FY 2022 AGENCY FINANCIAL REPORT 10 U.S. DEPARTMENT OF EDUCATION

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Financial Highlights

The financial statements, notes, and underlying business 

processes, systems, and controls are audited by an 

independent accounting firm with audit oversight provided 

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

the Department received a disclaimer of opinion on its 

FY 2022 financial statements. The financial statements 

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

Independent Auditors’ Report begins on page 104.

The financial statements are prepared to report the financial 

position and results of operations of the reporting entity, 

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

The statements are prepared from the Department’s 

books and records in accordance with generally accepted 

accounting principles for federal entities and the formats 

prescribed by OMB. Reports used to monitor and control 

INTRODUCTION

This section provides summarized information and analyses 

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

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

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

information contained in the financial statements and 

related notes.

The Department consistently produces complete, accurate, 

and timely financial information. The Department’s 

financial statements and notes are prepared in accordance 

with accounting principles generally accepted in the United 

States for federal agencies issued by the Federal Accounting 

Standards Advisory Board and the format and content 

specified by Office of Management and Budget (OMB) 

Circular No. A-136, Financial Reporting Requirements. 

Financial Statement Lines 

with Significant Changes

Amount Total Changes Changes Due to COVID-19

 FY 2022 FY 2021 Amount Percentage Amount Percentage

Balance Sheets

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

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

Loan Receivables, Net - Federal Family Education 

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

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

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

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

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

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

Loan Guarantee Liabilities 10.7 7.5 3.2 42.7% - 0.0%

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

Statements of Net Cost

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

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

Statements of Budgetary Resources

Unobligated Balance from Prior Year Budget 

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

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

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

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

Outlays, Net 668.5 267.1 401.4 150.3% 437.9 163.9%

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

Table 1. Key Financial Statement Changes

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

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

The broad-based debt relief announced on 

August 24, 2022, is expected to impact up 

to 43 million borrowers. Nearly 8 million 

borrowers may be eligible to receive one-time 

broad-based debt relief automatically because 

relevant income data is already available to the 

Department. If all borrowers claim relief they are 

entitled to, this action will provide relief to up to

43 million borrowers.

In addition, because of the other debt relief 

actions taken by the Department:

•	1.1 million borrowers have already received 

discharges related to borrower defense or 

school closures.

•	More than 1 million borrowers have already 

received additional credit toward forgiveness 

through the temporary changes to the 

PSLF program. 

•	More than 425,000 borrowers received loan 

relief due to a total and permanent disability.

budgetary resources are prepared from the same books 

and records. The financial statements should be read with 

the understanding that they are for a component of the 

U.S. government.

FINANCIAL STATEMENT IMPACTS OF 

DEBT RELIEF ACTIONS 

During FY 2022, the Department announced significant 

actions to provide relief to federal student loan borrowers, 

including extensions to the student loan repayment pause, 

and several additional debt relief actions. Debt relief actions 

that occurred or were announced during FY 2022 include:

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

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

recipients with loans held by the Department and up 

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

recipients. Applications for this debt relief launched on 

October 17, 2022.

• Revamping the Public Service Loan Forgiveness (PSLF) 

program, including temporary changes that allow 

student borrowers to get credit for past periods of 

repayment on loans that would not otherwise qualify for 

PSLF, including payments made on loans from FFEL 

Program, Perkins Loan Program, and other federal 

student loans. Additionally, the temporary changes allow 

past periods of repayment to count for certain types of 

deferment or forbearance periods, or if the borrowers 

were not on a qualified repayment plan. The changes 

also eliminate barriers for military service members 

to receive PSLF. The temporary changes expired on 

October 31, 2022.

• Approving borrower defense and closed school 

discharges for borrowers whose institutions took 

advantage of them, including borrowers who attended 

Corinthian Colleges Inc., the ITT Technical Institute, 

Marinello Schools of Beauty, Westwood College, 

DeVry University, Minnesota School of Business and/or 

Globe University.

• Providing relief for borrowers who have a total and 

permanent disability.

