migration of borrowers from traditional repayment plans 

to income driven repayment (IDR) plans. The movement to IDR plans has been facilitated by 

extensive outreach conducted by both FSA and its partners. Borrowers in repayment status are 

less costly to service then borrowers in adverse repayment status categories like delinquency or 

default. 

Data Quality and Limitations: 

The metric is calculated using the Direct Loan Portfolio by Delinquency Status Report published 

by the FSA Data Center using data provided by NSLDS. It is the outstanding principal and 

interest balance of “current” Direct Loans in the active repayment status divided by the total 

principal and interest balance of Direct Loans in an active repayment status at the non-default 

servicers. The metric result is calculated as a four-quarter moving average as of September 30 

of the current fiscal year. This allows FSA to account for changes relating to seasonality and 

indirect factors that could be false indicators of change. 
Fiscal Year 2018 Annual Report | Federal Student Aid 73

Performance Results by Strategic Goal 

Strategic Goal D: Foster trust and collaboration among stakeholders. 

Table 33

Performance Metric D.1

Ease of Doing Business with FSA 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 71.9-74.9 74.5  Met 

FY 2017 71.3–73.3 73.4  Met 

FY 2016 74.3–77.3 72.3  Not met 

FY 2015 75.9–77.9 75.8  Not met 

FY 2014 73–75 77  Met 

Target Context: 

FSA works closely with postsecondary institutions to provide students with federal student aid. 

Successfully delivering aid through a complex system depends on FSA’s ability to work well with 

its institutional, financial, and state partners by supporting them with technical assistance that 

will help them improve their performance and by providing adequate oversight to ensure that 

participants are complying with program requirements. To ensure that all participants in the 

postsecondary education funding system can easily access the information they need to 

perform their important functions and serve the interests of students, FSA conducts a survey 

with postsecondary institutions to gauge the “ease of doing business with FSA.”

Analysis of Progress: 

FSA met its target for this metric with a result of 74.5. 

The fiscal year 2018 score for the “Ease of Doing Business” item on the Schools Partners 

survey was 74.5, the upper end of the target range (71.9–74.9) for this score. The School 

Partners Survey reaches out to Financial Aid Administrators across the nation who work and 

interact with FSA. This score comes from the August 2018 survey of Financial Aid 

Administrators and was the sole measurement for FY 2018. FSA feels that the increased score 

is indicative of improvements that it continues to make at its call centers, improvements and 

greater awareness of the Financial Aid Toolkit, which allows a growing number of Financial Aid 

Administrators to “self-serve” through accessing the many resources available in the toolkit, and 

use of our updated websites, including StudentAid.gov. 

Data Quality and Limitations: 

A survey of 10 to 12 questions, regarding the ease of doing business with FSA, is sent to 

schools quarterly. The questions focus on the ease of use of FSA’s major delivery and 

information systems. The score is based on 1,548 responses, which resulted from 5,468 

invitations sent (a 28.3 percent response rate), a very high response rate for an on-line survey. 
74 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Results by Strategic Goal 

Table 34

Performance Metric D.2

Percentage of Contract Dollars Competed by FSA 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 89.3%–91.3% 96.8%  Met 

FY 2017 89.3%–91.3% 95.2%  Met 

FY 2016 89.3%–91.3% 92.9%  Met 

FY 2015 87.7%–89.7% 90.3%  Met 

FY 2014 85.3%–87.3% 88.7%  Met 

Target Context: 

Federal acquisition regulations require agencies to compete contracts, unless otherwise justified 

and approved in accordance with regulation. Competition increases transparency, drives 

savings and quality, and helps maintain a supplier base for future acquisition needs. This metric 

tracks the percentage of contract dollars competed by FSA. 

Analysis of Progress: 

FSA met its target for this metric with a result of 96.8 percent. 

FSA exceeding the target for this performance metric in FY 2018 is the result of FSA’s 

commitment to competitively award a high percentage of contract dollars each year, driving 

value for taxpayers through a competitive acquisition process. 

Data Quality and Limitations: 

The metric is a five-year rolling average. The numerator is the total amount of dollars competed 

over a five-year period ending in the most recently completed fiscal year; the denominator is the 

total amount of dollars expended on contracts over the same period. The data are extracted 

from the Federal Procurement Data System-Next Generation using the standard “Competition 

Report” for contracting office “Federal Student Aid Procurement Activity.”
Fiscal Year 2018 Annual Report | Federal Student Aid 75

Performance Results by Strategic Goal 

Table 35

Performance Metric D.3 

Collection Rate 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 $59.24 $62.15  Met 

FY 2017 $51.68 $59.69  Met 

FY 2016 $51.79 $53.07  Met 

FY 2015 $36.56 $51.58  Met 

FY 2014 $45.65 $35.90  Not met 

Target Context: 

FSA’s collection rate measures the amount of dollars collected from borrowers in the fiscal year 

per dollar spent to collect. Measuring this rate helps FSA gauge the efficiency of its back-end 

systems and processes. 

Analysis of Progress: 

FSA met its target for this metric with a result of $62.15. 

Four main components led to the increase in the FY 2018 Collection Rate Metric. Actual Loan 

Servicing costs are lower in part because the estimated $15.7 million in servicer recompete 

costs have not yet been realized. The Actual Default Collection costs are higher because a 

3.5 percent decrease was realized instead of the estimated decrease of 9.2 percent. The 

Private Collection Agency (PCA) costs are lower than projected due to the new 'flat rate' pricing 

paid to PCAs being fully implemented in FY 2018 and Actual Collections were 6 percent lower 

than projected. 

Data Quality and Limitations: 

Collections are defined as the total amount of principal collected on both current and defaulted 

debt during the 12-month period ending June 30 of each year. Costs include the total direct 

costs calculated for loan servicing plus debt collections for the same period using FSA’s ActivityBased Costing process. The cost data are derived from FSA’s Activity-Based Costing model 

(Default Collections and Loan Servicing) and PCA spending. A program from the general 

ledger captured the amount of collections and repayment. 
76 Fiscal Year 2018 Annual Report | Federal Student Aid

Performance Results by Strategic Goal 

Strategic Goal E: Invest in expanded workforce capability.

Table 36

Performance Metric E.1 

Employee Engagement Index 

Fiscal Year Target Actual Target Achieved Performance Result 

FY 2018 68.7%-70.7% 62.0%  Not Met 

FY 2017 65.4%–69.4% 69.7%  Met 

FY 2016 66.9%–68.9% 67.4%  Met 

FY 2015 66.7%–68.7% 67.9%  Met 

FY 2014 >=64.2% 67.7%  Met 

Target Context: 

Beginning in FY 2014, FSA has measured its progress on Strategic Goal E via the Federal 

Employee Viewpoint Survey (FEVS) and most specifically the Employee Engagement Index 

(EEI) within the FEVS. The EEI is based on a subset of 15 questions within the FEVS. The 

questions that formulate the EEI are a government-wide standard developed by the U.S. Office 

of Personnel Management and the Partnership for Public Service, which jointly administer and 

analyze the FEVS. Doing so aligns FSA with the Federal standard for FEVS analysis.

Analysis of Progress: 

FSA did not meet its target for this metric with a result of 62.0 percent. 

FSA experienced significant shifts in management; restructuring of its workflow and business 

units; and significant policy changes to employees’ work/life balance in FY 2018. FSA believes 

that these changes caused a dramatic decrease to its scores particularly under the Leaders 

Lead subsection of the Employee Engagement Index. The Leaders Lead subsection decreased 

from 59 percent in FY 2017 to 44 percent with a change differential of fifteen percentage points 

in FY 2018. These questions focused on employees’ perception of senior leaders’ integrity, 

honesty, and commitment to the workforce. 

Even with the significant changes in leadership, FSA’s employee engagement team coordinated 

with business units to deliver meaningful programs (under the FSA First Class initiative). These 

programs were designed to (1) increase employees’ awareness of FSA’s mission and priorities; 

(2) help employees map their own work to the organization’s mission; and (3) increase 

employees knowledge about other areas within FSA outside of their own business unit. 

Implementing strategic initiatives directly assisted to sustain the scores within the 60 percentile 

in positive responses associated with the EEI questions. 

Data Quality and Limitations: 

The EEI is calculated as the average of positive response percentages to a predetermined set 

of questions in the annual FEVS: questions numbered 3, 4, 6, 11, 12, 47, 48, 49, 51, 52, 53, 54, 

56, 60, and 61. These questions can be found as part of the FY 2018 FEVS results located at 

fedview.opm.gov. 
Fiscal Year 2018 Annual Report | Federal Student Aid 77

Fiscal Year 2018 Accomplishments of Federal Student Aid 

Fiscal Year 2018 Accomplishments of Federal Student Aid

During FY 2018, FSA realized additional accomplishments that were not measured specifically 

by the performance metrics implemented to measure performance against the FSA FY 2015–19 

Strategic Plan. Although not measured by FSA performance metrics, these accomplishments 

were the result of initiatives FSA undertook to support the implementation of the strategic plan 

or legislative changes. This section describes its additional accomplishments. 

FSA realized the following additional accomplishments in support of Strategic Goal A: 

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

 FSA launched the Next Gen FSA. Next Gen FSA will create an improved, world-class 

customer experience for FSA’s millions of customers, while creating a more agile, flexible 

model that will streamline FSA’s existing operations. Next Gen FSA will also improve the 

integrity of the Title IV programs and transform how FSA works with and oversees 

institutions of higher education and other organizations that support the organization’s

shared mission. 

 Throughout FY 2018, FSA focused on the development of the Next Gen FSA strategy and 

vision. To create the vision, FSA conducted extensive market research and learned from 

world-class providers. FSA currently has a diverse vendor landscape and customer 

interfaces are via multiple brands—this can create a less than optimal experience for FSA 

customers. Next Gen FSA goals include a world-class customer and partner experience, 

operational flexibility, operational efficiency, and improved customer outcomes. 

 FSA released the initial solicitation for the Next Gen Financial Services Environment and 

reviewed responses to identify the most promising potential solutions. The next phase of 

the solicitation was released on September 24, 2018, with awards anticipated in FY 2019. 

In addition, FSA released a solicitation for the Enterprise-wide Digital and Customer Care 

Platforms and Services; the awarding of the contract is expected in early FY 2019. FSA 

also began work on enhancements to FSA ID, which is currently used by all FSA customers. 

Enhancements are scheduled be rolled out in early calendar year 2019 and will move 

toward a single-sign-on for all student facing applications. FSA began further visioning for 

the Next Gen Partner Participation and Oversight to create a world-class partner experience 

for all partner interactions. 

 During FY 2018, FSA also established the infrastructure to realize this ambitious vision. A 

Next Gen Transformation Management Team (TMT) was established to track progress, 

centrally deploy project management and other support resources, and coordinate activities 

across the enterprise. The TMT is responsible for all Next Gen FSA processes, as well as 

for coordination amongst multiple work streams (i.e., work teams) that were created to 

accomplish specific Next Gen FSA goals and objectives. Leadership and initial staffing for 

the TMT and work streams were put in place and the process of bringing in additional 

federal and contract resources is under way. 
78 Fiscal Year 2018 Annual Report | Federal Student Aid

Fiscal Year 2018 Accomplishments of Federal Student Aid 

FSA realized the following additional accomplishments in support of Strategic Goal B: 

Proactively manage the student aid portfolio to mitigate risk. 

 FSA designed and implemented a new dynamic, robust, forward-thinking Enterprise Risk 

Management System to significantly improve its capabilities to identify, assess, manage and 

monitor risks at multiple levels to help FSA pursue its mission and achieve its strategic 

goals. FSA’s Enterprise Risk Management Office has initiated FSA’s first-ever enterprise 

cyber risk and fraud portfolios connected to FSA’s enterprise risk portfolio.

 FSA provided ongoing support, information, technical assistance, and other resources to 

students, institutions, and borrowers impacted by a wave of natural disasters across the 

southern United States, California, Hawaii, and the Caribbean, including proactive 

communications before the disasters struck and regular communications following the 

disaster; operational assistance; and regulatory and administrative relief and reporting 

flexibilities. More specifically, FSA issued over 4,000 emails to directly inform, and granted 

over 200 requests for regulatory, administrative or reporting relief and flexibilities to 

subsequently aid in the recovery efforts of nearly 1,700 institutions, enrolling over 2 million 

students, touched by Hurricanes Harvey, Irma, Maria, and the California Wildfires 

throughout the fall and early winter of 2017. 

 FSA has led efforts to monitor the hundreds of institutions provisionally participating in Title 

IV programs that were impacted by the de-recognition of Accrediting Council for Independent 

Colleges and Schools (ACICS) as a federal accreditor. In March 2018, a decision from the 

U.S. District Court for the District of Columbia remanded the 2016 decision back to 

Secretary DeVos and the Secretary issued an Order restoring ACICS’s status as an 

accrediting agency until a final decision is rendered on its original 2016 petition to retain 

accreditor status. Program Compliance worked quickly to communicate the outcomes of the 

Secretary’s Order to more than 120 institutions (at that time) which either remained affiliated 

with ACICS as an accreditor or those that continued to seek alternative accreditation, and 

provided direction to those institutions on how they could continue to participate in Title IV 

programs upon the June 2018 expiration of their Provisional Program Participation 

Agreements. 

 FSA successfully implemented a major software rewrite for EDExpress Releases 1, 2, 3, 

and Direct Loan Tools 18, which supported Title IV aid management by significantly 

increasing usability and security for participating schools. This change resolved a major 

organizational IT-related risk. 

FSA realized the following additional accomplishments in support of Strategic Goal C: 

Improve operational efficiency and flexibility. 

 In FY 2018, FSA conducted oversight for nearly 6,000 institutions participating in Title IV 

programs. Throughout FY 2018, the staff resolved over 2,300 deficient audits and flagged 

financial statements; issued over 470 Program Review Reports and Final Program Review 

Determinations (FPRD) to institutions subjected to a Program Review; and processed over 

6,000 recertifications and other eligibility applications. Focused oversight resulted in over 

$165 million in assessed liabilities against institutions and third party servicers via the 199 

FPRDs issued to those entities throughout FY 2018.

 FSA successfully transferred the HEAL Online Processing System from HHS. 
Fiscal Year 2018 Annual Report | Federal Student Aid 79

Fiscal Year 2018 Accomplishments of Federal Student Aid 

 In FY 2018, the U.S. Department of Homeland Security (DHS) required FSA to discontinue 

the paper/manual process for the DHS three-step verification for those students who 

required it (approximately 30,000 per year). The DHS Systematic Alien Verification for 

Entitlements (SAVE) system allows Financial Aid Administrators to be able to upload 

required documentation for DHS to make their determination and provide the results needed 

for student aid eligibility determination. The result of this new electronic process is that 

schools can now get verification results in a matter of 2-3 days versus the 20-30 day manual 

process. This new program implementation included changes to the SAVE system; a pilot 

program with nine schools, and implemented changes based on the pilot program. The 

implemented changes included updating the CPS System of Records Notice to allow for the 

creation of 6,500 SAVE system User IDs to be sent to each school and the development of 

detailed user instructions published on Information for Financial Aid Professionals website. 

FSA realized the following additional accomplishments in support of Strategic Goal D:

Foster trust and collaboration among stakeholders. 

 FSA published a series of new and updated data sets, reports, and other information to the 

FSA Data Center during FY 2018. Data published included new portfolio reports highlighting 

the characteristics of: all Direct Loan borrowers, Direct Loan borrowers in a ‘Repayment’ 

loan status, and borrowers enrolled in income-driven repayment plans. Additional new 

reports segmented federal student loan borrowers by two demographic levels. These new 

portfolio reports can be found at StudentAid.gov/student/portfolio. Last, new reports 

were posted providing snapshots of the number of applications and resulting loan 

discharges processed due to borrower defense to repayment and the Public Service 

Loan Forgiveness Program. The new reports were posted along with a series of updates 

to the quarterly application, disbursement, and portfolio reports. 

 FSA also published a series of new and updated data sets, reports, and other information 

regarding institutional outcomes and financial oversight including quarterly Heightened 

Cash Monitoring reports, the Proprietary 90/10 Revenue Percentages Report, 

Financial Responsibility Composite Scores, the Foreign Schools Gifts and Contracts 

Report, the School Fines Report, and the Top 10 Program Review and Audit Findings 

Report. 

 FSA furthers a stronger economy and supports innovation and client customer service 

through the award of 34.9 percent of its contract dollars to small businesses, driving the 

Department’s success in surpassing its small business goal of 24 percent. 

 FSA offered the largest free training opportunity to financial aid professionals in the United 

States. During the 2017 FSA Training Conference for Financial Aid Professionals in 

Orlando, FL, almost 6,000 financial aid professionals were able to attend over 60 training 

sessions related to the administration of the federal student aid programs. FSA also offered 

a track exclusively for foreign schools, Birds of a Feather networking sessions, and a 

resource center for one-on-one assistance with Department and FSA subject matter 

experts. Nearly 2,100 unique institutions, representing 72.4 percent of all 2016-2017 

Federal Student Aid funding, participated in the FSA Training Conference. 
80 Fiscal Year 2018 Annual Report | Federal Student Aid

Fiscal Year 2018 Accomplishments of Federal Student Aid 

FSA realized the following additional accomplishments in support of Strategic Goal E: 

Invest in expanded workforce capability. 

 During FY 2018, FSA created a new management development series of three interrelated 

workshops, based on research from the Harvard Business School and the Federal 

Executive Core Qualifications. This management series was fashioned to address the 

unique leadership needs identified as being developmentally beneficial for organizations 

during significant change. From this series, eight workshops were delivered to managers 

including the titles: Decisiveness: Leading in an Environment of Change and Managing 

Creativity.

 Workforce capability was also enhanced through the delivery of specialized training and 

education. A workshop delivered to the management team included, An Inclusive Workplace 

That Values All, which offered managers assistance in strengthening interagency 

collaborative relationships and improving overall communication. 

 Additionally, FSA delivered to its new supervisors the managerial training titled, 

Cornerstones of Supervision, along with providing leadership coaching. The 36-hour 

development program is designed to increase new, or new to FSA, supervisors’ capacity to 

lead high performing work units in support of FSA’s vision and mission. Leadership coaching 

complements the organization’s development programs; enhances managers’ effectiveness; 

and builds the capacity to lead staff through organizational changes as a result of the Next 

Gen FSA transition. 

 In addition to delivering training to the workforce, FSA also conducted training needs 

analysis for various organizational components to ascertain performance skill gap and 

development needs. 

 Thirty-six FSA employees worked on disaster relief efforts to benefit Puerto Rico and the 

U.S. Virgin Islands in the aftermath of Hurricane Maria, contributing nearly 1,500 man-hours 

of effort to disaster assistance. There were three FSA employees mobilized via the Surge 

Capacity Force to assist the Federal Emergency Management Agency with the recovery 

efforts in Florida and Puerto Rico. 
Fiscal Year 2018 Annual Report | Federal Student Aid 81

Legislative and Regulatory Recommendations

Legislative and Regulatory Recommendations

One of FSA’s mission responsibilities under the law is to provide input on legislative proposals 

(both from Congress and from the administration) and to support the Department’s regulatory 

activity. FSA also may suggest legislative or regulatory changes for consideration by the 

Department’s senior policy officials. These recommendations customarily center on improving 

and simplifying the Title IV federal student assistance programs, minimizing administrative 

costs, and improving program integrity. FSA’s recommendations inform the Department’s 

policymaking process, including its activities and decisions related to each year’s budget 

process. FSA provides this input and recommendations by direct contact with colleagues in the 

various policy offices within the Department, including the Office of the Under Secretary, the 

Office of Postsecondary Education, and the Office of Planning, Evaluation and Policy 

Development at both the senior policy level and at the staff level. During the past year, FSA 

provided specific recommendations to policy officials on several issues including: 

 continuing of current experiments under the Experimental Sites Initiative consistent with 

the Administration’s higher education priorities; 

 developing policies relating to the regulations for the eligibility of gainful employment 

programs at institutions of higher education; 

 developing guidance and providing regulatory flexibility and relief, and statutory 

proposals, for the purpose of assisting students, borrowers, institutions of higher 

education and others affected by recent natural disasters; and 

 developing and implementing policies to address the expiration of the Federal Perkins 

Loan Program. 
82 Fiscal Year 2018 Annual Report | Federal Student Aid

Annual Bonus Awards 

Annual Bonus Awards

As required by the 1998 amendments to the HEA, this Annual Report includes performance ratings 

and related awards for FSA senior managers and Senior Executive Service staff. Included in this 

section are the number of senior managers and Senior Executive Staff on board as of the end of FY 

2018. However, because FY 2018 performance results were not finalized at the time this report was 

prepared, the section discusses FY 2017 performance results. 

