oversight

FY 2015 Annual Report for Federal Student Aid

Published by the Department of Education, Office of Inspector General on 2015-11-13.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

ANNUAL REPORT FY 2015
United States Department of Education
Arne Duncan
Secretary

Federal Student Aid
James W. Runcie
Chief Operating Officer

Finance Office
Jay Hurt
Chief Financial Officer

November 13, 2015

About This Report

Federal Student Aid, a principal office of the United States Department of Education, is
required by legislation to produce an Annual Report, which details Federal Student Aid’s
financial and program performance. The Federal Student Aid Annual Report FY 2015 is a
comprehensive document that provides an analysis of Federal Student Aid’s financial and
program performance results for Fiscal Year 2015. The report enables the President,
Congress, and the public to assess the organization’s performance relative to its mission, and
determine whether Federal Student Aid has demonstrated accountability for the resources
entrusted to it.

This report presents information about Federal Student Aid’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 Amendments of 1998
•   Reports Consolidation Act of 2000
•   Improper Payments Information Act of 2002, amended
•   Federal Information Security Management Act of 2002
•   Government Performance and Results Modernization Act of 2010
•   Digital Accountability and Transparency Act of 2014

The United States Department of Education produces the U.S. Department of Education
FY 2015 Agency Financial Report. This report provides a comprehensive view of the
Department’s stewardship over its resources and includes a summary of the information
contained in the Federal Student Aid Annual Report FY 2015.


                               Federal Student Aid Annual Report FY 2015
                                           Letter From the Chief Operating Officer of Federal Student Aid


Letter From the Chief Operating Officer of Federal Student Aid



  Dear Federal Student Aid Colleagues, Partners, and Customers:

  It is an honor to present to you the Fiscal Year (FY) 2015
  Annual Report for Federal Student Aid. This report
  contains the results of Federal Student Aid’s performance
  throughout the past year and demonstrates our efforts to
  increase customer service, expand data analytics,
  improve cybersecurity, enhance borrower
  communications, and ensure strong consumer
  protections.

  Federal Student Aid witnessed a number of significant
  organizational milestones in FY 2015. The federal
  student loan portfolio grew to more than $1.2 trillion,
  representing an increase of over 7 percent compared to
  FY 2014. In total, Federal Student Aid delivered over
  $128 billion in aid to almost 12 million students at over
  6,100 schools this past fiscal year. Our administration
  continues to strive for the highest standards in the
  delivery and oversight of federal financial aid programs
                                                                         James W. Runcie
  while responsibly safeguarding taxpayer interest.
                                                                       Chief Operating Officer
  A key accomplishment for Federal Student Aid in FY 2015 was its on-going efforts to execute the
  President’s Student Aid Bill of Rights. President Obama announced the Student Aid Bill of
  Rights in March of this year and described it as a set of guiding principles behind his vision for
  affordable, quality postsecondary education. To help realize this vision, the President directed
  the Department of Education and other federal agencies to work across the federal government
  to do more to help borrowers afford their monthly loan payments. In addition, the directive
  ensures strong consumer protections for student loan borrowers, including protecting social
  security benefits for disabled borrowers, providing additional clarity to borrowers seeking
  bankruptcy protections, and modifying the debt collection process to increase transparency and
  fairness.

  In order to enhance customer service and provide borrowers with additional resources, Federal
  Student Aid implemented multiple updates to the Free Application for Federal Student Aid
  (FAFSA®) and increased borrower communication and outreach efforts concerning the
  Department’s loan repayment and forgiveness programs. In September 2015, the President
  announced several changes to the FAFSA process. The first major change involves moving the
  start date for applying for aid for the 2017–18 award year from January 1, 2017 to
  October 1, 2016. This will provide students and families with financial aid eligibility information
  much earlier in the application process and enable families to better assess the true cost of
  attendance and make informed decisions.

  The second major change President Obama announced involves changing which tax year
  income borrowers report on the FAFSA. Starting with the 2017–18 FAFSA, applicants will
  provide income information from one tax year earlier, known as the “prior-prior” year. This
  means that the 2017–18 FAFSA will collect income information from 2015 rather than income
  information from 2016. This change will allow more students and families to complete their
  FAFSA using income information imported electronically from the Internal Revenue Service
  (IRS), through our IRS Data Retrieval Tool (DRT). Electronically transferring data nearly
                                    Federal Student Aid Annual Report FY 2015
                                        Letter From the Chief Operating Officer of Federal Student Aid

eliminates the need to correct estimated tax information and prevents families from having to
wait to complete a FAFSA until the previous year’s tax return has been filed.