Although forgiveness of loan principal and interest 

associated with some of these actions will not occur until 

future fiscal years, these actions have already resulted in 

significant increases in cancellations of loan principal and 

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

As shown in Figure 1, cancellations of loan principal and 

interest increased 181% during FY 2022, primarily for the 

Direct Loan Program. A large portion of cancellations of 

loan principal and interest during FY 2022 were associated 

with the PSLF program and discharges for total and 

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

of total cancellations, respectively. Other notable types of 

cancellation activity include borrower defense discharges, 

cancellations of loan principal and interest for loans in 

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

 

 

Figure 1. Loan Cancellations 

(Dollars in Billions) FY 2022

Direct Loan 

Program FFEL Program

Loan 

Cancellation Type Principal Interest Principal Interest Other Total

Discharges for 

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

Discharges due 

to death of the 

borrower

766 60 34 6 0 866 

Discharges for total 

and permanent 

disability

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

Public service loan 

forgiveness 13,036 594 0 0 0 13,630 

Borrower defense 

discharges 877 0 146 3 0 1,026 

Cancellation of loans 

in default status 447 72 172 134 6 831 

Other 310 (25) 9 (2) 69 361 

Total Loan 

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

FY 2022 Loan Cancellations

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

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

FINANCIAL STATEMENT IMPACTS OF 

COVID-19 ACTIVITIES 

Many of the significant changes to the Department’s 

financial statements resulted from the impacts due to 

coronavirus disease 2019 (COVID-19) activities. Congress 

passed multiple COVID-19 relief bills in FY 2020 and 

FY 2021, including the following that provided a total 

of $282.5 billion of direct appropriation funding for 

educational purposes:

• Coronavirus Aid, Relief, and Economic Security Act of 

2020 (CARES Act) $31.0 billion

• Coronavirus Response and Relief Supplemental 

Appropriations Act of 2021 (CRRSAA) $82.0 billion

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

These appropriations funded a variety of programs 

administered primarily through grant programs. The largest 

component of the education funding provided by the 

COVID-19 relief appropriations established the Education 

Stabilization Fund which included (1) the Elementary and 

Secondary School Emergency Relief Fund, (2) the Higher 

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

Emergency Education Relief Fund, and (4) funds for 

outlying areas. 

The COVID-19 relief legislation and administrative actions 

also provided support for student loan borrowers by:

• Providing broad-based debt relief to address the financial 

harms of the pandemic by smoothing the transition 

back to repayment and helping borrowers at the 

highest risk of delinquencies or default once payments 

resume. Applications for this debt relief launched on 

October 17, 2022.

• Temporarily suspending nearly all federal student loan 

payments, interest free. 

• Authorizing Guaranty Agencies to reimburse themselves 

from the Federal Student Loan Reserve Fund for lost 

revenue that resulted from student loan repayment 

deferrals. This reimbursement covers the share of what a 

guaranty agency might have reasonably collected during 

the pandemic, but for the suspension.

• Making temporary changes to the PSLF program 

through a Limited PSLF Waiver to allow student 

borrowers to get credit for payments made while 

working for a qualifying employer, regardless of loan 

type or repayment plan. 

• Addressing issues with income-driven repayment (IDR) 

payment counting by allowing any borrower who 

made IDR-qualifying payments to count toward IDR, 

regardless of repayment plan. 

Funding for each of these actions was provided through 

indefinite appropriations. Cost impacts of the COVID-19 

loan modifications were recorded as loan modifications 

and are a component of subsidy expense, which reduced 

the overall loan receivable balances for the student loan 

programs. Detailed explanations of the COVID-19 Direct 

Loan Program loan modifications are provided in the 

Analysis of Direct Loan Program Subsidy Expense section 

beginning on page 21 and in Note 5 of the financial 

statements beginning on page 66.