At the end of FY 2018, there were 44 FSA senior managers and 7 Senior Executive Service 

members. The number of senior managers and Senior Executive Service members in FY 2018 

differed from FY 2017 due to attrition. The FSA Executive Committee, previously titled the FSA 

Operating Committee, contained 18 of the 44 senior managers and 2 of the 7 Senior Executive 

Service members. As members of the FSA Executive Committee, these senior managers and 

Senior Executive Service staff reported directly to the COO or Executives in the COO office. 

The remaining 26 senior managers and 5 Senior Executive Service staff served in a variety of 

senior positions and capacities within FSA.

The following section discusses FY 2017 performance results.

For performance year 2017, the composition of ratings for the 47 senior managers who did not 

serve on the FSA Operating Committee last year were as follows: 17 senior managers 

achieved a performance rating of Exceptional Results; 13 achieved a performance rating of 

High Results; 10 achieved a performance rating of Results Achieved; and 7 were not eligible for 

a rating. 

Award amounts for those senior managers achieving an Exceptional Results rating ranged from 

$5,667 to $25,000 with a median award of $9,857. Award amounts for those achieving a High 

Results rating ranged from $2,346 to $7,359 with a median award of $6,836. 

There were also 2017 performance ratings and awards for eight senior manager members of 

the FSA Operating Committee. The composition of those rated included: seven senior 

managers achieved a performance rating of Exceptional Results; one achieved a performance 

rating of High Results. One of the eight Senior Executive Service members is on the FSA 

Operating Committee and achieved a performance rating of Exceptional Results. The 

composition of ratings for the remaining seven Senior Executive Service members not on the 

FSA Operating Committee were as follows: four Senior Executive Service members achieved a 

performance rating of Exceptional; two achieved a performance rating of High Results; and one

achieved a performance rating of Results Achieved. 

Award amounts for the FSA Operating Committee ranged from approximately $15,000 to 

$35,000, depending on the performance rating of each individual. Only individuals with 

performance ratings of High Results Achieved or Exceptional Results achieved were eligible for 

performance-based awards. 

For additional information, please refer to: Higher Education Amendments 1998/sec101D 
Fiscal Year 2018 Annual Report | Federal Student Aid 83

Report of the Federal Student Aid Ombudsman

Report of the Federal Student Aid Ombudsman

The FSA Ombudsman Group entered its nineteenth year of service to federal student aid 

recipients in FY 2018. Established by the 1998 amendments to the HEA, the Ombudsman 

began operations on September 30, 1999. 

The Ombudsman Group addresses disputes regarding the Title IV financial aid programs 

through informal dispute resolution processes. The Ombudsman Group uses a collaborative 

approach in working with institutions of higher education, lenders, guaranty agencies, loan 

servicers, and other participants in student loan programs. This approach allows them to 

conduct fact-finding, review student loan data and records, and facilitate contacts between 

borrowers and their loan servicers in an effort to promote mutually agreeable resolution of 

issues brought by individual student loan customers. 

Since July 2016, the Ombudsman Group also has the responsibility of administering and 

managing FSA’s comprehensive informal complaint resolution process through the FSA 

Feedback System. This process engages FSA business units and contracted vendors to 

receive, review, respond, and report on individual direct customer feedback about the programs 

FSA administers and the participants it oversees. The FSA Feedback System was designed to 

augment established operational resources such as FSA websites, resources, and contact 

centers and loan servicers to give students and borrowers another way to clarify programmatic 

questions, file complaints and provide feedback about federal student loan lenders, servicers, 

collection agencies, institutions of higher education, and the Department. 

The first Feedback System Annual Report was published in December 2017. During FY 2018, 

the Ombudsman Group combined the operations of the FSA Feedback System with the 

operations of the Ombudsman Case Tracking System (OCTS) to unify and provide a single 

point of entry for all feedback within a Feedback and Dispute Management System (FDMS). 

This report provides information about the volume and nature of all feedback and disputes FSA 

received, reviewed, and resolved during FY 2018. 

Summary of All FDMS Customer Feedback Received during FY 2018 

Demographic Profile of All FDMS Customers 

FSA leverages the Enterprise Data Warehouse and Analytics (EDWA) System, to better 

understand the characteristics of customers submitting complaints. Through a better 

understanding of customer characteristics, FSA can improve processes and communication to 

more effectively meet customers’ needs. EDWA is an analytical platform that combines federal 

student aid lifecycle data from application through repayment into a centralized repository. 
84 Fiscal Year 2018 Annual Report | Federal Student Aid

Report of the Federal Student Aid Ombudsman 

Chart 18

FY 2018 Customer Demographic Profile for All FDMS Feedback

This chart profiles the most common attributes of a customer submitting feedback to FSA 

through FDMS. These attributes show that the customer: 

 is between 25 and 49 years of age 

 is not currently enrolled 

 attended a public institution of higher education 

 was not a first-time FAFSA filer 

 was an independent student 

 was eligible for Pell grants 

 owes student loans greater than $40,000 

 does not have an income-driven repayment plan 

 has never defaulted on their student loans. 

A review of past reports shows this information has remained relatively consistent. 
Fiscal Year 2018 Annual Report | Federal Student Aid 85

Report of the Federal Student Aid Ombudsman

All FDMS Feedback Classification and Categorization

Customers may submit FDMS feedback (cases16) about any type of federal student aid. All 

cases are assigned among two Lines of Business (LOBs): Feedback and Dispute. Cases 

pertaining to federally-held loans are researched and resolved through the Feedback LOB. 

Federally-owned loans include all Direct Loans, Federal Family Education Loans, and Perkins 

Loans owned by the Department. Cases pertaining to federal loans owned by commercial 

lenders or guaranty agencies—commonly referred to as commercially-held loans—are classified 

as Research cases and researched by the Ombudsman Group through the Dispute LOB. 

This section of the report summarizes all feedback received through both LOBs. 

Each incoming case is classified into a case type based on the customer’s perceptions and 

makes no judgement as to the validity of the perceptions. Each feedback submission is 

classified into one of five case types: 

 General Inquiry17: Cases involving general federal student aid questions; 

 Complaint: Customer’s dissatisfaction with the federal financial aid 

experience; 

 Suspicious Activity18: Report or allegation of suspected fraud during the student aid 

process; 

 Positive Feedback: Compliment about programs or FSA staff; or 

 Research: Cases assigned to the Ombudsman Group through the Dispute 

LOB

The activity in the system during FY 2018 equated to 38,332 cases received. These cases 

were comprised of General Inquiry 10,219; Complaints 25,074; (Allegations of) Suspicious 

Activity 1,874; Positive Feedback 470; and Research 695. 

 

16 The word “feedback” is the generic term used in this report to describe all submissions to the FSA Feedback 

System, and, in some instances, is interchangeable with the words “case” or “cases”.

 

17 Prior to February 2018, this category was found only in the Ombudsman Case Tracking System as General 

Assistance (GenAssist). These categories have been combined in this report as General Inquiry. 

18 A review of cases following the first year of operating the FSA Feedback System showed that customer’s 

frequently incorrectly classified a case as “Suspicious Activity.” Beginning February 2018, customers cannot choose 

“Suspicious Activity.” FSA now determines if a case should be classified as “Suspicious Activity” based on objective 

criteria.
86 Fiscal Year 2018 Annual Report | Federal Student Aid

Report of the Federal Student Aid Ombudsman 

Chart 19

All FDMS Feedback Received

(By Case Type) 

FY 2018

 

In addition to categorizing by case type, all cases are further categorized into subject categories 

based on the customer’s description. Subcategories further refine the nature of the case. Using 

this taxonomy assists FSA in identifying the areas that need attention as it relates to identifying 

program and operational changes and improvements. The following table shows the top five 

most frequent categories and subcategories, for all FDMS feedback received across all case 

types (FDMS Top Five) in FY 2018. 

Table 37

FDMS Top Five for All FDMS Feedback Received 

FY 2018 

Category Subcategory Volume Percentage of All 

Feedback Received 

Repaying Student Financial Aid Loan Accuracy 3,767 9.8% 

Repaying Student Financial Aid Loan Discharge, Cancellation, or 

Forgiveness 3,259 8.5% 

Repaying Student Financial Aid Loan Repayment Plan 2,031 5.3% 

Applying for Student Aid (FAFSA) Completing the FAFSA 1,649 4.3% 

Repaying Student Financial Aid Loan Delinquency or Default 1,611 4.2% 

Total 12,317 32.1%

The loan repayment phase of the student aid lifecycle is the reason for the majority of the 

feedback FSA received, representing 42.7 percent of all feedback received in FY 2018; thus the 

loan repayment phase of the student aid lifecycle dominates the top five categories. The 
Fiscal Year 2018 Annual Report | Federal Student Aid 87

Report of the Federal Student Aid Ombudsman

application process—specifically completing the FAFSA—generated the fourth most common 

type of feedback received in the fiscal year. 

Loan Accuracy includes all feedback in which the customer asserts the current balance of the 

loan, the interest rate, the loan amount disbursed, or the loan status is incorrect or misstated. 

Customers who are seeking to have a loan discharged, cancelled, or forgiven under the various 

programs offered by the Department submit feedback that is categorized under Loan Discharge, 

Cancellation or Forgiveness, which includes, for example, Borrower Defense to Repayment, 

and TPD. PSLF uses a separate category to track more specific feedback about that program. 

All feedback concerning selecting or qualifying for a specific repayment plan is captured under 

Loan Repayment Plan. 

All feedback concerning completing the FAFSA, which pertains to any issue a customer may 

encounter when completing the application, is captured under Completing the FAFSA. 

Feedback concerning loan delinquency or default, which includes resolution of the loan 

delinquency or removal of the loan from default is categorized under Loan Delinquency or 

Default. 

How FSA Resolves Feedback

Feedback resolution must be executed within the boundaries established by law and regulation. 

Resolution Actions indicate the specific way in which the feedback was resolved. These actions 

are grouped under three common Resolution Types. Resolutions achieved on cases in 

FY 2018, by a vast margin, consisted of providing to the customer additional explanation or 

information about the action or circumstance that prompted the customer to submit feedback to 

FSA. These resolved cases are identified with a Resolution Action of “Communication/Process 

Clarified for Customer.” 

Table 38

Resolution Types and Actions for All FDMS Cases Closed 

 FY 2018

Resolution Type Resolution Action Volume Percentage 

Resolved 

Action Taken 2,274 5.9%

Communication/Process Clarified for Customer 14,184 36.8%

No Response from Customer 64 0.2%

Referred 

Referred to Accrediting Agency 802 2.1%

Referred to FSA Contact Center 4,115 10.7%

Referred to FSA Website 1,676 4.3%

Referred to Other Government Entity 1,385 3.6%

Referred to Outside Third-Party 1,349 3.5%

Referred to School 2,874 7.5%

Referred within the Department 4,898 12.7%

Submission Logged

Feedback Logged 3,150 8.2%

No Response from Customer 1,668 4.3%

Policy Suggestion Logged 96 0.2%

Total 38,535 100%
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The Resolution Type, “Resolved”, designates feedback on which FSA has concluded all review 

and research activity. “Referred” is most commonly used with the case type of General Inquiry, 

but it also may be used to designate situations in which the customer is directed to another 

resource external to FSA because the nature of the feedback does not pertain to Title IV federal 

student aid programs or must be reported to another agency or entity. “Submission Logged” 

relates to feedback on which no assistance is provided, most commonly because the feedback 

was submitted anonymously, or contains specific direction to change Title IV law or regulation. 

This method of recording the manner in which individual cases are resolved helps highlight 

areas of customer confusion versus problems with program implementation that may require 

legislative, regulatory or operational changes. It also enables FSA to show how specific 

categories and sub-categories of cases are resolved, and provides a more refined picture of the 

relative flexibility of FSA to meet and satisfy customer expectations as expressed within 

individual feedback submissions. Table 39 presents the most frequent Resolution Type and 

Actions achieved for each of the FDMS Top Five shown in Table 37. 

Table 39

Frequent Resolution Types and Actions for Cases Closed 

(Presented for each of the FDMS Top Five) 

FY 2018

Category Sub-Category Resolution Type Resolution Action Volume 

Repaying Student Financial Aid Loan Accuracy 

Resolved Action Taken 346

Communication Process Clarified 1,572 

Referred Referred within the Department 759

Submission Logged Feedback Logged 247

Repaying Student Financial Aid 

Loan Discharge, 

Cancellation, or 

Forgiveness 

Resolved Action Taken 210

Communication Process Clarified 1,452 

Referred Referred within the Department 525

Submission Logged Feedback Logged 168

Repaying Student Financial Aid Loan Repayment Plan 

Resolved Action Taken 183

Communication Process Clarified 913

Referred Referred within the Department 477

Submission Logged Feedback Logged 81

Applying for Student Aid (FAFSA) Completing the FAFSA 

Resolved Action Taken 6 

Communication Process Clarified 284

Referred Referred to FSA Contact Center 989

Submission Logged Feedback Logged 170

Repaying Student Financial Aid Loan Delinquency or 

Default 

Resolved Action Taken 74

Communication Process Clarified 467

Referred Referred within the Department 577

Submission Logged Feedback Logged 60

Feedback LOB Cases Assigned to FSA Business Units

This section focuses on cases researched and resolved through the Feedback LOB. Cases in 

the Feedback LOB may be assigned to an FSA business unit or to an entity under contract to 

FSA (e.g., Loan Servicers or PCAs)

19

. 

All Feedback LOB submissions are classified into a category based on the customer’s 

description. The subcategory further refines the nature of the customer’s feedback for reporting 

 

19 General Inquiry/GenAssist cases are resolved at the initial point of submission and not assigned to a business unit. 
Fiscal Year 2018 Annual Report | Federal Student Aid 89

Report of the Federal Student Aid Ombudsman

purposes. The following table presents the five most frequent issue categories/subcategories 

federal financial aid recipients submitted, researched and resolved through the Feedback LOB. 

Table 40

Top Five Categories/Subcategories of Feedback LOB Cases Received 

FY 2018 

Category Subcategory Volume 

Repaying Student Financial Aid Loan Accuracy 3,110 

Repaying Student Financial Aid Loan Discharge, Cancellation, or Forgiveness 2,921 

Applying for Student Aid (FAFSA) Completing the FAFSA® 1,651

Repaying Student Financial Aid Loan Repayment Plan 1,569 

Repaying Student Financial Aid Loan Delinquency or Default 1,243 

Total 10,494 

Repaying Student Financial Aid/Loan Accuracy pertains to customer’s concerns about the 

accuracy of one or more of their loans. Examples of this subcategory include: interest rate; loan 

disbursement amount; current loan balance; loan payment amount; and, current loan status. 

Repaying Student Financial Aid/Loan Discharge, Cancellation, or Forgiveness pertains to any 

such issue except for TPD, Borrower Defense, and PSLF, as those are separate categories or 

subcategories. Examples include Teacher Loan Forgiveness, Ability to Benefit discharge, False 

Signature, and Identity Theft. 

Applying for Student Aid (FAFSA)/Completing the FAFSA pertains to any issue the customer 

experiences when applying for or receiving federal financial aid. Examples include unable to 

electronically sign FAFSA; completing the FAFSA takes too long; requirement on two years of 

tax returns; timing when the FAFSA needs to be filled out; and other challenges related to 

completion of the FAFSA. 

Repaying Student Financial Aid/Loan Repayment Plan pertains to customer’s concerns about a 

loan servicer’s administration or requirements of the available repayment plans. Examples 

include qualification for an income driven repayment plan; requirements for calculating the 

borrower’s choice of repayment plan; and requests to change repayment plan.

Repaying Student Financial Aid/Loan Payment Amount pertains to any issue regarding the 

customer’s scheduled payment amount. Examples include a customer's monthly loan payment 

amount is incorrect; a customer's federal loans are in default and are experiencing issues with a 

customer loan payment amount; a customer is disputing the loan repayment amount; or, a 

customer believes that a borrower's loans are not in default. 

Resolution Action: Communication/Process Clarified for Customer 

Table 38 highlights that over 36.8 percent of all cases were resolved with another explanation 

and/or more information about the circumstances that prompted the customer to submit 

feedback to FSA. As noted above, FSA must resolve complaints within the framework of 

existing law and regulation. This limitation means FSA often is constrained from offering a 

solution to the customer that directly and precisely resolves the matter in a way the customer 

most desires. For example, a customer may not like the interest rate on their loans. While this 

is certainly valid feedback, legislation mandates the interest rate on federal student loans. 
90 Fiscal Year 2018 Annual Report | Federal Student Aid

Report of the Federal Student Aid Ombudsman 

Chart 20 below further highlights these occurrences. The chart presents the Feedback LOB 

cases that were closed in FY 2018 with the Resolution Action, Communication/Process Clarified 

for Customer and shows the frequency in which this Resolution Action occurs in cases with 

category/subcategory corresponding to one of the Top Five Feedback 

Categories/Subcategories: 

Chart 20 

Top Five Categories/Subcategories for Cases Closed by Resolution Action, 

Communication/Process Clarified for Customer 

FY 2018 

 

There are key factors explaining why so many cases are resolved with FSA providing additional 

or clarifying information: 

 Customers having difficulty with requirements associated with completing and submitting 

the FAFSA such as electronic signatures, completing the FAFSA, and required income 

information. 

 Customers’ difficulty understanding requirements and proving eligibility for loan program 

benefits such as income-driven repayment plans or loan discharge, cancellation, or 

forgiveness 

 Unclear, hard-to-understand, or inconsistent information from FSA and its service 

providers 

 Customer understanding and awareness of how loan balances are affected by interest 

accrual and/or capitalization, and reduced by monthly payments 

Following are sample cases that are illustrative of these factors. 

Loan Accuracy. The customer said that another person’s loans were added to his loan 

account. The customer wants to pay only the loan he took. The issue also impacted his credit 

report. FSA researched its records and found that the borrower had two loans. Additional loans 

were transferred to the loan holder because of an incorrect Social Security Number. This issue 
Fiscal Year 2018 Annual Report | Federal Student Aid 91

Report of the Federal Student Aid Ombudsman

caused the customer to receive billing notices for an increased loan balance. The records were 

updated, which restored the customer’s account to the correct balance owed. 

Loan Discharge, Cancellation, or Forgiveness. The customer completed five years of 

teaching in a Title 1 school and submitted the loan forgiveness application. The loan servicer 

rejected multiple applications for what the customer asserts were minor clerical errors. FSA 

reviewed the most recent Teacher Loan Forgiveness application and determined it was 

materially completed. The application was forwarded for approval. The customer received 

$5,000 of loan forgiveness based on teaching service in a Title 1 school. 

Loan Repayment Plan. The customer asked for an Income-Driven Repayment Plan. Despite 

repeated applications, the loan servicer did not place the account in an Income-Driven 

Repayment Plan. FSA reviewed the borrower’s account and found the customer was enrolled 

in school at least half time, so the loans were in deferment. After consulting with the customer, 

the loan servicer approved the payment plan request and removed the in-school deferment. 

Treasury Offset Program. The customer said TOP payments totaling $13,000 were not 

applied to the defaulted loan account. If the TOP payments were applied, the borrower thought 

the loans would be paid in full. The Ombudsman reviewed the complaint and found that the 

borrower had two separate defaulted loan accounts. The Department held one account and a 

GA held the other account. All TOP payments were accounted for; however, because the 

payments were split between the loan holders, the loans were not paid in full. 

 

Loan Payment Amount. The customer reported their loan payment increased from $283 to 

$529. The customer advised that a payment of $300-$350 would be affordable. The research 

showed the borrower was on an income-driven repayment plan. Following the required annual 

renewal, the borrower’s payment amount, the customer’s income increased and the new 

payment amount was calculated correctly. The borrower was offered the option to continue the 

new payment or request reduced-payment forbearance. 

School-Related Feedback 

The majority of feedback about schools is assigned to FSA’s Program Compliance business unit 

for research and resolution. Customers provided feedback specifically related to 2,823 schools. 

Feedback in this category is described by school type, rather than school name, due to student 

privacy concerns associated with the small amount of feedback related to many schools. For 

school-related cases received by the Feedback LOB with case type "Complaint", the FY 2018 

data shows that proprietary schools accounted for the largest percentage of cases. 
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Report of the Federal Student Aid Ombudsman 

Chart 21

School Related Complaints Received in the Feedback LOB 

(By School Type) 

FY 2018 

 

As Chart 21 shows, proprietary schools disbursed 13.7 percent of all financial aid in Academic 

Year 2016-2017. Proprietary schools accounted for 45.3 percent of all school-related complaint 

submissions FSA received in FY 2018. 

Table 41

Top Five School-Related Feedback Subcategories for Cases Received 

FY 2018 

The top five subcategories for school-related feedback (School Top Five) which were received 

in FY 2018 are identified in Table 41 above. These subcategories are defined as: 

 Financial Allegations (Tuition and Fee Charges) is customer feedback concerning 

school tuition, fee charges, or a customer has a balance owed to the school. These are 

typically non-Title IV issues the customer describes in the feedback 

 School Quality of Education relates to feedback about a school participating in the 

federal student aid programs, which are responsible for providing a quality of education 

with adequate resources to support an effective learning environment; subject to 

accrediting agency oversight. 

 Delays Receiving Aid relates to feedback when a customer expresses that a school is 

unnecessarily or improperly delaying federal aid disbursement. 

Category Subcategory Volume 

My School Financial Allegations (Tuition and Fee Charges) 918

My School School Quality of Education 736

My School Delays Receiving Aid 528

My School Administrative Capability 513

My School School Owes Me Money 481

Total 3,176
Fiscal Year 2018 Annual Report | Federal Student Aid 93

Report of the Federal Student Aid Ombudsman

 Administrative Capability relates to a school’s ability to administer the federal financial 

aid programs in accordance with law and regulation. Types of feedback would include 

insufficient number of financial aid staff, lack of financial aid related policies and 

procedures, or failure to follow school policies regarding financial aid awards. 

 School Owes Me Money (Credit Balance Refund) is feedback about situations that 

occur whenever the amount of federal student aid funds credited to a student’s account 

for a payment period exceeds the amount assessed the student for allowable charges 

associated with that payment period. 

Program Compliance staff review the feedback and, as needed, contact the school and the 

customer for additional information. Program Compliance uses data from the school-related 

feedback received to inform its program review and school performance monitoring 

responsibilities. For optimal application of feedback data to these activities, it is necessary to 

examine also how most feedback gets resolved. Table 42 examines the most common 

Resolution Types and Resolution Actions for cases closed in FY 2018 that correspond to the 

School Top Five. 

Table 42

Frequent Resolution Types and Actions for School Related Cases 

(Presented for each of the School Top Five) 

FY 2018 

Category Sub-Category Resolution Type Resolution Action Volume 

My 

School 

Financial Allegations 

(Tuition and Fee Charges) 

Resolved Action Taken 8 

Communication Process Clarified 200

Referred Referred to School 294

Submission Logged No Response from Customer 54

My 

School 

School Quality of 

Education 

Resolved Action Taken 5 

Communication Process Clarified 80

Referred Referred to Accrediting Agency 364

Submission Logged Feedback Logged 107

My 

School Delays Receiving Aid 

Resolved Action Taken 2 

Communication Process Clarified 225

Referred Referred to School 66

Submission Logged No Response from Customer 43

My 

School Administrative Capability 

Resolved Action Taken 8 

Communication Process Clarified 60

Referred Referred to School 99

Submission Logged Feedback Logged 42

My 

School 

School Owes Me Money 

(Credit Balance Refund) 

Resolved Action Taken 7 

Communication Process Clarified 178

Referred Referred to School 92

Submission Logged Feedback Logged 38

Loan Servicing-Related Feedback

FSA contracts with ten20 entities to manage the servicing of non-defaulted federal student loans. 

These entities are responsible for advising borrowers about resources and benefits to better 

manage their federal student loan obligations; respond to customer service inquiries; address 

 

20 One of these servicers, ECSI, services Perkins loans; it does not service loans made under the Direct or Federal 

Family Education Loan programs. 
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Report of the Federal Student Aid Ombudsman 

billing and collecting payments21 on a loan; and perform other administrative tasks associated 

with maintaining a loan on behalf of the Department. The Default Division is an organization 

unit within FSA that manages the collection activities on the defaulted loan portfolio with the 

support of the contractor that maintains and operates the Debt Management and Collection 

System (DMCS) and contracted private collection agencies. 

FSA contracts with ten22 entities to manage the servicing of non-defaulted federal student loans. 

These entities are responsible for advising borrowers about resources and benefits to better 

manage their federal student loan obligations; respond to customer service inquiries; address 

billing and collecting payments23 on a loan; and perform other administrative tasks associated 

with maintaining a loan on behalf of the Department. The default loan portfolio is serviced by 

the DMCS. 

Table 43 shows the top three categories/subcategories for loan servicing-related cases (Loan 

Servicing Top Three) closed via the Feedback LOB in FY 2018. 

Table 43 

Top Three Categories/Subcategories of Loan Servicing-Related Feedback Closed 

FY 2018

Table 44

Frequent Resolution Types and Actions for Loan Servicing-Related Cases Closed 

(Presented for each of the Loan Servicing Top 3) 

FY 2018

Category Sub-Category Resolution Type Resolution Action Volume 

Repaying Student Financial Aid Loan Accuracy 

Resolved Action Taken 221

Communication Process Clarified 1054

Referred Referred within the Department 302

Submission Logged No Response from Customer 78

Repaying Student Financial Aid 

Loan Discharge, 

Cancellation, or 

Forgiveness 

Resolved Action Taken 152

Communication Process Clarified 972

Referred Referred to Accrediting Agency 286

Submission Logged Feedback Logged 59

Repaying Student Financial Aid Loan Repayment 

Plan 

Resolved Action Taken 152

Communication Process Clarified 582

Referred Referred to School 243

Submission Logged Feedback Logged 24

 

21 All payments on non-defaulted federal student loans the Department owns are remitted to the U.S. Department of 

the Treasury. That agency then reports payment information to the various servicers, which are then credited to the 

borrower’s account. 

22 One of these servicers, ECSI, services Perkins loans; it does not service loans made under the Direct or Federal 

Family Education Loan programs. 

23 All payments on non-defaulted federal student loans the Department owns are remitted to the U.S. Department of 

Treasury. That agency then reports payment information to the various servicers, which are then credited to the 

borrower’s account. 

Category Subcategory Volume 

Repaying Student Financial Aid Loan Accuracy 2,170 

Repaying Student Financial Aid Loan Discharge, Cancellation, or Forgiveness 2,016 

Repaying Student Financial Aid Loan Repayment Plan 1,307 

Total 5,493
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Reviewing the data shows that the top three servicing-related issues are consistent, except for 

the servicers that hold specific responsibilities. DMCS holds only defaulted loans; FedLoan 

Servicing is the designated servicer for all PSLF and TEACH grants; and, Nelnet processes all 

TPD discharge applications for federal student loans, regardless of which entity owns the loan. 

Feedback Submitted by Members of the Military, Veterans, or Their Dependents

FSA asks all customers to indicate if they are a member of the military, a veteran, or a 

dependent of a military member or veteran. FSA collects this information to ensure continued 

support of Executive Order 13607, signed in April 2012, which established the Principles of 

Excellence (POE) for Educational Institutions Servicing Service Members, Veterans, Spouses, 

and Other Family Members. 

For all feedback received in FY 2018, POE-identified customers submitted 1,386 feedback 

inquiries specifically related to their military status and/or educational benefits. 

Table 45:

POE-Identified Top Five Case Category Feedback Submissions 

FY 2018

POE-Identified Top 5 Case Category Feedback Received Volume 

Repaying Student Financial Aid 453

School 404

Student Eligibility 123

Allegation of Whistleblower 81

Public Service Loan Forgiveness (PSLF) Program 56

Dispute Cases Assigned to the Ombudsman Group 

The implementation of the Feedback system in July 2016 and the merge of the Feedback 

system with the OCTS in February 2018 not only simplified the feedback submission process for 

federal student aid recipients, it also imposed a more formal structure around FSA’s complaint 

management and resolution process. Customers providing their feedback to FSA have access 

to a robust, multi-level approach to resolution that includes the primary service/program delivery 

partner (e.g., the loan servicer, PCA, school, or others), the FSA business unit responsible for 

oversight of those entities (e.g., FSA Program Compliance and Business Operations), and as an 

avenue of last resort, the Ombudsman Group. Because all feedback is documented within one 

system, it unifies the record of the efforts of multiple parties to resolve a matter. 

The Ombudsman Group researches and resolves all cases within the Dispute LOB. 

Customers who dispute the outcome of a case previously responded to by an FSA business unit 

or one of FSA’s contracted servicers or private collection agencies may elect to have their issue 

reviewed by the Ombudsman Group. Cases pertaining to federal loans owned by commercial 

lenders or guaranty agencies—commonly referred to as commercially-held loans—are also 

classified as Research cases. Review by the Ombudsman Group is a customer’s last 

opportunity for informal resolution of an issue within the Department. 

During FY 2018, the Ombudsman Group received 695 cases for review and resolution. The 

Ombudsman Group closed 868 cases. 
96 Fiscal Year 2018 Annual Report | Federal Student Aid

Report of the Federal Student Aid Ombudsman 

Table 46

Top Five Dispute Cases by Category/Subcategory Assigned to the Ombudsman Group 

FY 2018 

Repaying Student Financial Aid Volume 

Loan Accuracy 155

Loan Discharge, Cancellation, or Forgiveness 100

Loan Delinquency or Default 88

Loan Repayment Plan 36

Repaying Student Loans in Default Volume 

Treasury Offset Program (TOP) 34

Total 413

As a neutral, independent third-party separate from FSA operations, the Ombudsman Group 

fulfills a role as the third tier in FSA’s feedback resolution process. The Ombudsman Group can 

reach across technical and responsibility boundaries within the federal student aid ecosystem to 

collect facts, review circumstances, and facilitate collaboration among differing parties 

associated with a dispute to reach a resolution that may not have otherwise been considered. 

Example cases described below illustrate this activity. 

Loan Accuracy. The customer disputed a loan she was being asked to repay, asserting it had 

been consolidated. Loan Servicer A maintained it still owned the debt; Loan Servicer B agreed 

with the customer’s assertion. 

Ombudsman Group research disclosed the loan in question was sold to the Department in 

2009, based on legislation granting temporary authorization to do so, but the loan holder did not 

notify Loan Servicer A. Simultaneous with the loan sale, the customer filed bankruptcy, 

triggering a claim filing with the guarantor; and, the customer applied for a new Direct 

Consolidation loan intended to pay off the loan in question. The Consolidation loan was 

approved and later transferred to Loan Servicer B. The loan in question, however, was returned 

to Loan Servicer A after the conclusion of the bankruptcy. 

 

Following joint review, research, and discussion, all parties agreed that the loan was sold to the 

Department in 2009 and was subsequently included in the Direct Consolidation loan held by 

Loan Servicer B. 

Loan Discharge, Cancellation, or Forgiveness. The customer applied for False Certification 

discharge based on Disqualifying Status. The customer alleged that his disability impacted 

employment opportunities. Prior FSA responses denied the discharge because there was no 

state law that precluded employment in the customer’s field of study.

Ombudsman Group research showed that the customer obtained two baccalaureate degrees, 

one in Political Science and one in Business Administration. Research also showed that the 

customer’s condition was not disclosed at the time of enrollment and that there was no state law 

that precluded employment in the customer’s field of study.
Fiscal Year 2018 Annual Report | Federal Student Aid 97

Report of the Federal Student Aid Ombudsman

Following review of the documents and relevant regulation, the Ombudsman Group did not find 

information that would compel the loan holder to reconsider the discharge request. The 

customer was also provided options to manage the loan account going forward. 

Loan Delinquency or Default. The customer stated the loan default was incorrect and he was 

not contacted about repayment. Ombudsman staff reviewed prior research and available 

information. Lender records showed multiple efforts to contact the customer about repayment. 

The lender had no record that the customer contacted them or remitted payment. The research 

confirmed that the lender performed appropriate due diligence and the default status was 

correct. The customer was provided options to resolve the default status. 

Treasury Offset Program. The customer disputed the offset on loans that were taken 40 years 

ago. The customer thought that the offset was an error because their loans were previously 

paid and monies had been refunded to them. Research disclosed that the customer had 

defaulted loans with two different loan holders. The customer had made payment to settle loans 

owed to one entity, but the debt to the other entity remained unpaid. 

The case was resolved as the Ombudsman Group provided the customer with information from 

both loan holders to show the separate accounts and the transactions related to each gave 

confidence that a balance remained unpaid. The customer was provided with options to request 

return of the offset and resolve the default status and resume repayment. 

Wage Garnishment. The customer said she could not afford wage garnishment and wanted it 

stopped. Ombudsman Group staff reviewed previous research and responses, as well as loan 

holder records. Research confirmed the borrower had not made payment arrangements, proper 

notices were sent, and a wage garnishment hearing request was not received. The research 

confirmed that the loan holder followed appropriate steps before initiating wage garnishment. 

The customer was provided with her options to request a hearing to review the wage 

garnishment or otherwise resolve the default. 

Table 47 

All Dispute Cases Closed 

(By Resolution Type) 

FY 2018

All Dispute Cases Closed by Resolution Type Volume 

Resolved 524

Referred 178

Submission Logged 166

Total 868

Other Case Types 

Suspicious Activity 

Prior to February 2018, a customer could self-designate a submission as suspicious activity. 

The Ombudsman Group learned that the majority of such submissions were incorrectly 

categorized. Customers can no longer self-designate a submission as suspicious activity. The 

Ombudsman Group carefully reviews each customer submission to determine if there is a 

credible allegation of fraud or illegal activity associated with the federal financial aid programs. 
98 Fiscal Year 2018 Annual Report | Federal Student Aid

Report of the Federal Student Aid Ombudsman 

Table 48 identifies all Suspicious Activity cases received by the Feedback LOB, by category 

during FY 2018. 

Table 48:

All Suspicious Activity Cases Received 

(By Category) 

FY 2018

Category Volume 

Allegation of Whistleblower 765

Allegation of Misuse of Departmental Resources 366

Allegation of Misuse of FSA Intellectual Property or Claim of a Departmental 

Affiliation 322

Allegation of Identity Theft 299

Allegation of Misuse of FSA ID 136

Total 1,888 

As with all other feedback, the manner in which they are resolved is tracked as cases closed by 

Resolution Type and Resolution Action. 

Table 49

Frequent Resolution Types and Actions for All Suspicious Activity Cases Closed 

(By category) 

FY 2018

Category Resolution Type Resolution Action Volume 

Allegation of Whistleblower 

Resolved Action Taken 21

Communication Process Clarified 260

Referred Referred to School 39

Submission Logged Feedback Logged 371

Allegation of Misuse of 

Departmental Resources

Resolved Action Taken 11

Communication Process Clarified 49

Referred Referred to Other Government Entity 276

Submission Logged Feedback Logged 37

Allegation of Misuse of FSA 

Intellectual Property or Claim of 

a Departmental Affiliation

Resolved Action Taken 4 

Communication Process Clarified 6 

Referred Referred to Other Government Entity 275

Submission Logged Feedback Logged 5 

Allegation of Identity Theft

Resolved Action Taken 28

Communication Process Clarified 205

Referred Referred to Other Government Entity 40

Submission Logged Feedback Logged 35

Allegation of Misuse of FSA ID

Resolved Action Taken 1 

Communication Process Clarified 29

Referred Referred to Other Government Entity 91

Submission Logged No Response from Customer 2 

FSA shares enforcement authority over schools, loan servicers, and other participants in the 

federal student aid programs with the Department’s OIG and other agencies at the federal and 

state level. All allegations of Suspicious Activity are shared with the Department’s OIG and the 

Federal Trade Commission Consumer Sentinel database. Sharing the information with the 
Fiscal Year 2018 Annual Report | Federal Student Aid 99

Report of the Federal Student Aid Ombudsman

Sentinel data base renders individual, case-level information available to a broader network of 

federal and state law enforcement entities. 

Positive Feedback 

Customers can provide positive feedback regarding their experience with FSA, schools, 

servicers, and other entities involved with the application, receipt, or repayment of federal 

student aid, including PCAs. 

Table 50

All Positive Feedback Received by the Feedback LOB 

(By category) 

FY 2018

Category Volume 

U.S. Department of Education Web Site, Application or Service 325

My Customer Service Experience 94

My Servicer 37

My School 6 

My Collection Agency 2 

Total 464

Using Feedback to Improve the Federal Student Aid Programs 

As noted at the outset of this report, Feedback System data is shared in EDWA. Data 

concerning the Suspicious Activity case type is shared with the Department’s OIG, and 

information about the Complaint and Suspicious Activity case types is shared with the Federal 

Trade Commission’s Consumer Sentinel database. The Ombudsman Group facilitates the 

sharing of information from feedback that customers submit by responding to ad hoc requests 

for data about feedback received. Further, the Ombudsman Group shares feedback data that 

is, in turn, compiled with other sources of feedback (e.g., received through social media or at 

community outreach events) on a monthly basis and shared with representatives across FSA. 

Most significantly, data from the Feedback system was examined and is being used to inform 

the requirements for the Next Generation project—a project that will transform FSA’s technology 

and operations infrastructure used to administer the federal student aid programs. The 

Ombudsman Group is hopeful the improvements brought about by this transformation will 

reduce the volume of feedback received as a result of confusing or conflicting information 

customers receive from FSA and its service providers. 

Another example of how FSA is using feedback data is connected to the PSLF program. The 

PSLF program allows government and non-profit entity employees to have their loans forgiven 

after 120 qualifying payments, which is generally ten years. 

During FY 2018, FSA received 1,641 cases related to PSLF. The primary reason for feedback 

about the PSLF program related to qualifying for the program, specifically from customers who 

have no loans from the Direct Loan program or were not on the correct repayment plan. 

The statute does not allow for consideration of loans other than those issued under the Direct 

Loan program. However, in recent years, as borrowers approached qualifying for PSLF, they 

often learned that their loans were not on a qualifying repayment plan. In many of those 
100 Fiscal Year 2018 Annual Report | Federal Student Aid

Report of the Federal Student Aid Ombudsman 

instances, borrowers asserted that their loan servicers frequently confirmed that the borrower 

was making progress toward forgiveness. The statute does not give the Secretary authorization 

to waive PSLF-qualifying criteria. 

In response, the Consolidated Appropriations Act, 2018 provided additional limited eligibility 

requirements, TEPSLF, which gives assistance to individuals who thought they were on the 

correct plan. TEPSLF is only for those customers who have made 120 payments since 2007 

and have been denied PSLF on that basis. The TEPSLF opportunity was funded $350 million. 

Table 51

Frequent Resolution Types and Actions for PSLF Cases Closed 

FY 2018

Category Sub-Category Resolution Type Resolution Action Volume 

Public Service Loan Forgiveness 

(PSLF) Program Direct Loan Eligibility 

Resolved Action Taken 15

Communication Process Clarified 103

Referred Referred within the Department 23

Submission Logged Feedback Logged 14

Public Service Loan Forgiveness 

(PSLF) Program Employee Certification Form 

Resolved Action Taken 15

Communication Process Clarified 19

Referred Referred within the Department 3 

Submission Logged Feedback Logged 1 

Public Service Loan Forgiveness 

(PSLF) Program PSLF Applications 

Resolved Action Taken 27

Communication Process Clarified 184

Referred Referred to FSA Contact Center 75

Submission Logged Feedback Logged 29

Public Service Loan Forgiveness 

(PSLF) Program

Qualifying Employment or 

Employer 

Resolved Action Taken 6 

Communication Process Clarified 23

Referred Referred to FSA Contact Center 5 

Submission Logged Feedback Logged 3 

Public Service Loan Forgiveness 

(PSLF) Program

Qualifying Monthly 

Payments 

Resolved Action Taken 284

Communication Process Clarified 354

Referred Referred within the Department 42

Submission Logged Feedback Logged 15

Public Service Loan Forgiveness 

(PSLF) Program Qualifying Repayment Plan 

Resolved Action Taken 50

Communication Process Clarified 101

Referred Referred within the Department 26

Submission Logged Feedback Logged 2 

Other Ombudsman Group Activity 

Customer Satisfaction Survey Results 

The Ombudsman Group contracts with ACSI to conduct the customer satisfaction survey. 

Approximately two weeks after a research case is closed, ACSI sends a survey to all dispute 

customers who provided an email address. ACSI then compiles those results on a quarterly 

basis, which are then shared with the Ombudsman Group. No information about survey 

respondents is provided to FSA. 

For all surveys completed in FY 2018, the ACSI score for the Ombudsman Group was 48. This 

is one point lower than FY 2017 and ten points higher than FY 2016. As noted in previous 

reports, the survey result is not as high as desired. Analysis of the numbers continues to show 

the Ombudsman Group’s ACSI scores are distributed in an inverted Bell curve, with the lowest 

and highest scores at the upper ends and lowest in the middle. 
Fiscal Year 2018 Annual Report | Federal Student Aid 101

Report of the Federal Student Aid Ombudsman

The Ombudsman Group functions as a neutral third-party in attempting to resolve disputes. 