The direct and indirect funding stemming from the 

combined COVID-19 relief legislation and administrative 

actions is summarized in Figure 2. Obligated and 

unobligated COVID-19 funds remaining to be disbursed as 

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

undisbursed funds are for the Elementary and Secondary 

School Emergency Relief (ESSER) Fund. While states 

may have made subawards for all of their ESSER funding, 

subawardees may still be in the process of completing 

their obligations and requesting reimbursement from the 

states who will then in turn drawdown the remaining 

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Elementary and Secondary School Emergency Relief 

(ESSER) Fund—Funds provided for state educational 

agencies (SEAs) and local educational agencies (LEAs) 

to support continued learning for K-12 students whose 

educations have been disrupted by COVID-19, and grants 

for the specific needs of homeless children and youth to 

address the challenges of COVID-19.

Higher Education Emergency Relief Fund (HEERF) —

Funds provided for institutions of higher education (IHEs) 

to address needs directly related to COVID-19, including 

transitioning courses to distance education and granting 

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

course materials, health care, and child care. 

Governor’s Emergency Education Relief (GEER) 

Fund—Grants provided to state governors to ensure 

education continues for students of all ages impacted by the 

COVID-19 national emergency. 

Outlying Areas, Bureau of Indian Education (BIE), 

and Discretionary Grants—Funds provided for outlying 

areas and discretionary grants to states with the highest 

COVID-19 burdens. 

Figure 2. COVID-19 Funding Flow

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

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

Figure 3. Assets by Type

Figure 4. Liabilities by Type

BALANCE SHEETS

The consolidated balance sheets present, as of a specific 

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

total assets, total liabilities, and net position.

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

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

relate to loans receivables, $858.6 billion, which comprised 

73.0 percent of all assets. Direct loans comprise the largest 

share of these receivables. Analysis of the net change 

in Direct Loan Program receivable balances begins on 

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

which was Fund Balance with Treasury, $317.0 billion, 

which decreased by $34.9 billion during FY 2022, largely 

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

September 30, 2022.

The Department’s liabilities totaled $954.9 billion as 

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

the Department’s liabilities are also associated with loan 

programs, primarily amounts borrowed from the U.S. 

Department of the Treasury (Treasury) to fund student 

loans. Debt associated with the Direct Loan Program 

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

of debt associated with the Direct Loan Program begins on 

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

ANALYSIS OF DIRECT LOAN PROGR AM 

RECEIVABLES, NET

Figure 5 shows the changes in the Direct Loan Program 

receivable components over the past five years. The principal 

amount has continued to grow as the Direct Loan Program 

has originated all new federal loans since July 2010, when 

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

the rate of increase in principal slowed as enrollment 

stagnated and sometimes declined. Also, accrued interest 

amounts had been increasing as more Direct Loans were 

moving into active repayment statuses, and the rate of 

enrollment in income-driven repayment plans that allow for 

payments to be lower than interest accrual had increased. 

The rate of increase in principal has slowed in recent years 

as the Direct Loan program has disbursed fewer than $95 

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

stagnant, and in some cases declining, enrollment. Even 

so, new loan disbursements continue to exceed overall loan 

principal repayments—student loan borrowers have many 

options to stretch out their repayment terms and reduce their 

monthly payments. The student loan repayment deferrals 

implemented in response to COVID-19 caused the rate of 

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

2022 compared to previous years.

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

Department’s financial statements report the value of direct 

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

their future cash flows, discounted at a fixed rate established 

based on Treasury securities. The difference between the 

recorded principal and interest balance and the net present 

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

which can be positive or negative.

A negative allowance for subsidy balance means that the 

present value of funds expected to be recovered is less than 

the principal outstanding. The increase in the negative 

allowance from FY 2018 through FY 2022 is due primarily 

to higher subsidy costs, the main causes being high 

participation in IDR plans and the COVID-19 deferrals of 

student loan repayments. In addition to these factors, the 

increase in the negative allowance for subsidy during FY 

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

debt relief (see discussion in the Analysis of Direct Loan 

Program Subsidy Expense section on page 21). 