Customers sometimes express dissatisfaction because they expect the Ombudsman to act as 

their advocate and provide an outcome that falls outside the law and regulations. Conversely, 

customers attaining a favorable outcome tend to provide higher ratings. These ratings suggest 

customers base their satisfaction on the outcome achieved rather than the service Ombudsman 

Group staff provided. 

Student Loan Ombudsman Caucus 

The Ombudsman Group hosted the annual meeting of the Student Loan Ombudsman Caucus 

in September 2018. The Caucus, chartered by the National Council of Higher Education 

Resources, is an informal group of individuals who serve as ombudsmen, or in an informal 

dispute resolution capacity at lenders, loan servicers, and guaranty agencies. The Caucus 

meets on a bi-monthly basis via conference call, and annually in a face-to-face session. 

During this year’s annual meeting, attendees reviewed case studies for handling situations 

related to joint consolidation loans and credit reporting. Presentations touched on the FAFSA 

mobile application, collecting and resolving complaints and disputes, POE, and credit reporting. 

Recommendations 

The statute provides that the Ombudsman, as part of this annual report, make 

recommendations for policy changes based on feedback received from federal financial aid 

recipients. 

Although the majority of feedback received is resolved with additional information offered or 

clarified for the customer, the root circumstances driving customers to provide feedback lie in 

the complexity of the requirements to qualify for aid and to secure benefits during loan 

repayment, such as IDR and loan discharge. This complexity not only frustrates customers, but 

also challenges FSA service providers to provide high-quality service. 

Recommendation. The Ombudsman recommends reducing the number of repayment plans 

offered. 

Federal loans, depending on program, loan type, and disbursement date are eligible for as 

many as eight different repayment plans. Each of these repayment plans has different eligibility 

criteria, calculations that result in different payment amounts, and different repayment terms. It 

is difficult for borrowers to understand the differences between plans and impacts of the various 

plans. Many select the lowest possible payment amount that can be offered, but do not 

understand the long-term implications of interest accrual, leaving many to express their 

frustration that monthly payments are having lower-than-expected impact on their total amount 

owed. 

Recommendation. IDR renewal should be “opt-out” through use of data retrieval from the 

Internal Revenue Service (IRS). 

Entering repayment, all borrowers are offered the opportunity to select (or, “opt-in”) the 

preferred repayment plan. If the borrower makes no selection, the monthly payment amount is 

calculated based on the standard repayment plan. A borrower approved for an IDR plan must 

submit a renewal request annually. Borrowers frequently do not receive or understand notices 

to submit renewal information; or they do not timely submit the renewal application. By 

considering IDR plans as “opt-in,” borrowers frequently find themselves in a situation where the 

IDR expired and the new payment amount due is a standard payment amount based on a 10-
102 Fiscal Year 2018 Annual Report | Federal Student Aid

Report of the Federal Student Aid Ombudsman 

year repayment term. Expiration or a change in repayment plan also causes interest to 

capitalize. 

Expanding use of the data retrieval tool through the IRS, a borrower’s IDR can automatically 

renew unless the borrower makes a specific request to change their repayment plan. Doing so 

reduces the administrative burden on borrowers and provides continuity in repayment. 

Recommendation. Interest capitalization should occur only when a federal student loan 

borrower consolidates outstanding federal student loans. 

The law and regulations mandate or permit interest capitalization in multiple circumstances. 

The result is an increased principal balance, increased future accrued interest, and increased 

payment amounts. Interest capitalization serves no purpose, other than to generate additional 

interest income. 

Capitalizing interest cannot be avoided when consolidating because the borrower is taking a 

new loan for the purpose of paying in full existing federal student loans. 

Recommendation. Existing tax law should be changed to eliminate any tax liability that would 

otherwise result from the write-off of loan principal remaining after completion of any Income 

Driven Repayment plan. 

Current tax law may result in a tax debt for borrowers whose loans are discharged or forgiven in 

certain circumstances. Income Contingent Repayment became available in 1994 with the 

creation of the Direct Loan Program. Beginning in 2019, borrowers who have not had sufficient 

income to fully repay their federal student loans will now potentially face a tax liability because 

the amount of the student loan debt written off may be considered income in the year that writeoff occurs. Although the borrower is relieved of repaying the remaining balance of the student 

loan, they now have a debt owed to the IRS. This holds true for all income-driven repayment 

plans. 

Recommendation. Use of data match capabilities with the IRS for borrowers approved for 

TPD discharge will ease the administrative burden for a vulnerable population. 

Feedback about TPD discharge of federal student loans has declined in recent years. This is 

due, in large part, to the data sharing agreement between the Social Security Administration 

and the Department. In 2018, the Department also entered a data sharing agreement with the 

VA. In calendar year 2017, the Department approved 7,665 TPD discharges for disabled 

veterans. In 2018, this new data match has allowed the Department to approve more than 

15,000 TPD discharges for disabled veterans. 

Most borrowers awarded TPD discharges are subject to a 3-year monitoring period upon 

approval of that discharge. During this monitoring period, the borrower must provide proof of 

earned income. 

Borrowers routinely have loans reinstated because they do not provide proof of income. The 

reasons range from neglect on their part up through an inability to understand what is required. 

Once the loans are reinstated, regardless of the circumstances, borrowers must reapply (often 

incurring costs to have a physician complete the discharge request) and enter a new three-year 

monitoring period. 
Fiscal Year 2018 Annual Report | Federal Student Aid 103

Financial Section 

Financial Section 
104 Fiscal Year 2018 Annual Report | Federal Student Aid

Overview of the Financial Section 

Overview of the Financial Section 

This section provides a financial presentation of FSA’s stewardship and accountability for its 

resources. The Message from the Chief Financial Officer is followed by the audited financial 

statements, the accompanying notes to the financial statements, required supplementary 

Information, and the Independent Auditors’ Report. 

Message from the Chief Financial Officer

The Message from the Chief Financial Officer discusses the financial accomplishments of 

FSA during the current fiscal year. 

Financial Statements

The Financial Statements consist of the following comparative statements: the Balance 

Sheet, Statement of Net Cost, Statement of Changes in Net Position and Statement of 

Budgetary Resources. 

Notes to the Financial Statements

The Notes to the Financial Statements provide a description of significant accounting 

policies and detailed information on select statement line items. 

Required Supplementary Stewardship Information (Unaudited)

The unaudited Required Supplementary Stewardship Information provides information on 

the stewardship of the resources entrusted to FSA (human capital) and the subsequent 

responsibilities that cannot be measured in traditional financial reports. 

Required Supplementary Information (Unaudited)

The unaudited Required Supplementary Stewardship Information presents the Combining 

Statements of Budgetary Resources by Program.

Independent Auditors’ Report

The Independent Auditors’ Report presents the combined audit report issued by the 

Independent Auditors. Included in the combined audit report are the Report on the Financial 

Statements, the Report on Internal Control, and the Report on Compliance and Other 

Matters. The subsection also includes the Office of Inspector General Audit Transmittal 

Letter and Management’s Response to the Audit. 
Fiscal Year 2018 Annual Report | Federal Student Aid 105

Message from the Chief Financial Officer 

Message from the Chief Financial Officer 

Federal Student Aid’s (FSA’s) mission statement is Funding America’s Future, One Student at a 

Time. This mission supports the Federal government’s goal of increasing access to 

postsecondary education, ultimately leading to a better-educated citizenry and a higher 

standard of living for all Americans. My colleagues and I at FSA remain driven to achieve this 

mission while protecting taxpayers’ interests and minimizing costs.

In fiscal year (FY) 2018, FSA spent $1.5 billion to deliver $122.4 billion of federal aid to more 

than 12.7 million postsecondary students and their families as well as to oversee a loan portfolio 

of 43 million borrowers with over $1.4 trillion in federal student loan debt. This is an enormous 

financial responsibility to students seeking financial assistance, borrowers who are paying off 

their student loans, and taxpayers who expect fiscal prudence and stewardship. Thanks to the 

dedicated and talented staff at the United States Department of Education (the Department) and 

FSA, we met the unprecedented challenges presented by this financial responsibility and 

continued to maintain our high standards of financial management and fiscal reporting. To 

manage the largest student aid operation in the world, FSA utilizes an effective investment 

management process and an internal control framework. 

FSA manages its $1.5 billion administrative budget to deliver our mission at expected 

performance levels. This past year, we implemented a more secure Internal Revenue Service 

Data Retrieval Tool in the 2018-19 Free Application for Federal Student Aid (FAFSA®) and our 

Income-Driven Repayment plan application, along with numerous other operational changes. 

These changes were implemented on-time and within budget, improving the customer 

experience for millions of Americans. 

As part of the internal control framework, FSA documented and tested 1,287 key process 

controls, including 1,036 Business Process and 251 entity level controls, and 1,361 information 

technology system internal controls across 38 business processes and sub-processes and 

17 integrated Information Technology systems, respectively. In FY 2018, we assessed that 

97 percent of the controls tested are designed and operating effectively. The other 3 percent 

are immaterial deficiencies for which we have established or are establishing corrective actions. 

We will continue to repeat this assessment process on a regular basis, constantly looking for 

opportunities to improve our operations. This strong underlying internal control frameworks 

helps FSA leverage its small number of staff to manage loan and grant operations that impact a 

relatively large percentage of the U.S. population. 

I am honored to work with professionals throughout the Department who so enthusiastically 

meet our financial management challenges and achieve such distinguished results. 

Sincerely, 

Alison L. Doone 

Chief Financial Officer 

November 15, 2018
106 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Statements 

Financial Statements

FSA prepares the following statements: the Consolidated Balance Sheets, the Consolidated 

Statements of Net Cost, the Consolidated Statements of Changes in Net Position, and the 

Combining Statements of Budgetary Resources. These statements are prepared pursuant 

to the requirements of the Chief Financial Officers Act of 1990, the Government 

Management Reform Act, and OMB Circular A-136, Financial Reporting Requirements; and 

demonstrate FSA’s accountability and stewardship of the resources entrusted to it and 

Below is a brief description of the principal financial statements and the accompanying notes 

presented in this report: 

Consolidated Balance Sheets:

 The Consolidated Balance Sheets present, as of a specific time, the amount of 

resources FSA had to use or distribute (assets), the amounts owed by FSA 

(liabilities) and the difference between the two (net position). 

Consolidated Statements of Net Cost:

 The Consolidated Statements of Net Cost present the annual cost of agency 

operations. The gross cost less any offsetting revenue is used to determine the net 

cost. 

Consolidated Statements of Changes in Net Position:

 The Consolidated Statements of Changes in Net Position report the accounting 

activities, including changes to Cumulative Results of Operations and Unexpended 

Appropriations that caused the change in net position during the reporting period. 

Combining Statements of Budgetary Resources:

 The Combining Statements of Budgetary Resources report the budgetary resources 

that were made available to FSA, the status of those resources at fiscal year-end, 

along with the outlays of budgetary resources. 

Notes to the Financial Statements: 

 The accompanying Notes to the Financial Statements provide a description of 

significant accounting policies and detailed information on select financial statement 

line items. The Notes also include information that supports the computation of the 

various financial statement activities. 
Bala 

Fiscal Year 2018 Annual Report | Federal Student Aid 107

Financial Statements 

Balance Sheets

United States Department of Education 

Federal Student Aid 

Consolidated Balance Sheets 

As of September 30, 2018 and 2017 

(Dollars in Millions)

FY 2018 FY 2017 

Assets:

Intragovernmental: 

Fund Balance with Treasury (Note 3) $ 73,405 $ 74,032

Other Intragovernmental Assets (Note 4) 19 7 

Total Intragovernmental 73,424 74,039 

Public: 

 Credit Program Receivables, Net (Note 5) 

 Direct Loan Program 1,115,053 1,041,554 

 FFEL Program 92,947 102,410 

 Other Credit Programs for Higher Education 1,495 1,442 

 Other Assets (Note 4) 2,346 2,249

 Total Public 1,211,841 1,147,655 

Total Assets (Note 2) $ 1,285,265 $ 1,221,694

Liabilities:

Intragovernmental:

Debt (Note 7) 

Direct Loan Program $ 1,150,610 $ 1,061,559 

FFEL Program 107,261 116,290 

Other Credit Programs for Higher Education 610 624

Subsidy Due to Treasury General Fund (Note 8) 7,528 7,013 

Other Intragovernmental Liabilities (Note 9) 2,769 2,608 

Total Intragovernmental 1,268,778 1,188,094 

Other Liabilities (Note 9) 7,428 10,392 

Total Liabilities (Note 6) $ 1,276,206 $ 1,198,486

Commitments and Contingencies (Note 13) 

Net Position:

Unexpended Appropriations $ 32,487 $ 28,524

Cumulative Results of Operations (23,428) (5,316) 

Total Net Position $ 9,059 $ 23,208

Total Liabilities and Net Position $ 1,285,265 $ 1,221,694

The accompanying notes are an integral part of these statements.
108 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Statements 

Consolidated Statement of Net Cost

United States Department of Education 

Federal Student Aid 

Consolidated Statement of Net Cost 

For the Year Ended September 30, 2018 

(Dollars in Millions)

 

FY 2018 

Program Costs 

EXPAND POSTSECONDARY OPPORTUNITIES, IMPROVE OUTCOMES TO 

FOSTER ECONOMIC OPPORTUNITY, AND PROMOTE PRODUCTIVE CITIZENRY 

Direct Loan Program 

# Gross Costs $ 37,965 

# Earned Revenue (32,329) 

Net Cost of Direct Loan Program $ 5,636 

FFEL Program 

# Gross Costs $ 4,599 

# Earned Revenue (3,336) 

Net Cost of FFEL Program $ 1,263 

Other Credit Programs for Higher Education 

# Gross Costs $ 76 

# Earned Revenue (559) 

Net Cost of Other Credit Programs for Higher Education $ (483)

Non-Credit Programs 

# Gross Costs $ 28,592 

# Earned Revenue 

 - 

Net Cost of Non-Credit Programs $ 28,592 

Net Program Costs $ 35,008 

Total Gross Costs $ 71,232 

Total Earned Revenue (36,224) 

Net Cost of Operations (Notes 10 & 12) $

35,008 

The accompanying notes are an integral part of these statements.
Fiscal Year 2018 Annual Report | Federal Student Aid 109

Financial Statements 

Consolidated Statement of Net Cost

United States Department of Education 

Federal Student Aid 

Consolidated Statement of Net Cost 

For the Year Ended September 30, 2017 

(Dollars in Millions)

FY 2017

Program Costs:

Increase College Access, Quality, and Completion 

Gross Costs $ 73,771

Earned Revenue (35,825) 

Net Program Costs $ 37,946

Net Cost of Operations (Notes 10 & 12) $ 37,946

The accompanying notes are an integral part of these statements.
110 Fiscal Year 2018 Annual Report | Federal Student Aid

Financial Statements 

Consolidated Statements of Changes in Net Position

United States Department of Education 

Federal Student Aid 

Consolidated Statements of Changes in Net Position 

For the Years Ended September 30, 2018 and 2017 

(Dollars in Millions)

FY 2018 FY 2017 

Cumulative 

Results of 

Operations 

Unexpended 

Appropriations 

Cumulative 

Results of 

Operations 

Unexpended 

Appropriations 

Beginning Balances:

Beginning Balances $ (5,316) $ 28,524 $ (28,213) $ 26,531

 Budgetary Financing Sources: 

Appropriations Received $ - $ 49,784 $ - $ 89,625

Appropriations Transferred – In/Out - - - (2) 

Other Adjustments (Rescissions, etc.) - (1,224) - (1,437) 

Appropriations Used 44,597 (44,597) 86,193 (86,193) 

Nonexchange Revenue (1) - - - 

 Other Financing Sources:

Imputed Financing from Costs Absorbed by Others 14 - 10 - 

Negative Subsidy Transfers, Downward Subsidy 

Re-Estimates, and Other (27,714) - (25,360) - 

Total Financing Sources $ 16,896 $ 3,963 $ 60,843 $ 1,993

Net Cost of Operations: $ (35,008) $ - $ (37,946) $ -

Net Change: $ (18,112) $ 3,963 $ 22,897 $ 1,993

Net Position $ (23,428) $ 32,487 $ (5,316) $ 28,524

 

The accompanying notes are an integral part of these statements.
Fiscal Year 2018 Annual Report | Federal Student Aid 111

Financial Statements 

Combined Statements of Budgetary Resources

United States Department of Education 

Federal Student Aid 

Combined Statements of Budgetary Resources 

For the Years Ended September 30, 2018 and 2017 

(Dollars in Millions)

FY 2018 FY 2017 

Budgetary 

Non-Budgetary 

Credit Reform 

Financing Accounts Budgetary 

Non-Budgetary Credit 

Reform Financing 

Accounts 

Budgetary Resources 

Unobligated Balance from Prior Year Budget Authority (Net) $ 12,015 $ 15,859 $ 14,064 $ 10,389

Appropriations (Discretionary and Mandatory) 48,627 - 88,321 - 

Borrowing Authority (Discretionary and Mandatory) (Note 11) - 167,543 - 166,426 

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) 393 61,439 1,037 68,906 

Total Budgetary Resources $ 61,035 $ 244,841 $ 103,422 $ 245,721

Memorandum (non-add) entries: 

 Net adjustments to unobligated balance brought forward, Oct 1 901 (7,024) 3,680 (4,914) 

Status of Budgetary Resources 

New Obligations Incurred and Upward Adjustments (Total) 

(Note 11) $ 46,002 $ 221,384 $ 92,308 $ 222,838

Unobligated Balance, End of Year: 

 Apportioned, Unexpired Accounts 12,290 - 8,595 - 

 Unapportioned, Unexpired Accounts 2,168 23,457 2,093 22,883 

Unexpired Unobligated Balance, End of year $ 14,458 $ 23,457 $ 10,688 $ 22,883

Expired Unobligated Balance, End of Year 575 - 426 - 

Unobligated Balance, End of Year (Total) $ 15,033 $ 23,457 $ 11,114 $ 22,883

Total Status of Budgetary Resources $ 61,035 $ 244,841 $ 103,422 $ 245,721

Outlays, Net (Discretionary and Mandatory) 45,918 83,059 84,986 40,490 

Distributed Offsetting Receipts (-) (Note 11) (27,321) - (19,438) - 

Agency Outlays, Net (Discretionary and Mandatory) 

(Note 11) $ 18,597 $ 83,059 $ 65,548 $ 40,490

The accompanying notes are an integral part of these statements.
112 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

Notes to the Financial Statements 

Note 1 Summary of Significant Accounting Policies 

Note 2 Non-Entity Assets 

Note 3 Fund Balance with Treasury 

Note 4 Other Assets 

Note 5 Credit Programs for Higher Education: Credit Program Receivables, Net and 

Liabilities for Loan Guarantees 

Note 6 Liabilities not Covered by Budgetary Resources 

Note 7 Debt 

Note 8 Subsidy Due to Treasury General Fund 

Note 9 Other Liabilities 

Note 10 Net Cost of Operations 

Note 11 Statements of Budgetary Resources 

Note 12 Reconciliation of Net Cost of Operations to Budget 

Note 13 Commitments and Contingencies 
Fiscal Year 2018 Annual Report | Federal Student Aid 113

Notes to the Financial Statements

Notes to the Financial Statements for the Years Ended, 

September 30, 2018 and 2017

Note 1. Summary of Significant Accounting Policies

Reporting Entity and Programs 

Federal Student Aid (FSA) was created as a Performance Based Organization (PBO) within the 

U.S. Department of Education (the Department) in 1998, as a result of amendments to the Higher 

Education Act of 1965 (HEA), from previously existing Department student financial assistance 

program offices. FSA operates under the PBO mandate to develop a management structure driven 

by strong incentives to manage for results. FSA’s primary goal is to assist lower-income and 

middle-income students in overcoming the financial barriers that make it difficult to attend and 

complete postsecondary education. 

Federal Student Loan Programs. FSA and the Department administer the William D. Ford 

Federal Direct Loan (Direct Loan) program, the Federal Family Education Loan (FFEL) program, 

the Health Education Assistance Loan program (HEAL), and the Federal Perkins Loan program to 

help students and their families finance the costs of postsecondary education. A direct loan is any 

debt instrument issued to the public by the federal government. A FFEL loan guarantee is a 

guarantee, insurance, or other pledge with respect to the payment of all or part of the principal or 

interest on any debt obligation of a non-federal borrower to a non-federal lender. 

The Direct Loan program, added to the 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, PLUS, and Consolidation. Evidence of financial need is required 

for an undergraduate student to receive a subsidized Stafford loan. The other three loan programs 

are available to borrowers at all income levels. Loans can be used only to meet qualified 

educational expenses. 

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

agencies that provide loan guarantees on loans made by private lenders to eligible students. The 

Student Aid and Fiscal Responsibility Act (SAFRA), which was included in the Health Care and 

Education Reconciliation Act of 2010 (HCERA), 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 interest in student loan assets acquired using temporary 

authority provided in the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA). 

ECASLA gave FSA temporary authority to purchase FFEL loans and participation interests in 

those loans. FSA implemented three activities under this authority: loan purchase commitments; 

purchases of loan participation interests; and a put, or forward purchase commitment, with an 

Asset-Backed Commercial Paper (ABCP) Conduit. This authority expired after September 30, 

2010; as a result, loan purchase commitments and purchases of loan participation interests 

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

activity ceased operations in January 2014. (See Notes 5 and 10) 

Grant Programs. FSA and the Department manage numerous grant programs, which provide 

financial aid, that in most cases does not need to be repaid, to students with financial need. The 

largest of these programs is the Federal Pell Grant (Pell Grant) program, which provides needbased grants to low-income undergraduate and certain post baccalaureate students that promotes 

access to postsecondary education. Other grant programs include Federal Work-Study Program, 

Federal Supplemental Educational Opportunity Grants (FSEOG), Teacher Education Assistance 
114 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

for College and Higher Education (TEACH) Grants, and Iraq and Afghanistan Service Grants. 

(See Note 10) 

Basis of Accounting and Presentation 

These financial statements were prepared to report the financial position, net cost of operations, 

changes in net position, and budgetary resources of FSA as required by the Chief Financial 

Officers Act of 1990 and the Government Management Reform Act of 1994. The financial 

statements were prepared from the books and records of the Department and FSA, in accordance 

with Generally Accepted Accounting Principles (GAAP) accepted in the U.S. for federal entities, 

issued by the Federal Accounting Standards Advisory Board (FASAB), and the Office of 

Management and Budget (OMB) Circular No. A-136, Financial Reporting Requirements, as 

revised. These financial statements are different from the financial reports prepared by the 

Department pursuant to OMB directives that are used to monitor and control FSA’s use of 

budgetary resources. 

FSA’s financial statements should be read with the realization that they are for the reporting 

organization FSA, within the Department of Education, which is itself a component of the U.S. 

Government, a sovereign entity. One implication of this is that the liabilities cannot be liquidated 

without legislation providing resources and legal authority to do so. 

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. 

Transactions and balances among FSA funds have been eliminated from the consolidated 

financial statements. 

Accounting for Federal Credit Programs 

FSA’s accounting for its loan and loan guarantees is based on the requirements of the Federal 

Credit Reform Act of 1990 (FCRA). The purpose of the FCRA is to record the lifetime subsidy cost 

of direct loans and loan guarantees, in present value terms, at the time the loan is disbursed 

(subsidy). Components of subsidy costs for loans and guarantees include defaults (net of 

recoveries); contractual payments to third-party private loan collectors who receive a set 

percentage of amounts collected; and, as an offset, origination and other fees collected. For direct 

loans, the difference between interest rates incurred by FSA on its borrowings from Treasury and 

interest rates charged to particular borrowers is also subsidized (or may provide an offset to 

subsidy if FSA’s rate is less). 

Under the FCRA, subsidy cost is estimated using the net present value of future cash flows to and 

from FSA. In accordance with the FCRA, credit programs either estimate a subsidy cost to the 

government (a “positive” subsidy), breakeven (zero subsidy cost), or estimate a negative subsidy 

cost. Negative subsidy occurs when the estimated cost of providing loans to borrowers from 

Treasury borrowing, collection costs and loan forgiveness is less than the value of collections from 

borrowers for interest and fees, in present value terms. 

The subsidy cost of direct loan and loan guarantee programs are budgeted and tracked by the 

fiscal year in which the loan award is made or the funds committed. Such a grouping of loans or 

guarantees is referred to as a “cohort.” A cohort is a grouping of direct loans obligated or loan 

guarantees committed by a program in the same year even if disbursements occur in subsequent 

years. 
Fiscal Year 2018 Annual Report | Federal Student Aid 115

Notes to the Financial Statements

In order to account for the change in the net present value of the loan portfolio over time, the 

subsidy cost is “amortized” each year. Amortization accounts for the differences in interest rates, 

accruals, and cash flows over the life of a cohort, ensuring that cost is reflected in subsidy 

estimates and re-estimates. Amortization of subsidy is calculated as the difference between 

interest received from borrowers and Treasury (on uninvested funds) and interest paid to Treasury 

on borrowings. 

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

for loan guarantees committed and direct loans obligated after September 30, 1991. 

 Financing accounts borrow funds from Treasury, make direct loan disbursements, collect 

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

interest from borrowers, earn interest from Treasury on any uninvested funds, and transfer 

excess subsidy to Treasury General Fund receipt accounts. Financing accounts are 

presented separately in the combined statements of budgetary resources (SBR) as nonbudgetary credit reform accounts to allow for a clear distinction from all other budgetary 

accounts. This facilitates reconciliation of the SBR to the Budget of the United States 

Government. 

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

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

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

appropriations for administrative expenses. 

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

when there are negative subsidies for new loan disbursements or downward re-estimates 

of the subsidy cost of existing loans. (See Note 11) 

FSA records an obligation each year for direct loan awards to be made in a fiscal year based on 

estimates of schools’ receipt of aid applications. FSA advances funds to schools based on these 

estimates. Promissory notes are signed when schools reach individual agreements with borrowers 

and the schools subsequently report each disbursement of advanced funds to the Department. A 

new promissory note is usually not required for students in the second or later year of study. Half 

of all loan awards are issued in the fourth quarter of the fiscal year. Loans awarded are typically 

disbursed in multiple installments over an academic period. As a result, loans may be disbursed 

over multiple fiscal years. Loan awards may not be fully disbursed due to students leaving or 

transferring to other schools. FSA’s obligation estimate may also not reflect the actual amount of 

awards made. Based on historical averages, FSA expects approximately 7.8 percent of the 

amount obligated for new loan awards will not be disbursed. 

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

the length of postponement different for each lender. Interest accrues while a loan is in deferment 

or forbearance. Loans are cancelled if a person dies, meets disability requirements, or through the 

bankruptcy courts. Loans are also cancelled 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, FSA offers the Pay As You Earn (PAYE) 

program. This student loan repayment program is designed to help borrowers who struggle to 

make their normal student loan payments. The plan allows payments to be limited to 10 percent of 

discretionary income if qualifications are met. Under the PAYE program, if all requirements are 

met, forgiveness of the remaining balance of a student loan is possible after 20 years of consistent 

payments. 
116 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

Budgetary Resources 

Budgetary resources are amounts available to enter into new obligations and to liquidate them. 

FSA’s budgetary resources include unobligated balances of resources from prior years and new 

resources, which include appropriations, authority to borrow from Treasury, and spending authority 

from collections. 

Borrowing authority is an indefinite budgetary resource authorized under the FCRA. This resource, 

when realized, finances the unsubsidized portion of the Direct Loan, FFEL, and other loan 

programs. In addition, borrowing authority is requested to cover the cost of the initial loan 

disbursement as well as any related negative subsidy to be transferred to Treasury General Fund 

receipt accounts. Treasury prescribes the terms and conditions of borrowing authority and lends to 

the financing account amounts as appropriate. Amounts borrowed, but not yet disbursed, are 

included in uninvested funds and earn interest. Treasury uses the same weighted average interest 

rates for both the interest charged on borrowed funds and the interest earned on uninvested funds. 

Treasury sets a different fixed interest rate to be used for each loan cohort once the loans are 

substantially disbursed. FSA may carry forward borrowing authority to future fiscal years provided 

that cohorts are disbursing loans. All borrowings from Treasury are effective on October 1st of the 

current fiscal year, regardless of when FSA borrowed the funds, except for amounts borrowed to 

make annual interest payments. 

Authority to borrow from Treasury provides most of the funding for disbursements made under the 

Direct Loan program, FFEL, and other loan programs. Subsidy and administrative costs of the 

programs are funded by appropriations. Borrowings are repaid using collections from borrowers, 

fees, and interest on uninvested funds. 

Unobligated balances represent the cumulative amount of budgetary resources that are not 

obligated and that remain available for obligation under law, unless otherwise restricted. 

Resources expiring at the end of the fiscal year remain available for five years, but only for upward 

adjustments of prior year obligations, after which they are cancelled and may not be used. 

Resources that have not expired at year-end are available for new obligations, as well as upward 

adjustments of prior-year obligations. Funds are appropriated on an annual, multi-year, or no-year 

basis. Appropriated funds expire on the last day of availability and are no longer available for new 

obligations. Amounts in expired funds are unavailable for new obligations, but may be used to 

adjust previously established obligations. 

Permanent Indefinite Budget Authority. The Direct Loan, FFEL, and other loan programs have 

permanent indefinite budget authority through legislation. Parts B and D of the HEA pertain to the 

existence, purpose, and availability of permanent indefinite budget authority for these programs. 

Reauthorization of Legislation. Funds for most FSA programs are authorized, by statute, to be 

appropriated for a specified number of years, with an automatic one-year extension available 

under Section 422 of the General Education Provisions Act. Congress may continue to appropriate 

funds after the expiration of the statutory authorization period, effectively reauthorizing the program 

through the appropriations process. The current Budget of the United States Government

presumes all programs continue per congressional budgeting rules. (See Note 11)

Entity and Non-Entity Assets 

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

authority to use for its operations. Non-entity assets are those held by FSA but not available for 

use in its operations. FSA non-entity assets are offset by liabilities to third parties and have no 

impact on net position. FSA combines its entity and non-entity assets on the balance sheet and 

discloses its non-entity assets in the notes. (See Note 2) 
Fiscal Year 2018 Annual Report | Federal Student Aid 117

Notes to the Financial Statements

Fund Balance with Treasury 

The 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 FSA. FSA’s records are reconciled with 

Treasury’s records. (See Note 3) 

Accounts Receivable 

Accounts receivable are amounts due to FSA from the public and other federal agencies. 

Receivables from the public result from overpayments to recipients of grants and other financial 

assistance programs, and disputed costs resulting from audits of educational assistance programs. 

Amounts due from federal agencies result from reimbursable agreements entered into by FSA 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 FSA’s experience in the collection of receivables and an 

analysis of the outstanding balances. (See Note 4) 

Guaranty Agencies’ Federal Funds

Guaranty Agencies’ Federal Funds are primarily comprised of the federal government’s interest in 

the program assets held by state and nonprofit FFEL program guaranty agencies. Section 422A of 

the HEA required FFEL guaranty agencies to establish federal student loan reserve funds (federal 

funds). Federal funds include initial federal start-up funds, receipts of federal reinsurance 

payments, insurance premiums, guaranty agency share of collections on defaulted loans, 

investment income, administrative cost allowances, and other assets. 

The balance in the Federal Fund represents consolidated reserve balances of the 26 guaranty 

agencies based on the Guaranty Agency financial reports that each agency submits annually to 

FSA. Although FSA 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 FSA’s 

balances in order to comply with federal accounting principles and disclose funds held outside of 

Treasury. 

Guaranty Agencies’ Federal Funds are classified as non-entity assets with the public and are offset 

by a corresponding liability due to Treasury. The federal funds are held by the guaranty agencies 

but can only be used for certain specified purposes listed in the Department’s regulations. The 

federal funds are the property of the U.S. and are reflected in the Budget of the United States 

Government. Payments made to the FSA from guaranty agencies’ federal funds through a 

statutory recall or agency closures represent capital transfers and are returned to Treasury’s 

General Fund. (See Notes 2, 4, and 9) 

Credit Program Receivables, Net and Liabilities for Loan Guarantees 

The financial statements reflect FSA’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, 

FSA 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 FSA less the present value 

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

subsidized costs is net of recoveries, interest supplements, and offsetting fees. 

The liability for loan guarantees presents the net present value of all future cash flows from 

currently insured FFEL loans, including claim payments, interest assistance, allowance payments, 
118 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

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 FSA and held by FSA or 

guaranty agencies. In most cases, after approximately four years, defaulted guaranteed loans not 

in repayment are turned over by the guaranty agencies to FSA 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) 

Property and Equipment, Net and Leases 

FSA has very limited acquisition costs associated with buildings, furniture, and equipment as all 

federal and contractor staff are housed in leased buildings. The Department and FSA also lease 

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 Note 4) 

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 guaranty programs), and Federal Perkins Loan Program balances due to 

be repaid to the Treasury General Fund. (See Note 6) 

Debt 

FSA 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. FSA 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 30th. (See Note 7)

Subsidy Due To Treasury General Fund 

FSA must transfer to the Treasury General Fund all excess funding resulting from downward reestimates of credit program loans that are subject to FCRA requirements. This excess funding is 

included in the liability for subsidy due to Treasury and will be transferred to Treasury in the 
Fiscal Year 2018 Annual Report | Federal Student Aid 119

Notes to the Financial Statements

succeeding fiscal year upon receipt of authority from OMB. Subsidy due to Treasury also includes 

future liquidating account collections (estimated collections in excess of estimated outlays) for the 

Department’s pre-1992 FFEL and HEAL loans that, when collected, will also be transferred to the 

Treasury General Fund. (See Note 8)

Accounts Payable 

Accounts payable include amounts owed by FSA for goods and services received from other 

entities and scheduled payments transmitted but not yet processed. Accounts payable to the public 

primarily consists of in-process grant and loan disbursements, including an accrued liability for 

schools that have disbursed loans prior to requesting funds. (See Note 9) 

Accrued Grant Liability 

Some grant recipients incur allowable expenditures as of the end of an accounting period but have 

not been reimbursed by FSA. FSA accrues a liability for these allowable expenditures. The amount 

is estimated using statistical sampling of unliquidated balances. (See Note 9) 

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.

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. 

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 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. 
120 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

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

and is recorded as a liability with the public, not covered by budgetary resources. The actuarial 

FECA liability includes the expected liability for death, disability, medical, and miscellaneous costs 

for approved compensation cases. DOL determines the actuarial FECA liability annually, as of 

September 30, using an actuarial method that considers historical benefit payment patterns, wage 

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

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

Net Cost 

FSA expanded its FY 2018 Statement of Net Cost to improve the level of transparency of its costs 

and revenue. FSA elected to present its FY 2017 Statement of Net Cost in the more summarized 

format that was published in its previously audited financial statements. 

Net cost consists of gross costs and earned revenue. Major components of FSA’s net costs 

include credit program subsidy expense, credit program interest revenue and expense, and grant 

expenses. Administrative overhead costs are allocated to loan and non-credit programs based on 

number of applications processed, number of loans serviced, dollar amount of loan originations, 

cost of school compliance actions, and the cost to collect defaulted loans. (See Note 10)

Credit Program Subsidy Expense. Subsidy expense is an estimate of the present value 

cost of providing loans, but excludes the administrative costs of issuing and servicing the 

loans. In order to estimate subsidy expense, the Department must project lifetime cash 

flows associated with loans disbursed in a specific fiscal year (i.e., the loan cohort). The 

Department projects these lifetime cash flows using a set of econometric and financial 

models, as well as cash flow models. The Department estimates subsidy expenses 

annually for new loans disbursed in the current year; updates the previous cost estimates 

for outstanding loans disbursed in prior years (subsidy re-estimates); and updates previous 

cost estimates based on changes to terms of existing loans (loan modifications). Loan 

modifications include actions resulting from new legislation or from the exercise of 

administrative discretion under existing law, which directly or indirectly alters the estimated 

subsidy cost of outstanding direct loans (or direct loan obligations). (See Notes 5 and 10) 

Credit Program Interest Revenue and Expense. FSA recognizes interest revenue from 

the public when interest is accrued on Direct Loan program loans, defaulted and acquired 

FFEL loans, and outstanding principal for other loan programs. Interest due from borrowers 

is accrued at least monthly and is satisfied upon collection or capitalization into the loan 

principal. Federal interest revenue is recognized on the unused fund balances with 

Treasury in the financing accounts. 

Federal interest expense is recognized monthly on the outstanding borrowing from 

Treasury (debt) used to finance direct loan and loan guarantee programs. Accrued interest 

to Treasury is paid on September 30th. The interest rate for federal interest expense is the 

same as the rate used for federal interest revenue. 

Interest expense equals interest revenue plus administrative fees accrued for all credit 

programs due to subsidy amortization. Subsidy amortization is required by the FCRA and 

accounts for the difference between interest expense and revenue cash flows. For direct 

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

guaranteed loans, the liability for loan guarantees is adjusted with the offset to interest 

expense. (See Note 10) 

Net Position 

Net position consists of unexpended appropriations and cumulative results of operations. 

Unexpended appropriations include undelivered orders and unobligated balances, except for 
Fiscal Year 2018 Annual Report | Federal Student Aid 121

Notes to the Financial Statements

federal credit financing and liquidating funds and trust funds. Cumulative results of operations 

represent the net difference since inception between (1) expenses and (2) revenues and financing 

sources. 

Taxes 

FSA 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 

FSA and Department management are required to make certain estimates while preparing 

consolidated financial statements in conformity with GAAP. These estimates are reflected in the 

assets, liabilities, net cost, and net position of the financial statements and may differ from actual 

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

events, historical experiences, and other assumptions that are believed to be reasonable under the 

circumstances. Significant estimates reported on the financial statements include: allocation of 

administrative overhead costs; allowance for subsidy and subsidy expense for direct, defaulted 

guaranteed and acquired loans; the liability for loan guarantees; and grant liability and advance 

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

Reclassifications

The following reclassifications were made to the prior year financial statements and notes to 

conform to the current year presentation. These changes had no effect on total assets, liabilities 

and net position, net cost of operations, or budgetary resources. 

 The Combined Statements of Budgetary Resources were condensed to present budgetary 

resources, status of budgetary resources, and net outlays, while removing the presentation 

of the change in obligated balance to conform to FY 2018 changes in OMB Circular A-136. 

 Note 6, Liabilities Not Covered by Budgetary Resources, was expanded to include the 

presentation of liabilities not requiring budgetary resources to conform to FY 2018 changes 

in OMB Circular A-136. 

Note 2. Non-Entity Assets 

(Dollars in Millions) 

 2018 2017 

 Intragovernmental With the Public Intragovernmental With the Public 

Non-Entity Assets 

Credit Program Receivables, Net $ - $ 551 $ - $ 495 

Other Assets 

 Guaranty Agencies' Federal Funds 

 - 2,176 - 2,077 

 Accounts Receivable, Net 

 - 36 - 33 

Total Non-Entity Assets - 2,763 - 2,605 

Entity Assets 73,424 1,209,078 74,039 1,145,050 

Total Assets $ 73,424 $ 1,211,841 $ 74,039 $ 1,147,655 

FSA’s FY 2018 assets are predominantly entity assets (99.4 percent), leaving the small portion of 

assets remaining as non-entity assets. Non-entity assets with the public primarily consist of 

guaranty agency reserves (78.8 percent), reported as Guaranty Agencies’ Federal Funds, and 

Federal Perkins Loan program loan receivables (19.9 percent), reported as credit program 

receivables, net. The corresponding liabilities for these non-entity assets are reflected in various 
122 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

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) 

 2018 2017

Unobligated Balance 

 Available $ 12,290 $ 8,595 

 Unavailable 24,024 23,325 

Obligated Balance, not Disbursed 99,484 100,544 

Authority Temporarily Precluded from Obligation 1 1 

Borrowing Authority Not Yet Converted to Fund Balance with Treasury (Note 11) (62,394) (58,433) 

Total Fund Balance with Treasury $ 73,405 $ 74,032 

Available unobligated balances represent amounts that are apportioned for obligation in the current 

fiscal year. Unavailable unobligated balances represent amounts that are not apportioned for 

obligation during the current fiscal year and expired appropriations no longer available to incur new 

obligations. Total unavailable unobligated balance ($24,024 million) differs from unapportioned and 

expired amounts on the SBR ($26,200 million) due to the Guaranty Agencies’ Federal Funds 

($2,176 million).