 

Figure 5. Components of Direct Loan Receivables, Net

(Dollars in Billions)

Direct Loan 

Component 

(Dollars in 

Billions)

Fiscal Year

2018 2019 2020 2021 2022

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

Rate of Increase 

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

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

Allowance for 

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

Total No. of 

Direct Loan 

Borrowers 

(in Millions)

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

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

Table 2 shows the payment status of the direct loan 

principal and interest balances outstanding over the past 

five years. The Current Repayment category consists of 

loans that are being paid back on time, including the 

current portion of loans being repaid pursuant to IDR 

plans. Loans in the Delinquent category are past due 

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

includes loans that are more than 360 days delinquent 

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

and loans in disability status. 

While technical default is 271 days delinquent, default is 

defined as 361 days delinquent for reporting purposes.

The balances reported for Current Repayment and 

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

significantly lower than other years, primarily due to the 

COVID-19 student loan repayment deferrals that placed 

loans in forbearance and subsequently cured delinquencies. 

As a result of the COVID-19 student loan repayment 

deferrals, the delinquent balances are now zero.

While the COVID-19 student loan repayment deferrals 

suspended payments for federally owned student loans, 

some borrowers elected to continue to make student loan 

payments. In addition to improving borrowers’ overall 

financial health, factors that may have influenced borrowers 

to continue making payments on their student loans during 

forbearance include the following:

• Borrower flexibility to make payments or suspend

payments as their financial circumstances permitted

without notification to the loan servicer.

• Potential earlier loan payoff.

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

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

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

principal. During the pause, this quickly increased to

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

each dollar goes toward principal).

• Potentially improving the borrower’s credit rating

by reducing the student debt balance. The relative

strength of FSA borrower payment activity has been

driven, in part, by efforts of borrowers to improve

their credit stance to purchase homes during the

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

Department of Housing and Urban Development and

Federal Housing Authority implemented nontemporary

policy changes to improve the underwriting stance of

federal student loan borrowers.

• Potentially improved overall borrower financial health

and reduced financial stress by reducing student debt.

Loan Status

Fiscal Year

2018 2019 2020** 2021** 2022**

Total No. of 

Direct Loan 

Recipients 

(in Millions)

34.2 35.1 35.9 37.0 37.1

Total Dollar 

Amount of 

Direct Loans 

Outstanding

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

Current 

Repayment1 $ 531.20 $ 594.70 $ 14.20 $ 16.20 $ 11.80 

% Current 

Repayment 46.0% 47.6% 1.1% 1.2% 0.8%

In School, 

Grace Period, 

and Education 

Deferments

$ 295.50 $ 294.80 $ 282.80 $ 271.90 $ 259.50 

% In School, 

Grace Period, 

and Education 

Deferments

25.6% 23.6% 21.5% 19.7% 18.2%

Forbearance 

and 

Noneducation 

Deferments

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

% Forbearance 

and 

Noneducation 

Deferments

10.5% 10.7% 67.4% 70.2% 72.8%

Delinquent 

(Past Due 

31–360 Days)

$ 92.50 $ 90.80 $ 0.50 $ 0.00 $ 0.00

% Delinquent 

(Past Due 

31–360 Days)

8.0% 7.3% 0.0% 0.0% 0.0%

Default/

Bankruptcy/

Other*

$ 115.00 $ 134.60 $ 131.90 $ 122.80 $ 117.50 

% Default/

Bankruptcy/

Other*

10.0% 10.8% 10.0% 8.9% 8.2%

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

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

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

of loans on income-driven repayment plans.

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

Portfolio (principal and interest)

**Student loan payment pause in effect from March 2020 

Table 2. Payment Status of Direct Loan Principal and 

Interest Balance

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

ANALYSIS OF DEBT ASSOCIATED WITH 

LOANS, DIRECT LOAN PROGR AM 

The Department borrows funds to disburse new loans 

and pay credit program outlays and related costs. The 

Department repays Treasury after consideration of cash 

position and the liability for future cash outflows. 

The Department’s total debt associated with the 

Direct Loan Program was $837.4 billion as of 

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

from FY 2021. Total debt decreased largely because the 

Department received subsidy appropriations for loan 

modifications during FY 2022 and used these resources to 

repay debt to Treasury.