Note 4. Other Assets 

(Dollars in Millions) 

 2018 2017 

 

 Intragovernmental With the Public Intragovernmental With the Public 

Guaranty Agencies' Federal Funds $ - $ 2,176 $ - $ 2,077 

Accounts Receivable, Net - 125 - 137 

Advances 19 14 7 1 

Property and Equipment, Net - 27 - 31 

Other - 4 - 3 

Total Other Assets $ 19 $ 2,346 $ 7 $ 2,249 
Fiscal Year 2018 Annual Report | Federal Student Aid 123

Notes to the Financial Statements

Note 5. Credit Programs for Higher Education: Credit Program 

Receivables, Net and Liabilities for Loan Guarantees 

Credit Program Receivables, Net 

(Dollars in Millions)

 

 Principal Accrued 

Interest 

 Allowance for 

Subsidy 

(Present Value) 

 Net 

2018

Direct Loan Program $ 1,083,735 $ 71,981 $ (40,663) $ 1,115,053 

FFEL Program 95,083 21,116 (23,252) 92,947 

Other Credit Programs for Higher 

Education 1,617 420 (542) 1,495 

Total Credit Receivables $ 1,180,435 $ 93,517 $ (64,457) $ 1,209,495 

2017

Direct Loan Program $ 998,825 $ 59,534 $ (16,805) $ 1,041,554 

FFEL Program 101,601 19,338 (18,529) 102,410 

Other Credit Programs for Higher 

Education 1,545 393 (496) 1,442 

Total Credit Receivables $ 1,101,971 $ 79,265 $ (35,830) $ 1,145,406 

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. What follows is additional analysis of the activity, costs and adjustments 

for each of the loan programs. 

Direct Loan Program. The federal government makes loans directly to students and parents 

through participating institutions of higher education 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 and held 

by the Department. Of the $1,155.7 billion in gross loan receivables, as of September 30, 2018, 

$84.9 billion (7.3 percent) in loan principal was in default and had been transferred to the 

Department’s defaulted loan servicer, compared to $70.7 billion (6.7 percent) as of September 30, 

2017.
124 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

Direct Loan Program Reconciliation of Allowance for Subsidy 

(Dollars in Millions)

 2018 2017 

Beginning Balance, Allowance for Subsidy $ 16,805 $ (5,292) 

Activity 

 Fee Collections 1,696 1,694 

 Loan Cancellations (7,521) (7,689) 

 Subsidy Allowance Amortization 25,918 23,276 

 Other (604) (513) 

Total Activity 19,489 16,768 

Subsidy Expense for Direct Loans Disbursed in the Current Year by 

Component 

 Interest Rate Differential 1,614 (13,045) 

 Defaults, Net of Recoveries 1,106 (133) 

 Fees (1,747) (1,968) 

 Other (4,103) 12,541 

Total of the Above Subsidy Expense Components (3,130) (2,605) 

Components of Loan Modifications 

Loan Modification Costs 144 - 

Modification Adjustment Transfers Gain (8) - 

Loan Modifications 136 - 

Components of Subsidy Re-estimates 

 Interest Rate Re-estimates (4,573) (5,765) 

 Technical and Default Re-estimates 11,936 13,699 

Upward Subsidy Re-estimates 7,363 7,934 

Ending Balance, Allowance for Subsidy $ 40,663 $ 16,805 

The estimation process used to determine the amount of positive or negative subsidy expense 

each fiscal year, and subsequently the cumulative taxpayer cost of the program (allowance for 

subsidy), is subject to various internal and external risk factors which often show strong 

interdependence with one another. These risks include uncertainty about changes in the general 

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

performance with regard to contractual cash flows within the loan programs.

Due to the complexity of the Direct Loan program, there is inherent projection risk in the process 

used for estimating long-term program costs. As stated, some uncertainty stems from potential 

changes in student loan legislation and regulations because these changes may fundamentally 

alter the cost structure of the program. Operational and policy shifts, such as growing efforts to 

increase borrower enrollment in income-driven repayment (IDR) plans, may also affect program 

costs by causing significant changes in borrower repayment timing. Actual performance may 

deviate from estimated performance, which is not unexpected given the long-term nature of these 

loans (cash flows may be estimated up to 40 years), and the multitude of projection paths and 

possible outcomes. The increasing enrollment of borrowers in the IDR plans has made projection 

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

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

risks facing the Direct Loan program. 
Fiscal Year 2018 Annual Report | Federal Student Aid 125

Notes to the Financial Statements

Loan cancellations include write-offs of loans because the borrower died, became disabled, or 

declared bankruptcy. The interest rate re-estimate reflects the cost of finalizing the Treasury 

borrowing rate to be used for borrowings received to fund the disbursed portion of the loan awards 

obligated. Other components of subsidy transfers consist of contract collection costs, program 

review collections, fees, loan forgiveness and other accruals. 

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

(Dollars in Millions)

 2018 2017 

Interest Expense on Treasury Borrowing $ 32,329 $ 31,286 

Total Interest Expense $ 32,329 $ 31,286 

Interest Revenue from the Public $ 54,157 $ 50,142 

Interest Revenue on Uninvested Funds 3,890 4,258 

Administrative Fees 200 162 

Amortization of Subsidy (25,918) (23,276) 

Total Revenues $ 32,329 $ 31,286 

Direct Loan Program Subsidy Expense 

(Dollars in Millions)

 

2018 2017 

Subsidy Expense for Direct Loans Disbursed in the Current Year 

 Interest Rate Differential $ 1,614 $ (13,045) 

 Defaults, Net of Recoveries 1,106 (133) 

 Fees (1,747) (1,968) 

 Other (4,103) 12,541 

Total Subsidy Expense for Direct Loans Disbursed in the Current Year (3,130) (2,605) 

Loan Modifications 136 - 

Upward Subsidy Re-estimates 7,363 7,934 

Direct Loan Subsidy Expense $ 4,369 $ 5,329 

FY 2018 Direct Loan Program Modifications. The Department recognized net loan modifications 

totaling $136 million in FY 2018. The FY 2018 modifications include the cost associated with the 

policy change related to forgiving accrued interest on borrower defense claims that have been 

denied and pending for more than one year. In addition, the Consolidated Appropriations Act, 2018

provided limited, additional conditions under which a borrower may become eligible for PSLF if 

some or all of the payments were made under a nonqualifying repayment plan. Finally, an 

$8 million upward modification was recorded based on the Bipartisan Budget Act of 2018 which 

gives the Department broad authority to forgive Direct Loans received by students who did not 

complete the period for which they enrolled as a result of hurricanes Maria and Irma that disrupted 

Puerto Rico and the U.S. Virgin Islands in 2017. 

Upward Subsidy Re-estimates for All Prior Year Loan Cohorts. Direct Loan program reestimated subsidy cost was adjusted upward by $7.4 billion in FY 2018. Re-estimated costs only 

include cohorts that are 90 percent disbursed; cohort years 1994–2017. In addition to the major 

assumption updates described below, the re-estimate reflects several other assumption updates, 

including interest rates provided by OMB, volume, and enter repayment rates. 
126 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

 IDR Model Changes. In 2018, the Department updated several assumptions within its IDR 

submodel and refined the logic for borrowers switching between IDR plans. These updates 

led to a net downward re-estimate of $4.1 billion. 

 Repayment Plan Selection. The Department incorporated new repayment plan data that 

showed a continuing increase in IDR plan usage. The update also reflects changes in 

interpretation of repayment plan codes for Direct Loan consolidations. Much of the 

consolidation loan volume that was previously classified as standard (ten-year fixed) is now 

classified as extended. Also, the Department changed the methodology for assigning and 

forecasting plans from an origination cohort basis to an enter repayment cohort basis. 

Lastly, the Department placed limits on forecasted growth of IDR participation to reflect an 

anticipated saturation point. The combined effect of these changes was a net upward reestimate of $2.1 billion. 

 Default Rates. The Department made updates to the default rate model in FY 2018 which 

led to a net upward re-estimate of $14.8 billion. 

With the increase in IDR participation, the Department also conducted sensitivities on incomes for 

students in IDR and PSLF plans. For example, a 5 percent upward increase in borrower incomes 

decreases costs by almost $1.3 billion for cohort 2017. A 5 percent increase in PSLF plan 

participation would increase costs by $0.4 billion for cohort 2017. 

Direct Loan Subsidy Rates—Cohort 2018 

 

 Interest 

Differential Defaults Fees Other Total 

Stafford -0.01% 1.84% -1.07% 7.54% 8.30% 

Unsubsidized Stafford -19.55% 1.34% -1.07% 9.56% -9.72% 

PLUS -33.15% 0.89% -4.26% 8.73% -27.79% 

Consolidation 3.96% 0.37% 0.00% 9.85% 14.18% 

Weighted Average Total -11.95% 0.86% -1.20% 8.92% -3.37% 

The subsidy rate represents the subsidy expense of the program in relation to the obligations or 

commitments made during the fiscal year and are weighted on gross volume. The subsidy rates 

shown above, which reflect aggregate positive subsidy in the FY 2018 cohort, cannot be applied to 

direct loans disbursed during the current reporting year to yield the subsidy expense, nor are these 

rates applicable to the portfolio as a whole. The Department does not re-estimate student loan 

cohorts until they are at least 90 percent disbursed. As a result, the financial statement re-estimate 

does not include a re-estimate of the current year cohort. The first re-estimate of this cohort will 

take place upon execution of the FY 2020 President’s Budget.

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. 
Fiscal Year 2018 Annual Report | Federal Student Aid 127

Notes to the Financial Statements

Direct Loan Program Loan Disbursements by Loan Type 

(Dollars in Millions)

 2018 2017 

Stafford $ 20,343 $ 23,368 

Unsubsidized Stafford 49,009 51,410 

PLUS 23,117 18,695 

Consolidation 41,625 48,999 

Total Disbursements $ 134,094 $ 142,472 

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 reestimates 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 $41.6 billion during FY 2018 and $49.0 billion during FY 2017. 

Under the FCRA, the subsidy costs of new consolidation loans are not reflected until the future 

fiscal year in which they are disbursed. The effect of the early payoff of the existing loans—those 

being consolidated—is recognized in the future projected cash flows of the past cohort year in 

which the loans were originated. 

Federal Family Education 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 cancelled. As of September 30, 2018 and 2017, total 

principal balances outstanding of guaranteed loans held by lenders were approximately $157 

billion and $176 billion, respectively. As of September 30, 2018 and September 30, 2017, the 

estimated maximum government exposure on outstanding guaranteed loans held by lenders was 

approximately $154 billion and $173 billion, respectively. Of the insured amount, the Department 

would pay a smaller amount to the guaranty agencies. The rates range from 75 to 100 percent of 

the loan value depending on when the loan was made and the guaranty agency’s claim 

experience. 
128 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

FFEL Program Loan Receivables 

(Dollars in Millions)

 

Principal Accrued 

Interest 

Allowance for 

Subsidy 

(Present Value) 

Net 

2018

DEFAULTED FFEL GUARANTEED LOANS 

FFEL GSL Program (Pre-1992) $ 3,917 $ 5,836 $ (8,077) $ 1,676 

FFEL GSL Program (Post-1991) 33,849 7,802 (15,186) 26,465 

Total Defaulted FFEL Guaranteed 

Loans 37,766 13,638 (23,263) 28,141 

ACQUIRED FFEL LOANS 

Loan Purchase Commitment 19,277 2,435 (21) 21,691 

Loan Participation Purchase 36,475 4,713 458 41,646 

ABCP Conduit 1,565 330 (426) 1,469 

Total Acquired FFEL Loans 57,317 7,478 11 64,806 

FFEL Program Loan Receivables $ 95,083 $ 21,116 $ (23,252) $ 92,947 

2017

DEFAULTED FFEL GUARANTEED LOANS 

FFEL GSL Program (Pre-1992) $ 3,882 $ 5,659 $ (8,019) $ 1,522 

FFEL GSL Program (Post-1991) 34,395 7,216 (13,838) 27,773 

Total Defaulted FFEL Guaranteed 

Loans 38,277 12,875 (21,857) 29,295 

ACQUIRED FFEL LOANS 

Loan Purchase Commitment 21,375 2,224 1,656 25,255 

Loan Participation Purchase 40,288 3,947 2,072 46,307 

ABCP Conduit 1,661 292 (400) 1,553 

Total Acquired FFEL Loans 63,324 6,463 3,328 73,115 

FFEL Program Loan Receivables $ 101,601 $ 19,338 $ (18,529) $ 102,410 
Fiscal Year 2018 Annual Report | Federal Student Aid 129

Notes to the Financial Statements

FFEL Program Reconciliation of Liabilities for Loan Guarantees 

(Dollars in Millions)

 2018 2017 

Beginning Balance, FFEL Financing Account Liability for Loan Guarantees $ 3,636 $ 1,417 

Activity 

 Interest Supplement Payments (1,052) (810) 

 Claim Payments (5,716) (5,819) 

 Fee Collections 1,550 1,633 

 Interest on Subsidy Amortization (1,099) (1,263) 

 Other 6,476 7,459 

Total Activity 159 1,200 

Upward/(Downward) Subsidy Re-estimates (1,204) 1,019 

Ending Balance, FFEL Financing Account Liability for Loan Guarantees 2,591 3,636 

FFEL Liquidating Account Liability for Loan Guarantees 1 23 

FFEL Liabilities for Loan Guarantees $ 2,592 $ 3,659 

Liabilities for Loan Guarantees is included as a component of other liabilities on the balance sheet 

(see Note 9).

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

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

Allowance for Subsidy Reconciliation for Acquired FFEL Loans 

(Dollars in Millions)

 

Loan Purchase 

Commitment 

Loan Participation 

Purchase 

ABCP 

Conduit Total 

2018

Beginning Balance, Allowance 

for Subsidy $ (1,656) $ (2,072) $ 400 $ (3,328) 

Activity 

 Subsidy Allowance Amortization 550 903 48 1,501 

 Loan Cancellations (168) (314) (16) (498) 

 Direct Asset Activities (44) (68) (6) (118) 

Total Activity 338 521 26 885 

Upward Subsidy Re-estimates 1,339 1,093 - 2,432 

Ending Balance, Allowance for 

Subsidy $ 21 $ (458) $ 426 $ (11) 

2017

Beginning Balance, Allowance 

for Subsidy $ (2,922) $ (4,347) $ 374 $ (6,895) 

Activity 

 Subsidy Allowance Amortization 635 1,219 53 1,907 

 Loan Cancellations (203) (390) (19) (612) 

 Direct Asset Activities (45) (67) (8) (120) 

Total Activity 387 762 26 1,175 

Upward Subsidy Re-estimates 879 1,513 - 2,392 

Ending Balance, Allowance for 

Subsidy $ (1,656) $ (2,072) $ 400 $ (3,328) 
130 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

FFEL Program Subsidy Expense 

(Dollars in Millions) 

 

2018 2017 

Upward/(Downward) Subsidy Re-estimates 

FFEL Loan Guarantee Program $ (1,204) $ 1,019 

Loan Purchase Commitment 1,339 879 

Loan Participation Purchase 1,093 1,513 

FFEL Program Subsidy Expense $ 1,228 $ 3,411 

FFEL re-estimated subsidy cost was adjusted upward by $1.2 billion in FY 2018. The net upward 

re-estimates in these programs were due primarily to interest rates provided by OMB and updated 

prepayment rates. 

Other Credit Programs for Higher Education 

(Dollars in Millions)

 

 Principal Accrued Interest 

 Allowance for 

Subsidy 

(Present Value) 

 Net 

2018

Federal Perkins Loans $ 474 $ 297 $ (220) $ 551 

TEACH Program Loans 746 91 (253) 584 

HEAL Program Loans 397 32 (69) 360 

Total $ 1,617 $ 420 $ (542) $ 1,495 

 

2017

Federal Perkins Loans $ 424 $ 268 $ (197) $ 495 

TEACH Program Loans 723 95 (225) 593 

HEAL Program Loans 398 30 (74) 354 

Total $ 1,545 $ 393 $ (496) $ 1,442 

Federal Perkins Loan Program. The Federal Perkins Loan program provides low-interest loans 

to eligible postsecondary school students. In some statutorily defined cases, funds are provided to 

reimburse schools for loan cancellations. For defaulted loans assigned to the Department, 

collections of principal, interest, and fees, net of amounts paid by the Department to cover contract 

collection costs, are transferred to Treasury annually.

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 2018

 

 Interest 

Differential Defaults Fees Other Total 

Subsidy Rates 16.92% 0.25% 0.00% 5.89% 23.06% 
Fiscal Year 2018 Annual Report | Federal Student Aid 131

Notes to the Financial Statements

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 prior to 1992. All loan 

activity for 1992 and beyond is recorded in corresponding financing accounts.

Note 6. Liabilities Not Covered by Budgetary Resources 

(Dollars in Millions) 

 2018 2017 

 

 Intragovernmental With the Public Intragovernmental With the Public 

Liabilities Not Covered By Budgetary 

Resources 

 Other Liabilities 

 Accrued Unfunded Annual Leave $ - $ 13 $ - $ 14 

 FECA Liabilities 

 

- 1 

 

- 1 

Total Liabilities Not Covered By Budgetary 

Resources 

 

- 14 

 

- 15 

Liabilities Not Requiring Budgetary Resources 

 Subsidy Due to Treasury General Fund 2,029 - 1,784 - 

 Federal Perkins Loan Program 538 

 

- 482 - 

 Miscellaneous Receipt, Deposit Funds and 

Clearing Accounts 52 

 

- 46 - 

Total Liabilities Not Requiring Budgetary 

Resources 2,619 

 

- 2,312 - 

Total Liabilities Covered By Budgetary Resources 1,266,159 7,414 1,185,782 10,377 

Total Liabilities $ 1,268,778 $ 7,428 $ 1,188,094 $ 10,392 

Note 7. Debt 

(Dollars in Millions) 

 

Beginning 

Balance

Borrowing Repayments Ending 

Balance 

2018

Direct Loan Program $ 1,061,559 $ 155,257 $ (66,206) $ 1,150,610 

FFEL Program 116,290 227 (9,256) 107,261 

Other Credit Programs for Higher Education 624 71 (85) 610 

Total $ 1,178,473 $ 155,555 $ (75,547) $ 1,258,481 

2017

Direct Loan Program $ 994,285 $ 160,508 $ (93,234) $ 1,061,559 

FFEL Program 131,347 - (15,057) 116,290 

Other Credit Programs for Higher Education 713 87 (176) 624 

Total $ 1,126,345 $ 160,595 $ (108,467) $ 1,178,473 
132 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

FSA borrows from Treasury to fund the disbursement of new loans and the payment of credit 

program outlays and related costs. During FY 2018, debt increased 6.8 percent from $1,178.5 

billion in the prior year to $1,258.5 billion. FSA makes periodic principal payments, after evaluating 

the cash position and liability for future outflows in each program and pays interest, as mandated 

by the FCRA. 

Approximately 91.4 percent of FSA’s debt, as of September 30, 2018, is attributable to the Direct 

Loan program. The majority of the net borrowing activity (borrowing less repayments) for the year 

was designated for funding new Direct Loan disbursements. 

FSA also borrows from Treasury for activity in the Other Credit Programs for Higher Education. 

During FY 2018, TEACH net borrowing of $15.3 million was used for the advance of new grants 

and repayments of principal made to Treasury. 

Note 8. Subsidy Due to Treasury General Fund 

(Dollars in Millions) 

 2018 2017 

Credit Program Downward Subsidy Re-estimates 

 Direct Loan Program $ 2,484 $ 5,010 

 FFEL Program 3,015 219 

Total Credit Program Downward Subsidy Re-estimates 5,499 5,229 

Future Liquidating Account Collections 

 FFEL Program 1,856 1,614 

 Other Credit Programs for Higher Education 173 170 

Total Future Liquidating Account Collections 2,029 1,784 

Total Subsidy Due to Treasury General Fund $ 7,528 $ 7,013 

When downward subsidy re-estimates are executed, the amounts will be transferred to the 

Treasury General Fund in the following fiscal year. Future liquidating account collections represent 

the net present value of estimated future excess collections (estimated collections in excess of 

estimated outlays) for FSA’s pre-1992 FFEL and HEAL loan programs. 

Note 9. Other Liabilities 

(Dollars in Millions)

 2018 2017 

 

 Intragovernmental With the Public Intragovernmental With the Public 

Accounts Payable $ 1 $ 3,656 $ 1 $ 4,039 

Accrued Grant Liability - 932 - 2,452 

Guaranty Agencies' Funds Due to Treasury 2,176 - 2,077 - 

Loan Guarantee Liability - 2,814 - 3,870 

Federal Perkins Loan Program 538 - 482 - 

Miscellaneous Receipt, Deposit Funds and 

Clearing Accounts 52 - 46 - 

Advances from Others and Deferred Credits - 4 - 10 

Accrued Unfunded Annual Leave - 13 - 14 

FECA Liabilities - 1 - 1 

Accrued Payroll and Benefits - 8 - 6 

Employer Contributions and Payroll Taxes 2 

 

- 2 - 

Total Other Liabilities $ 2,769 $ 7,428 $ 2,608 $ 10,392 
Fiscal Year 2018 Annual Report | Federal Student Aid 133

Notes to the Financial Statements

Note 10. Net Cost of Operations 

Gross Costs and Exchange Revenue by Program 

(Dollars in Millions)

 2018 

EXPAND POSTSECONDARY OPPORTUNITIES, IMPROVE OUTCOMES TO FOSTER ECONOMIC OPPORTUNITY, 

AND PROMOTE PRODUCTIVE CITIZENRY 

Direct Loan Program 

Gross Cost 

Credit Program Interest Expense $ 32,329 

Subsidy Expense 4,369 

Administrative Expenses 1,267 

Earned Revenue 

Interest & Administrative Fees (58,247) 

Subsidy Amortization 25,918 

Other - 

Net Cost of Direct Loan Program 5,636 

FFEL Program 

Gross Cost 

Credit Program Interest Expense 4,233 

Subsidy Expense 1,228 

Subsidy Amortization (Guaranteed Loans) (1,099) 

Guaranty Agencies 96 

Administrative Expenses 141 

Earned Revenue 

Interest & Administrative Fees (4,635) 

Subsidy Amortization (Acquired FFEL Loans) 1,501 

Guaranty Agencies (202) 

Net Cost of FFEL Program 1,263 

Other Credit Programs for Higher Education 

Gross Cost 

Credit Program Interest Expense 19 

Subsidy Expense 56 

Administrative Expenses 1 

Earned Revenue 

Interest & Administrative Fees (48) 

Subsidy Amortization 29 

Other (540) 

Net Cost of Other Credit Programs for Higher Education (483) 

Non-Credit Programs 

Gross Cost 

Grants 28,456 

Other 136 

Net Cost of Non-Credit Programs 28,592 

Net Program Costs 35,008 

Total Gross Costs 71,232 

Total Earned Revenues (36,224) 

Net Cost of Operations $ 35,008 
134 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

Gross Costs and Exchange Revenue by Program 

(Dollars in Millions)

 2017 

Increase College Access, Quality, and Completion 

Gross Cost 

 Intragovernmental $ 36,054 

 With the Public 37,717 

Total Gross Program Costs 73,771 

Earned Revenue 

 Intragovernmental (5,335) 

 With the Public (30,490) 

Total Program Earned Revenue (35,825) 

Net Cost of Operations $ 37,946 

Credit Program Interest Expense and Revenues 

(Dollars in Millions) 

 

Gross 

Interest 

Expense 

Subsidy 

Amortization Net 

Interest 

Expense 

Gross Interest and 

Administrative Fee Revenue 

Subsidy 

Amortization Net 

Revenue 

 

Intragovern

- 

mental 

With the Public Intragovernmental 

With the 

Public 

With the 

Public 

2018 

Direct Loan 

Program $ 32,329 $ - $ 32,329 $ 3,890 $ 54,357 $ (25,918) $ 32,329 

FFEL Program 4,233 (1,099) 3,134 1,032 3,603 (1,501) 3,134 

Other Credit 

Programs for 

Higher Education 19 - 19 4 44 (29) 19 

Total $ 36,581 $ (1,099) $ 35,482 $ 4,926 $ 58,004 $ (27,448) $ 35,482 

2017 

Direct Loan 

Program $ 31,286 $ - $ 31,286 $ 4,258 $ 50,304 $ (23,276) $ 31,286 

FFEL Program 4,661 (1,263) 3,398 1,071 4,234 (1,907) 3,398 

Other Credit 

Programs for 

Higher Education 23 - 23 6 43 (26) 23 

Total $ 35,970 $ (1,263) $ 34,707 $ 5,335 $ 54,581 $ (25,209) $ 34,707 

Interest expense equals interest revenue plus administrative fees accrued for all credit programs 

due to subsidy amortization. Subsidy amortization is required by the FCRA and accounts for the 

difference between interest expense and revenue cash flows. For direct loans, the allowance for 

subsidy is adjusted with the offset to interest revenue. For guaranteed loans, the liability for loan 

guarantees is adjusted with the offset to interest expense. 

Grant Expenses 

(Dollars in Millions)

 2018 

PELL Grants $ 26,672 

Federal Work-Study Program 1,015 

Federal Supplemental Educational Opportunity Grants 769 

Total Grant Costs $ 28,456 
Fiscal Year 2018 Annual Report | Federal Student Aid 135

Notes to the Financial Statements

Pell Grants – provides need-based grants to students to promote access to postsecondary 

education. Grant amounts are dependent on: the student’s expected family contribution; the cost of 

attendance (as determined by the institution); the student’s enrollment status (full-time or parttime); and whether the student attends for a full academic year or less. Pell grants are the single 

largest source of grant aid for postsecondary education.

Federal Work-Study Program – provides funds by formula to enable eligible institutions to offer 

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

students and encourages community service work. The work is often related to the student’s 

course of study. This program is administered by the schools that participate in the Federal WorkStudy program. Hourly earnings under this program must be at least the Federal minimum wage. 

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

25 percent paid by the employer.

Federal Supplemental Education Opportunity Grants – provides funds by formula to enable 

eligible institutions to offer grants to students based on need. Federal grants distributed under this 

program are administered directly by the financial aid office at each participating school. 

Note 11. Statements of Budgetary Resources 

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

2018, budgetary resources were $305.9 billion and net agency outlays were $101.7 billion. As of 

September 30, 2017, budgetary resources were $349.1 billion and net agency outlays were 

$106.0 billion. 

New Obligations Incurred and Upward Adjustments by Apportionment Type and Category

(Dollars in Millions)

 2018 2017 

Direct: 

 Category A $ 1,705 $ 1,585 

 Category B 265,585 313,549 

 Exempt from Apportionment 96 12 

New Obligations Incurred and Upward Adjustments $ 267,386 $ 315,146 

The apportionment categories are determined in accordance with the guidance provided in OMB 

regulations. Category A apportionments are those resources that can be obligated in the current 

fiscal year without restriction on the purpose of the obligation, other than to be in compliance with 

legislation underlying programs for which the resources were made available. Category B 

apportionments are restricted by purpose for which obligations can be incurred. In addition, some 

resources are available without apportionment by OMB. 

Unused Borrowing Authority 

(Dollars in Millions) 

 

2018 2017 

Beginning Balance, Unused Borrowing Authority $ 58,433 $ 60,730 

Current Year Borrowing Authority 167,543 166,426 

Funds Drawn from Treasury (155,555) (160,595) 

Borrowing Authority Withdrawn (8,027) (8,128) 

Ending Balance, Unused Borrowing Authority $ 62,394 $ 58,433 
136 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

FSA is given authority to draw funds from Treasury to finance the Direct Loan, FFEL, and other 

loan programs. Unused borrowing authority is a budgetary resource and is available to support 

obligations for these programs. FSA periodically reviews its borrowing authority balances in 

relation to its obligations resulting in the withdrawal of unused amounts. 

Undelivered Orders at the End of the Period 

(Dollars in Millions) 

 

2018 2017 

 Intragovernmental With the Public Intragovernmental With the Public 

Unpaid $ 73 $ 95,736 $ 57 $ 94,997 

Paid 19 206 7 215 

Undelivered Orders $ 92 $ 95,942 $ 64 $ 95,212 

Undelivered orders represent the amount of goods and/or services ordered which have not been 

actually or constructively received. The paid amount includes any orders which may have been 

prepaid or advanced but for which delivery or performance has not yet occurred. 

Distributed Offsetting Receipts 

(Dollars in Millions) 

 

2018 2017 

Negative Subsidies and Downward Re-estimates of Subsidies: 

 Direct Loan Program $ 26,539 $ 18,849 

 FFEL Program 236 370 

 HEAL Program 8 18 

 Total Negative Subsidies and Downward Re-estimates 26,783 19,237 

Other 538 201 

Distributed Offsetting Receipts $ 27,321 $ 19,438 

The majority of the distributed offsetting receipts line item on the SBR represents amounts paid 

from the Direct Loan program and FFEL program financing accounts to Treasury General Fund 

receipt accounts for downward current fiscal year executed subsidy re-estimates and negative 

subsidies. The collections are recorded as offsetting receipts and they offset the agency's budget 

authority and outlays. 

Explanation of Differences Between the Statements of Budgetary 

Resources and the Budget of the United States Government

Budgetary accounting as shown in the President’s Budget includes a public enterprise fund that 

reflects the gross obligations by the FFEL program for the estimated activity of the consolidated 

Federal Fund of the guaranty agencies. Ownership by the federal government is independent of 

the actual control of the assets. Since the actual operation of the Federal Fund is independent from 

the Department’s direct control, budgetary resources and obligations are estimated and disclosed 

in the President’s Budget to approximate the gross activities of the combined Federal Funds. 

Amounts reported on the SBR for the Federal Fund are compiled through combining all guaranty 

agencies’ annual reports to determine a net valuation amount for the Federal Fund.
Fiscal Year 2018 Annual Report | Federal Student Aid 137

Notes to the Financial Statements

Note 12. Reconciliation of Net Cost of Operations to Budget 

(Dollars in Millions)

 

2018 2017 

RESOURCES USED TO FINANCE ACTIVITIES: 

New Obligations Incurred and Upward Adjustments $ 267,386 $ 315,146 

Spending Authority from Offsetting Collections & Recoveries (139,125) (185,284) 

Offsetting Receipts (27,321) (19,438) 

Net Budgetary Resources Obligated 100,940 110,424 

Imputed Financing From Costs Absorbed by Others 14 10 

Other Financing Sources (27,714) (25,360) 

Net Other Resources (27,700) (25,350) 

Net Resources Used to Finance Activities 73,240 85,074 

RESOURCES USED OR GENERATED FOR ITEMS NOT PART OF THE NET COST OF OPERATIONS: 

(Increase)/Decrease in Budgetary Resources Obligated but Not Yet Provided (800) (3,566) 

Resources that Fund Subsidy Re-estimates Accrued in Prior Period (134) (28,006) 

Credit Program Collections 97,424 141,750 

Acquisition of Fixed Assets - (8) 

Acquisition of Net Credit Program Assets or Liquidation of Liabilities for Loan 

Guarantees (169,934) (171,543) 

Resources from Non-Entity Activity 27,705 25,352 

Net Resources That Do Not Finance the Net Cost of Operations (45,739) (36,021) 

Net Resources Used to Finance the Net Cost of Operations 27,501 49,053 

COMPONENTS OF THE NET COST OF OPERATIONS THAT WILL NOT REQUIRE OR GENERATE RESOURCES IN THE 

CURENT PERIOD: 

Change in Depreciation 4 1 

Subsidy Amortization and Interest on the Liability for Loan Guarantees 26,347 23,947 

Other (5) 2 

Total Components Not Requiring or Generating Resources 26,346 23,950 

Increase in Annual Leave Liability (1) 2 

Accrued Re-estimates of Credit Subsidy Expense 17,954 134 

Increase in Exchange Revenue Receivable from the Public (36,791) (35,154) 

Other (1) (39) 

Total Components Requiring or Generating Resources in Future Periods (18,839) (35,057) 

Total Components That Will Not Require or Generate Resources in the Current 

Period 7,507 (11,107) 

Net Cost of Operations $ 35,008 $ 37,946 
138 Fiscal Year 2018 Annual Report | Federal Student Aid

Notes to the Financial Statements

The reconciliation of net cost of operations to budget reconciles the resources used to finance 

activities, both those received through budgetary resources and those received through other 

means, with the net cost of operations on the statement of net cost. This reconciliation provides an 

explanation of the differences between budgetary and financial (proprietary) accounting, as 

required by FASAB Standard No. 7, Accounting for Revenue and Other Financing Sources and 

Concepts for Reconciling Budgetary and Financial Accounting. 

Resources used to finance activities (section one) are reconciled with the net cost of operations by: 

(a) excluding resources used or generated for items not part of the net cost of operations (section 

two), and (b) including components of the net cost of operations that will not require or generate 

resources in the current period (section three). The primary resources used to finance activities 

that do not fund the net cost of operations include the acquisition of net credit program assets, the 

liquidation of liabilities for loan guarantees, and subsidy re-estimates accrued in the prior period. 

Significant components of the net cost of operations that will not generate or use resources in the 

current period include subsidy amortization, interest on the liability for loan guarantees, and 

increases in exchange revenue receivable from the public. 

Note 13. Commitments and Contingencies 

FSA 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)

2018 2017 

 FY Amount FY Amount 

2019 $ 13 2018 $ 12 

2020 13 2019 13 

2021 14 2020 13 

2022 14 2021 14 

2023 15 2022 14 

After 2023 15 After 2022 15 

 Total $ 84 Total $ 81 

FSA leases two buildings from the General Services Administration. The table above presents the 

estimated future minimum lease payments for these buildings. 

Guaranty Agencies 

FSA may assist guaranty agencies experiencing financial difficulties. FSA has not done so in fiscal 

years 2018 or 2017 and does not expect to in future years. No provision has been made in the 

financial statements for potential liabilities. 

Federal Perkins Loan Program 

The Federal Perkins Loan program provides financial assistance to eligible postsecondary school 

students. In FY 2018, the Department provided funding of 83.2 percent of the capital used to 

make loans to eligible students through participating schools at 5 percent interest. The schools 

provided the remaining 16.8 percent of program funding. For the latest academic year that ended 

June 30, 2018, approximately 356 thousand loans were made totaling $886.3 million at 1,272 

institutions, making an average of $2,491 per loan. The Department’s equity interest was 

approximately $6.3 billion as of June 30, 2018. 
Fiscal Year 2018 Annual Report | Federal Student Aid 139

Notes to the Financial Statements

Federal Perkins Loan program borrowers who meet statutory eligibility requirements—such as 

those who provide service as teachers in low-income areas or as Peace Corps or AmeriCorps 

VISTA volunteers, as well as those who serve in the military, law enforcement, nursing, or family 

services—may receive partial loan forgiveness for each year of qualifying service. 

The Federal Perkins Loan program was scheduled to officially end on September 30, 2015. 

However, the program was extended through September 30, 2017 by the Federal Perkins Loan 

Program Extension Act of 2015 (Extension Act). The Extension Act eliminated the Perkins Loan 

grandfathering provisions that the Department had put in place, and establishes new eligibility 

requirements for undergraduate and graduate students to receive Perkins Loans. As of 

September 30, 2017, FSA is no longer authorized to make new Perkins Loans. 

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 effect on FSA’s 

financial position. The cost of loan forgiveness related to borrower defense claims reflected in the 

accompanying financial statements is limited to loans originated through September 30, 2018. The 

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

September 30, 2018, is not expected to have a material impact on these financial statements. 

Other Matters 

Some portion of the current-year financial assistance expenses (grants) may include funded 

recipient expenditures that are subsequently disallowed through program review or audit 

processes. In the opinion of management, the ultimate disposition of these matters will not have a 

material effect on the FSA’s financial position.
140 Fiscal Year 2018 Annual Report | Federal Student Aid

Required Supplementary Stewardship Information (Unaudited) 

Required Supplementary Stewardship Information 

(Unaudited)

Human Capital investments are those expenses included in net cost for general public 

education and training programs that are intended to increase or maintain national economic 

productive capacity. 

Year to date expenses incurred for human capital investments consisted of the following as of 

September 30, 2018 and the preceding four fiscal year ends: 

Summary of Human Capital Expenses 

 (Dollars in Millions) 

 2018 2017 2016 2015 2014

Federal Student Aid Expense 

 Direct Loan Subsidy $ 4,369 $ 5,329 $ 16,119 $ (892) $ 8,126 

 FFEL Program Subsidy 1,228 3,411 10,235 (3,856) (6,585) 

 Perkins Loans, Pell and Other Grant 28,512 28,770 30,671 31,400 33,098 

 Salaries and Administrative 246 224 308 242 206 

Total $ 34,355 $ 37,734 $ 57,333 $ 26,894 $ 34,845 

The William D. Ford Federal Direct Loan (Direct Loan) Program is a direct-lending program in 

which loan capital is provided to students by the federal government through borrowings from 

the United States (U.S.) Department of Treasury. This program has expanded dramatically 

since the passage of the SAFRA Act, which was included in the Health Care and Education 

Reconciliation Act of 2010 (HCERA), under which no new loan originations were permitted to be 

made from the Federal Family Education Loan (FFEL) program after June 30, 2010, so that 

loans that may have previously been made through the FFEL program are now made through 

the Direct Loan Program. 

 

The FFEL Loan Program has originated no new loans since June 30, 2010, but its permanent 

budget authority allows it to continue to operate with state and private nonprofit guaranty 

agencies to honor loan guarantees and for the Department to pay interest supplements on 

outstanding loans by private lenders to eligible students. The FFEL Loan Program expenses 

include the Loan Participation Purchase, Loan Purchase Commitment, and ABCP Conduit 

expenses. 

Perkins Loan and Grant programs include the Federal Pell Grant Program that awards direct 

grants through participating institutions to undergraduate students with financial need. 

Participating institutions either credit the appropriated funds to the student’s school account or 

pay the student directly once per term. 

The Teacher Education Assistance for College and Higher Education (TEACH) Grant program 

awards annual grants to students who agree to teach in a high-need subject area in a public or 

private elementary or secondary school that serves low-income students. If the students do not 

satisfy their agreement to serve, the grants are converted to Direct Unsubsidized Loans. 

Federal Student Aid’s programs link with the overall initiatives of the Department in enhancing 

education—a fundamental stepping-stone to higher living standards for American citizens. 

While education is vital to national economic growth, education’s contribution is more than 
Fiscal Year 2018 Annual Report | Federal Student Aid 141

Required Supplementary Stewardship Information (Unaudited) 

increased productivity and incomes. Education improves health, promotes social change, and 

opens doors to a better future for children and adults. 

In the past, economic outcomes, such as wage and salary levels, have been determined largely 

by the educational attainment of individuals and the skills employers expect of those entering 

the labor force. Both individuals and society as a whole continue to place increased emphasis 

on educational attainment as the workplace has become increasingly technological, and 

employers now seek employees with the highest level of skills. For prospective employees, the 

focus on higher-level skills means investing in learning or developing skills through education. 

Like all investments, developing higher-level skills involves costs and benefits. 

Returns, or benefits, of investing in education come in many forms. While some returns accrue 

for the individual, others benefit society and the nation in general. Returns related to the 

individual include higher earnings, better job opportunities, and jobs that are less sensitive to 

general economic conditions. Returns, related to the economy and society, include reduced 

reliance on welfare subsidies, increased participation in civic activities, and greater productivity. 