Figure 6 shows the Direct Loan Program cumulative 

borrowing and repayment activity that resulted in the debt 

amount on the balance sheet. A diagram depicting the 

Direct Loan Program financing process is displayed with 

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

 

Figure 6. Components of Direct Loan 

Receivables, Net 

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

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

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

Fiscal Year 2018 2019 2020 2021 2022

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

Borrowing from Treasury 155.3 137.6 116.9 120.0 162.8 

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

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

Interest Earned from Treasury 3.9 4.1 4.8 4.2 7.6 

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

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

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

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

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

Stafford Subsidized 20.3 20.0 19.1 18.3 15.7 

Stafford Unsubsidized 49.0 48.1 46.1 44.1 45.5 

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

Consolidation1 41.6 39.8 30.4 21.5 36.9 

Loan Collections2 84.9 91.3 69.9 37.2 45.5 

Principal 63.5 67.0 55.3 33.3 41.3 

Interest 19.5 22.4 12.9 2.3 2.6 

Fees 1.9 1.9 1.7 1.6 1.6 

* Numbers may not add due to rounding.

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

1

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

2

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

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

 

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

STATEMENTS OF NET COST

The consolidated statements of net cost report the 

Department’s components of the net cost of operations for 

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

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

from activities. Gross costs are composed of the cost of 

credit and grant programs, and operating costs. Exchange 

revenue is primarily interest earned on credit program 

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

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

1 and discussed in more detail below, significant changes in 

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

to loan modifications and reestimates (subsidy expense) and 

grant expenses related to COVID-19 activities. 

 

Figure 9. Primary Components of Gross Costs and Earned Revenue 

(Dollars in Billions)

 

 

Figure 8. Gross Costs & Earned Revenue 

(Dollars in Billions)

GROSS COSTS AND EARNED REVENUE BY TYPE

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

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

subsidy amortization. 

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

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

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

ANALYSIS OF DIRECT LOAN PROGR AM 

SUBSIDY EXPENSE 

The Department’s gross costs can fluctuate significantly 

each year as a result of changes in estimated subsidy 

expenses—primarily subsidy expenses for direct loans. The 

primary components of subsidy expenses include year-end 

subsidy re-estimates and loan modifications. 

Subsidy expenses are estimates of the present value cost 

of providing direct loans but exclude the administrative 

costs of issuing and servicing the loans. The Department 

estimates subsidy expenses using a set of econometric and 

financial models as well as cash flow models. 

The Department estimates subsidy expenses annually for 

new loans disbursed in the current year and updates the 

previous cost estimates for outstanding loans disbursed in 

prior years based on various updated assumptions (subsidy 

re-estimates). The Department also updates subsidy 

expenses due to changes to terms of existing loans (subsidy 

modifications). Figure 10 shows these three components of 

the Direct Loan Program subsidy expense for the past five 

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

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

costs, and assumptions concerning borrowers’ selection of 

repayment plans impact the estimated cost calculation and 

determine whether the individual components and overall 

subsidy expense are positive or negative. 

The Direct Loan Program subsidy expense for new loans 

disbursed in the current year was negative from FY 2018 

through FY 2019 primarily because lending interest rates 

charged were greater than the historically low rates at which 

the Department borrowed from Treasury. In practical 

terms, a negative subsidy occurs when the interest and/

or fees charged to the borrower are more than sufficient to 

cover the interest on Treasury borrowings and the costs of 

borrower default. Subsidy expense for new loans disbursed 

since FY 2020 has been positive due to rising enrollment 

in IDR plans and a reduction in projected future income 

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

higher expected cost to the government for issuing student 

loans by reducing the amount that many borrowers will 

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

loan forgiveness benefit for amounts remaining after 20 or 

25 years, particularly common among high-debt borrowers.