Over time, the returns of developing skills through education have become evident. Statistics 

illustrate the rewards of investing in postsecondary education. 
142 Fiscal Year 2018 Annual Report | Federal Student Aid

Required Supplementary Information (Unaudited) 

Required Supplementary Information (Unaudited)

United States Department of Education 

Federal Student Aid 

Combining Statement of Budgetary Resources (Unaudited) 

For the Year Ended September 30, 2018 

(Dollars in Millions) 

Combined 

Health Education Assistance 

Loans 

Budgetary 

Non-Budgetary 

Credit Reform 

Financing Accounts Budgetary 

Non-Budgetary 

Credit Reform 

Financing Accounts 

Budgetary Resources: 

Unobligated Balance from Prior Year Budget Authority, Net $ 12,015 $ 15,859 $ - $ 25

Appropriations (Discretionary and Mandatory) 48,627 - - - 

Borrowing Authority (Discretionary and Mandatory) (Note 11) - 167,543 - - 

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) 393 61,439 6 8 

Total Budgetary Resources $ 61,035 $ 244,841 $ 6 $ 33

Memorandum (non-add) entries: 

Net adjustments to unobligated balance brought forward, Oct. 1 $ 901 $ (7,024) $ (6) $ - 

Status of Budgetary Resources: 

New Obligations Incurred and Upward Adjustments (Total) 

(Note 11) $ 46,002 $ 221,384 $ 1 $ 10 

Unobligated Balance, End of Year: 

 Apportioned, Unexpired Accounts 12,290 - - - 

 Unapportioned, Unexpired Accounts 2,168 23,457 5 23

Unexpired Unobligated Balance, End of year $ 14,458 $ 23,457 $ 5 $ 23

Expired Unobligated Balance, End of Year 575 - - - 

Unobligated Balance, End of Year (Total) $ 15,033 $ 23,457 $ 5 $ 23 

Total Status of Budgetary Resources $ 61,035 $ 244,841 $ 6 $ 33

Outlays, Net (Discretionary and Mandatory) 45,918 83,059 (5) 2 

Distributed Offsetting Receipts (-) (Note 11) (27,321) - (8) - 

Agency Outlays, Net (Discretionary and Mandatory) 

(Note 11) $ 18,597 $ 83,059 $ (13) $ 2
Fiscal Year 2018 Annual Report | Federal Student Aid 143

Required Supplementary Information (Unaudited) 

United States Department of Education 

Federal Student Aid 

Combining Statement of Budgetary Resources (Unaudited) 

For the Year Ended September 30, 2018 

(Dollars in Millions) 

Direct Student Loan Program Teach Program

Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts

Budgetary Resources: 

Unobligated Balance from Prior Year Budget Authority, Net $ 276 $ 472 $ 4 $ - 

Appropriations (Discretionary and Mandatory) 12,490 - 75 - 

Borrowing Authority (Discretionary and Mandatory) (Note 11) - 167,206 - 110

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) - 45,435 - 42

Total Budgetary Resources $ 12,766 $ 213,113 $ 79 $ 152

Memorandum (non-add) entries: 

 Net adjustments to unobligated balance brought forward, Oct. 1 $ 276 $ (5,786) $ - $ (2)

Status of Budgetary Resources: 

New Obligations Incurred and Upward Adjustments (Total) 

(Note 11) $ 12,490 $ 207,845 $ 75 $ 150 

Unobligated Balance, End of Year: 

 Apportioned, Unexpired Accounts - - - - 

 Unapportioned, Unexpired Accounts - 5,268 - 2 

Unexpired Unobligated Balance, End of year $ - $ 5,268 $ - $ 2 

Expired Unobligated Balance, End of Year 276 - 4 - 

Unobligated Balance, End of Year (Total) $ 276 $ 5,268 $ 4 $ 2 

Total Status of Budgetary Resources $ 12,766 $ 213,113 $ 79 $ 152

Outlays, Net (Discretionary and Mandatory) 12,014 92,745 64 (11) 

Distributed Offsetting Receipts (-) (Note 11) (26,539) - - - 

Agency Outlays, Net (Discretionary and Mandatory) 

(Note 11) $ (14,525) $ 92,745 $ 64 $ (11)
144 Fiscal Year 2018 Annual Report | Federal Student Aid

Required Supplementary Information (Unaudited) 

United States Department of Education 

Federal Student Aid 

Combining Statement of Budgetary Resources (Unaudited) 

For the Year Ended September 30, 2018 

(Dollars in Millions) 

Federal Family Education 

Loan Program

Perkins Loans 

and Grants

Administrative 

Funds

Budgetary 

Non-Budgetary 

Credit Reform 

Financing Accounts Budgetary Budgetary

Budgetary Resources: 

Unobligated Balance from Prior Year Budget Authority, Net $ 2,091 $ 15,362 $ 9,613 $ 31 

Appropriations (Discretionary and Mandatory) 2,596 - 31,787 1,679 

Borrowing Authority (Discretionary and Mandatory) (Note 11) - 227 - - 

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) 388 15,954 (1) - 

Total Budgetary Resources $ 5,075 $ 31,543 $ 41,399 $ 1,710

Memorandum (non-add) entries:

Net adjustments to unobligated balance brought forward, Oct. 1 $ (85) $ (1,236) $ 728 $ (12)

Status of Budgetary Resources: 

New Obligations Incurred and Upward Adjustments (Total) 

(Note 11) $ 2,678 $ 13,379 $ 29,053 $ 1,705 

Unobligated Balance, End of Year: 

 Apportioned, Unexpired Accounts 249 - 12,039 2 

 Unapportioned, Unexpired Accounts 2,148 18,164 15 - 

Unexpired Unobligated Balance, End of year $ 2,397 $ 18,164 $ 12,054 $ 2 

Expired Unobligated Balance, End of Year - - 292 3 

Unobligated Balance, End of Year (Total) $ 2,397 $ 18,164 $ 12,346 $ 5 

Total Status of Budgetary Resources $ 5,075 $ 31,543 $ 41,399 $ 1,710

Outlays, Net (Discretionary and Mandatory) 2,275 (9,677) 29,985 1,585 

Distributed Offsetting Receipts (-) (Note 11) (236) - (538) - 

Agency Outlays, Net (Discretionary and Mandatory) 

(Note 11) $ 2,039 $ (9,677) $ 29,447 1,585 
Fiscal Year 2018 Annual Report | Federal Student Aid 145

Required Supplementary Information (Unaudited) 

United States Department of Education 

Federal Student Aid 

Combining Statement of Budgetary Resources (Unaudited) 

For the Year Ended September 30, 2017 

(Dollars in Millions) 

Combined 

Health Education Assistance 

Loans 

Budgetary 

Non-Budgetary 

Credit Reform 

Financing Accounts Budgetary 

Non-Budgetary 

Credit Reform 

Financing Accounts 

Budgetary Resources: 

Unobligated Balance from Prior Year Budget Authority, Net $ 14,064 $ 10,389 $ 1 $ 38

Appropriations (Discretionary and Mandatory) 88,321 - - - 

Borrowing Authority (Discretionary and Mandatory) (Note 11) - 166,426 - - 

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) 1,037 68,906 7 8 

Total Budgetary Resources $ 103,422 $ 245,721 $ 8 $ 46 

Memorandum (non-add) entries: 

 Net adjustments to unobligated balance brought forward, Oct. 1 $ 3,680 $ (4,914) $ (5) $ - 

Status of Budgetary Resources: 

New Obligations Incurred and Upward Adjustments (Total) 

(Note 11) $ 92,308 $ 222,838 $ 2 $ 22 

Unobligated Balance, End of Year: 

 Apportioned, Unexpired Accounts 8,595 - - - 

 Unapportioned, Unexpired Accounts 2,093 22,883 6 24

Unexpired Unobligated Balance, End of year $ 10,688 $ 22,883 $ 6 $ 24

Expired Unobligated Balance, End of Year 426 - - - 

Unobligated Balance, End of Year (Total) $ 11,114 $ 22,883 $ 6 $ 24 

Total Status of Budgetary Resources $ 103,422 $ 245,721 $ 8 $ 46 

Outlays, Net (Discretionary and Mandatory) 84,986 40,490 (5) 14

Distributed Offsetting Receipts (-) (Note 11) (19,438) - (18) - 

Agency Outlays, Net (Discretionary and Mandatory) 

(Note 11) $ 65,548 $ 40,490 $ (23) $ 14
146 Fiscal Year 2018 Annual Report | Federal Student Aid

Required Supplementary Information (Unaudited) 

United States Department of Education 

Federal Student Aid 

Combining Statement of Budgetary Resources (Unaudited) 

For the Year Ended September 30, 2017 

(Dollars in Millions) 

Direct Student Loan Program Teach Program

Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts Budgetary

Non-Budgetary 

Credit Reform 

Financing Accounts

Budgetary Resources: 

Unobligated Balance from Prior Year Budget Authority, Net $ - $ 421 $ 4 $ (1)

Appropriations (Discretionary and Mandatory) 45,538 - 153 - 

Borrowing Authority (Discretionary and Mandatory) (Note 12) - 166,338 - 88

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) - 47,593 - 37

Total Budgetary Resources $ 45,538 $ 214,352 $ 157 $ 124

Memorandum (non-add) entries: $ 

 Net adjustments to unobligated balance brought forward, Oct. 1 $ - $ (4,578) $ - $ (3)

Status of Budgetary Resources: 

New Obligations Incurred and Upward Adjustments (Total) 

(Note 12) $ 45,538 $ 208,093 $ 153 $ 122 

Unobligated Balance, End of Year: 

 Apportioned, Unexpired Accounts - - - - 

 Unapportioned, Unexpired Accounts - 6,259 - 2 

Unexpired Unobligated Balance, End of year $ - $ 6,259 $ - $ 2 

Expired Unobligated Balance, End of Year - - 4 - 

Unobligated Balance, End of Year (Total) $ - $ 6,259 $ 4 $ 2 

Total Status of Budgetary Resources $ 45,538 $ 214,352 $ 157 $ 124

Outlays, Net (Discretionary and Mandatory) 44,675 62,002 152 (96) 

Distributed Offsetting Receipts (-) (Note 12) (18,849) - - - 

Agency Outlays, Net (Discretionary and Mandatory) 

(Note 12) $ 25,826 $ 62,002 $ 152 $ (96)
Fiscal Year 2018 Annual Report | Federal Student Aid 147

Required Supplementary Information (Unaudited) 

United States Department of Education 

Federal Student Aid 

Combining Statement of Budgetary Resources (Unaudited) 

For the Year Ended September 30, 2017 

(Dollars in Millions) 

Federal Family Education 

Loan Program

Perkins Loans 

and Grants

Administrative 

Funds

Budgetary 

Non-Budgetary 

Credit Reform 

Financing Accounts Budgetary Budgetary

Budgetary Resources: 

Unobligated Balance from Prior Year Budget Authority, Net $ 1,218 $ 9,931 $ 12,787 $ 54 

Appropriations (Discretionary and Mandatory) 11,156 - 29,897 1,577 

Borrowing Authority (Discretionary and Mandatory) (Note 12) - - - - 

Spending Authority from Offsetting Collections 

(Discretionary and Mandatory) 1,033 21,268 (1) (2)

Total Budgetary Resources $ 13,407 $ 31,199 $ 42,683 $ 1,629

Memorandum (non-add) entries: $

 Net adjustments to unobligated balance brought forward, Oct. 1 $ (81) $ (333) $ (3,786) $ (20)

Status of Budgetary Resources: 

New Obligations Incurred and Upward Adjustments (Total) 

(Note 12) $ 11,231 $ 14,601 $ 33,798 $ 1,586 

Unobligated Balance, End of Year: 

 Apportioned, Unexpired Accounts 99 - 8,493 3 

 Unapportioned, Unexpired Accounts 2,077 16,598 10 - 

Unexpired Unobligated Balance, End of year $ 2,176 $ 16,598 $ 8,503 $ 3 

Expired Unobligated Balance, End of Year - - 382 40

Unobligated Balance, End of Year (Total) $ 2,176 $ 16,598 $ 8,885 $ 43

Total Status of Budgetary Resources $ 13,407 $ 31,199 $ 42,683 $ 1,629

Outlays, Net (Discretionary and Mandatory) 10,008 (21,430) 28,576 1,580 

Distributed Offsetting Receipts (-) (Note 12) (370) - (201) - 

Agency Outlays, Net (Discretionary and Mandatory) 

(Note 12) $ 9,638 $ (21,430) $ 28,375 1,580 
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Independent Auditors’ Report

Office of Inspector General Audit Transmittal Letter 

Independent Auditors’ Report
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Independent Auditors’ Report

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Independent Auditors’ Report 
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Other Information

Other Information (Unaudited) 
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Other Information

Other Information 

Improper Payment Information Act (as Amended by IPERA and IPERIA) Reporting Details 

The Improper Payments Information Act of 2002 (IPIA; Pub. L. 107-300) as amended by the 

Improper Payments Elimination and Recovery Act of 2010 (IPERA; Pub. L. 111-204) and the 

Improper Payments Elimination and Recovery Improvement Act of 2012; Pub. L. 112-248) 

requires federal agencies to report information annually on improper payments to the President 

and Congress through the annual Performance and Accountability Reports or Annual Financial 

Reports. For improper payments information, FSA’s activities are part of an overall 

Departmental integrated reporting effort and reported within the Department’s AFR. Please 

refer to the Improper Payments Reporting Details narrative found in the Other Information 

section located within the Department's AFR. 

Summary of Financial Statement Audit and Management Assurances 

For details on FSA programs, please refer to the Analysis of Systems, Controls and Legal 

Compliance discussion found in the Management’s Discussion and Analysis section of this 

document as well as the Summary of Financial Statement Audit and Management Assurances

narrative located in the Other Information section of the Department’s AFR. 

Management Challenges 

For details on FSA Management Challenges, please refer to relevant items included in the 

Office of Inspector General’s Management Challenges for FY 2018 Executive Summary found 

in the Other Information section located within the Department’s AFR. 
166 Fiscal Year 2018 Annual Report | Federal Student Aid

Other Information 

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Fiscal Year 2018 Annual Report | Federal Student Aid 167

Appendices 

Appendices 
168 Fiscal Year 2018 Annual Report | Federal Student Aid

Appendices 

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Fiscal Year 2018 Annual Report | Federal Student Aid 169

Appendix A 

Discontinued Strategic Goals and Performance Metrics

Appendix A: Discontinued Strategic Goals and 

Performance Metrics

Discontinued Strategic Goals and Performance Metrics 

As part of its commitment to continuous performance improvement, FSA conducts frequent 

reviews of its strategic plan. During FY 2018, FSA reviewed its current strategic plan, the FSA 

FY 2015–2019 Strategic Plan and identified changes that would enhance FSA’s performance 

reporting and improve the delivery of its mission, “Funding America’s Future, One Student at a 

Time”. As a result of its findings, FSA refined its performance measurements and adjusted one 

of its performance metrics to reflect better information. The revised metric provides a more 

accurate measure of FSA’s performance. 

In FY 2018, FSA revised one performance metrics. The revised metric is presented and 

discussed as part of the Annual Performance Report section of this report. The metric and its 

results, as reported in prior years’ Annual Reports, are located in the tables below. 

Table 52: Discontinued Performance Metric 

Strategic Goal A: Improve quality of service for customers across the entire student aid 

life cycle. 

Performance Metric Description Change Type 

Performance Metric A.1 Percent of First-Time FAFSA Filers Among High School Seniors Improved 

information 

Table 53: Previous Results of Discontinued Performance Metric 

Performance Metric A.1: Percent of First-Time FAFSA Filers Among High School Seniors

Fiscal Year Actual Target Achieved Performance Result 

FY 2017 60.2%  Met 

FY 2016 57.5%  Not met 

FY 2015 60.5%  Met 

FY 2014 60.1%  Met 
170 Fiscal Year 2018 Annual Report | Federal Student Aid

Appendix B 

Glossary of Acronyms and Terms

Appendix B: Glossary of Acronyms and Terms

Acronym Description 

A

ABCP Conduit Asset-Backed Commercial Paper Conduit 

ACICS Accrediting Council for Independent Colleges and Schools 

ACSI American Customer Satisfaction Index 

AFR U.S. Department of Education FY 2018 Agency Financial Report 

APG Agency Priority Goal 

Annual Report Federal Student Aid FY 2018 Annual Report 

AY Award Year 

C

CPS Central Processing System 

Conduit Asset-Backed Commercial Paper Conduit 

COO Chief Operating Officer 

CSRS Civil Service Retirement System 

D

the Department U.S. Department of Education 

DHS U.S. Department of Homeland Security 

Direct Loan William D. Ford Federal Direct Loan 

DMCS Debt Management and Collection System 

DOL U.S. Department of Labor 

E

ECASLA Ensuring Continued Access to Student Loans Act of 2008 

EDWA Enterprise Data Warehouse and Analytics 

EEI Employee Engagement Index 

Extension Act Federal Perkins Loan Program Extension Act of 2015

F

FAFSA® Free Application for Federal Student Aid 

FASAB Financial Accounting Standards Advisory Board 

FCRA Federal Credit Reform Act of 1990 

FECA Federal Employees’ Compensation Act

Federal Funds Federal Student Loan Reserve Funds 

FERS Federal Employees Retirement System 
Fiscal Year 2018 Annual Report | Federal Student Aid 171

Appendix B 

Glossary of Acronyms and Terms

Acronym Description 

F

FEVS Federal Employee Viewpoint Survey 

FDMS Feedback and Dispute Management System 

FDMS Top Five Top five most frequent categories and subcategories of FDMS feedback 

FFEL Federal Family Education Loan 

FMFIA Federal Managers’ Financial Integrity Act of 1982

FPRD Final Program Review Determinations 

FSA Federal Student Aid 

FSA FY 2015–19 

Strategic Plan 

Federal Student Aid: Strategic Plan, FY 2015–19

FSEOG Federal Supplemental Educational Opportunity Grants

FY Fiscal Year 

G

GA Guaranty Agency 

GAAP Generally Accepted Accounting Principles 

GenAssist General Assistance 

H

HCERA Health Care and Education Reconciliation Act of 2010 

HEA Higher Education Act of 1965, as amended

HEAL Health Education Assistance Loan

HHS U.S. Department of Health and Human Services 

I

IDR Income Driven Repayment 

IRS Internal Revenue Service 

IT Information Technology 

L

Loan Servicing Top 

Three 

Top three categories/subcategories of loan servicing-related cases 

LOB Line of Business 

M

Met Performance result met or exceeded target 
172 Fiscal Year 2018 Annual Report | Federal Student Aid

Appendix B 

Glossary of Acronyms and Terms

Acronym Description 

N

N/A 

Performance result is not applicable because the performance metric 

was not developed, the performance metric was not implemented, or the 

required data were not available in time for inclusion. 

Next Gen FSA Next Generation Financial Services Environment 

Next Gen PPO Next Generation Partnership Participation and Oversight 

NFP Not-For-Profit 

Not met Performance result did not meet target 

NSLDS National Student Loan Data System 

O

OCTS Ombudsman Case Tracking System 

OIG Office of Inspector General 

OMB U.S. Office of Management and Budget 

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

Management and Internal Control

OPM U.S. Office of Personnel Management 

OPR Organizational Performance Review 

P

PAYE Pay as You Earn 

PBO Performance-Based Organization 

PCA Private Collection Agency 

Pell Grant Federal Pell Grant Program 

POE Principles of Excellence 

PSLF Public Service Loan Forgiveness 

Pub.L Public Law 

S

SAFRA Student Aid and Fiscal Responsibility Act 

SAVE Systematic Alien Verification for Entitlements 

SBR Statement of Budgetary Resources 

School Top Five Top five categories/subcategories for school-related feedback 

Secretary Secretary of Education 

SSAE Statement on Standards for Attestation Engagements 

SOC1 Service Organization Control 1 
Fiscal Year 2018 Annual Report | Federal Student Aid 173

Appendix B 

Glossary of Acronyms and Terms

Acronym Description 

T

TEACH Teacher Education Assistance for College and Higher Education Grant 

TEPSLF Temporarily Expanded Public Service Loan Forgiveness 

Title IV Title IV of the Higher Education Act of 1965, as amended 

TIVAS Title IV Additional Servicers 

TMT Transformation Management Team 

TOP Treasury Offset Program 

TPD Total and Permanent Disability 

Treasury U. S. Department of the Treasury 

U

U.S. United States 

V

VA United States Department of Veterans Affairs 
174 Fiscal Year 2018 Annual Report | Federal Student Aid

Appendix C 

Availability of the Federal Student Aid Annual Report 

 Appendix C: Availability of the Federal Student Aid 

Annual Report

The Federal Student Aid FY 2018 Annual Report and the Annual Reports from prior years are

available on the following websites: 

FSA: StudentAid.gov/strategic-planning-reporting

The Department: http://www.ed.gov/about/reports/annual/index.html

The Federal Student Aid: Strategic Plan, Fiscal Years 2015–19 and the strategic plans from 

prior years are also available at StudentAid.gov/strategic-planning-reporting

Stay connected to Federal Student Aid through social media: 

 Visit the FSA website: StudentAid.gov

 Like FSA on Facebook : Facebook.com/FederalStudentAid

 Follow FSA on Twitter : @FAFSA

 Find FSA on YouTube : YouTube.com/user/FederalStudentAid
Fiscal Year 2018 Annual Report | Federal Student Aid 175

Acknowledgements 

Acknowledgements 

The FSA FY 2018 Annual Report was prepared with the energies and talents of many 

Federal Student Aid employees. To these dedicated individuals, the Chief Operating 

Officer and Chief Financial Officer would like to offer their sincere appreciation and 

recognition. 

In particular, we would like to recognize the following Federal Student Aid offices for their 

contributions: 

 Finance Office 

 Strategic Planning and Reporting Division 

 Office of the Ombudsman 

 Office of Communications and Outreach 

 COO Front Office 

 Technology Office 

We also offer our sincerest thanks and acknowledgement to the staff of the following 

Department of Education offices for their contributions: 

 Office of the Chief Financial Officer 

 Budget Service 

 Office of the Secretary 

 Office of Legislative and Congressional Affairs 

 Office of Chief Information Officer 

We would also like to acknowledge the Office of the Inspector General and KPMG LLP

for the professional manner in which they conducted the audit of the Fiscal Year 2018

Financial Statements. 

The Federal Student Aid FY 2018 Annual Report

Federal Student Aid 

A Principal Office of the U.S. Department of Education 

Finance Office 

November 2018