The Department updates its subsidy cost estimates each 

year for outstanding loans disbursed in prior years using 

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

of Direct Loan subsidy re-estimates during FY 2022 was 

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

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

Figure 10. Direct Loan Program Subsidy

(Dollars in Billions)

2018 2019 2020 2021 2022

Subsidy Expense for New 

Loans Disbursed in the 

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

Subsidy Re-estimates 7.4 64.5 56.1 24.0 (21.9)

Loan Modifications 0.1 - 39.7 68.3 400.0 

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

Subsidy Re-estimate Components 2022 2021

Income-Driven Repayment (IDR) 

Model Changes $ (24.0) $ 22.4 

Prior Year's Cohort Assumption Changes 7.7 15.5 

Interest on the Re-Estimate (0.4) 5.0 

Default 3.0 (6.4)

Repayment Plan Selection (3.0) 0.7 

Discount Rates (16.6) (11.5)

Non-IDR Discharges 2.9 3.2 

Deferment And Forbearance 2.6 (4.8)

Collections (1.7) 1.5 

Interactive Effects 7.4 (1.6)

Other Assumptions 0.2 - 

Total Direct Loan Program Subsidy 

Re-estimates $ (21.9) $ 24.0 

Modification Costs

Loan Modification Components 2022 2021

Student Loan Repayment Deferrals $ 48.6 $ 49.5 

Broad-Based Debt Relief 337.3 - 

Shift to Business Process Operations (9.1) - 

PSLF Waiver 9.1 - 

IDR Waiver 14.1 - 

Total and Permanent Disability - 18.7 

Faith-Based Final Rule - 0.1 

Total Direct Loan Program 

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

 

Figure 11. Grant Expenses by Program Areas 

(Dollars in Billions)

COVID-19 Grant Expenses

(Dollars in Millions)

COVID-19 Grants FY 2022 FY 2021

Education Stabilization Fund:

Elementary and Secondary School 

Emergency Relief Fund

$ 48,502 $ 20,036 

Higher Education Emergency 

Relief Fund

 25,976 31,407 

Governor’s Emergency Education 

Relief Fund

 2,654 1,341 

Outlying Areas & Discretionary Grants 312 130 

Total Education Stabilization Fund 77,444 52,914 

Other COVID-19 Grants 865 66 

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

The Department also updates previous cost estimates 

based on any new legislation or other government actions 

that change the terms of existing loans and alter the 

estimated subsidy cost. This process is referred to as a 

modification. During FY 2022, the Department recorded 

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

table below Figure 10 also identifies the components of 

modifications that were recorded during FY 2022. More 

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

financial statements beginning on page 56.

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

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

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

the amount of accrued downward re-estimates of subsidy 

expense that will be transferred to Treasury in the 

succeeding fiscal year upon receipt of authority from OMB. 

More detail on Subsidy Due to Treasury can be found in 

the notes to the financial statements beginning on page 56.

GRANT EXPENSES

As shown in Figure 11, overall grant expenses changed 

primarily because of COVID-19 grants. More detail 

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

the financial statements beginning on page 87. In addition 

to COVID-19 funded grants, the Department has more 

than 100 other grant and loan programs. The three largest 

of these grant program areas are:

• Pell Grants—Provides need-based grants to students 

to promote access to postsecondary education. Grant 

amounts are dependent on the student’s expected family 

contribution, the cost of attendance (as determined by 

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

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

largest source of grant aid for postsecondary education.

• Education for the Disadvantaged—Primarily consists 

of grants that provide financial assistance through 

SEAs to LEAs and public schools with high numbers 

or percentages of poor children to help ensure that all 

children meet challenging state academic content and 

student academic achievement standards. The program 

also provides funds to states to support educational 

services to children of migratory farmworkers and fishers 

and to neglected or delinquent children and youth 

in state-run institutions, attending community day 

programs, and in correctional facilities.

• Special Education—Primarily consists of Individuals 

with Disabilities Education Act grants that provide 

funds by formula to states to assist them in providing 

a free appropriate public education in the least 

restrictive environment for children with disabilities 

ages 3 through 21 and assists states in providing early 

intervention services for infants and toddlers from 

birth through age 2 and their families. Also provides 

discretionary grants to IHEs and other nonprofit 

organizations to support research, demonstrations, 

technical assistance and dissemination, technology, 

personnel development and parent training, and 

information centers. 

In addition to student loans and grants, the Department 

offers other discretionary grants under a variety of 

authorizing legislation, with approximately 90 percent of 

nonstudent aid funds awarded by formula and 10 percent 

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

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

STATEMENTS OF CHANGES IN 

NET POSITION

The consolidated statements of changes in net position 

report the beginning net position, the summary effect of 

transactions that affect net position during the fiscal year, 

and the ending net position. Net position is the residual 

difference between assets and liabilities and consists of 

unexpended appropriations and cumulative results of 

operations. Unexpended appropriations include undelivered 

orders and unobligated balances for grant and administrative 

operations. Cumulative results of operations represent the 

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

revenues and financing sources.

STATEMENTS OF BUDGETARY 

RESOURCES

The combined statements of budgetary resources present 

information on how budgetary resources were made 

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

Information in the statements is based on budgetary 

transactions as prescribed by OMB and Treasury.

Figure 12 shows the components of the Department’s 

budgetary resources, which totaled $902.0 billion for FY 

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

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

increase in appropriations received totaling $120.4 billion, 

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

indirect appropriations for COVID-19 activity.

 

Figure 12. Components of Budgetary Resources 

(Dollars in Billions)

Other significant changes to the Department’s combined 

statements of budgetary resources include the following:

• Unobligated Balances from Prior Year Budget Authority 

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

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

funded balances.

• New Obligations and Upward Adjustments (Total) 

decreased by $186.2 billion, or 29.7 percent, due 

primarily to a decrease of $190.8 billion for grant 

obligations funded by the COVID-19 appropriations 

and loan modifications for COVID-19 student 

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

PSLF Waivers.

• Unobligated Balance, End of Year increased $26.2 

billion, or 42.2 percent. This increase was largely due 

to a $42.5 billion increase in unapportioned balances 

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

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

MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)

Table 3. Outlays, Distributed Offsetting Receipts, and 

Disbursements, Net

(Dollars in Billions)

FY 2022 FY 2021

Outlays, Net

Credit Programs $510.0 $141.7 

Grants 155.3 122.4 

Contractual Services 2.5 2.3 

Personnel Compensation and Benefits 0.7 0.7 

Total Outlays, Net $668.5 $267.1 

Distributed Offsetting Receipts

Negative Subsidies and Downward 

Re-estimates Of Subsidies (28.2) (5.6)

Repayment of Perkins Loans and 

Capital Contributions (0.7) (0.9)

Other (0.2) (0.1)

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

Disbursements, Net

Direct Loan Program

Gross Disbursements $177.6 $143.8 

Offsetting Collections (526.6) (171.5)

Total Direct Loan Program 

Disbursements, Net (349.0) (27.7)

FFEL Program

Gross Disbursements 10.3 8.3 

Offsetting Collections (43.6) (19.2)

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

Other Loan Programs

Gross Disbursements 0.5 0.7 

Offsetting Collections (0.5) (2.0)

Total Other Loan Program 

Disbursements, Net - (1.3)

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

The combined statements of budgetary resources also 

present the Department’s summary disbursement and 

collection amounts shown in Table 3.

Outlays, Net is comprised of gross outlays and offsetting 

collections in the Department’s budgetary funds. Outlays, 

net increased $401.4 billion (150.3 percent) due primarily 

to an increase of $368.3 billion in credit programs 

outlays. Total credit program outlays during FY 2022, 

$510.0 billion, included $461.1 billion associated with 

upward loan modifications.

Distributed Offsetting Receipts primarily represents 

amounts paid from the Direct Loan Program and FFEL 

Program financing accounts to Treasury General Fund 

receipt accounts for downward current fiscal year executed 

subsidy re-estimates and modifications, and negative 

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

FY 2021 was attributed to the Direct Loan Program. 

Disbursements, Net is comprised of gross outlays and 

offsetting collections in the Department’s credit program 

nonbudgetary financing funds. Of the $342.4 billion net 

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

attributed to the Direct Loan Program.