Federal Student Aid has enhanced its borrower outreach initiatives, including implementing
direct email campaigns in FY 2015 regarding affordable loan repayment options, recertifying
eligibility for income-driven repayment (IDR) plans, making on-time payments, and rehabilitating
defaulted loans. In total, these campaigns have reached more than 2 million borrowers and the
campaign results show a positive correlation to borrower action. In addition, Federal Student Aid
worked in collaboration with the U.S. Treasury Department and tax preparers during the 2015 tax
filing season to increase federal student loan borrowers' awareness of IDR plans. This year, two
of the largest tax preparers in the country, H&R Block and Intuit, Incorporated, used their online
tax preparation tools and newsletters to share information about repayment options, including
the President's Pay As You Earn plan, with millions of their customers. Because of efforts such
as these, as well as changes to the contracts of federal student loan servicers to incentivize
effective outreach to borrowers, approximately 4 million Direct Loan borrowers are currently
enrolled in IDR plans. Enrollments in IDR plans have increased more than 50 percent over the
past year and are at an all-time high with loan servicers enrolling several thousands of borrowers
in IDR plans daily.

Federal Student Aid implemented new Gainful Employment regulations in FY 2015. These
regulations are a specific instance of tightening the focus on transparency and accountability for
institutions to protect students and taxpayers. The regulations require institutions to provide
important information about their programs, and focus on student outcomes; factors such as
what their former students are earning, their success at graduating, and the amount of debt they
accumulated. The closure of Corinthian Colleges and subsequent transition of locations to the
Zenith Education Group demonstrated the importance of for-profit and publically traded school
oversight. Additionally, in FY 2015, Federal Student Aid was able to strengthen oversight and
compliance related to for-profit and publically traded schools, and oversight of campus security
requirements under the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime
Statistics Act (Clery Act). Federal Student Aid worked to improve Clery Act enforcement efforts
by streamlining the intake and tracking process to resolve complaints efficiently.

In our continued effort to increase transparency and accountability, Federal Student Aid
expanded the FSA Data Center to include additional information about IDR plans, as well as,
updated contracts and program reviews. We made strides to increase cybersecurity protection
for applicants and borrowers through the enterprise-wide implementation of the FSA ID, which
will help to safeguard borrower information. In addition, we commenced a security review of all
guaranty agencies and, as of the end of the fiscal year, started the government-wide
Cybersecurity Sprint to ensure the integrity of customer’s financial and personal information.

Federal Student Aid owes its success to our nearly 1,300 employees, and I am honored to work
with them. This report represents merely a few of the many accomplishments achieved in
FY 2015 and is a testament to our staff’s dedication to the mission of Federal Student Aid.

Sincerely,



James W. Runcie
Chief Operating Officer
Federal Student Aid
United States Department of Education
November 13, 2015


                                 Federal Student Aid Annual Report FY 2015
                                                                                   Table of Contents


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

     iii     Federal Student Aid at a Glance
     iv      How Federal Student Aid Benefits the Public
     v       Guide to Federal Student Aid Programs
     vii     Introduction to the Federal Student Aid Annual Report

1    Management’s Discussion and Analysis

      3      Mission And Organizational Structure
             7    Federal Student Financial Aid Programs
     12      Performance Management
             14   FY 2015 Strategic Goals, Objectives, and Performance Metrics
             26   Agency Priority Goal
             27   Quality of Performance Data
     28      Financial Management Discussion and Analysis
             29   Balance Sheet
             34   Statement of Net Cost
             35   Statement of Changes in Net Position
             36   Statement of Budgetary Resources
             37   Financial Management Risks
     40      Analysis of Systems, Controls, and Legal Compliance
     44      Limitations of Financial Statements

45   Annual Performance Report

     47      Introduction to the Annual Performance Report
     49      Performance Results by Strategic Goal
             50    Strategic Goal A: Provide superior service and information to students and
                                       borrowers.
             55    Strategic Goal B:   Work to ensure that all participants in the system of funding
                                       postsecondary education serve the interests of students,
                                       from policy to delivery.
             57    Strategic Goal C:   Develop efficient processes and effective capabilities that
                                       are among the best in the public and private sectors.
             59    Strategic Goal D:   Ensure program integrity and safeguard taxpayers’ interests.
             62    Strategic Goal E:   Strengthen FSA’s performance culture and become one of
                                       the best places to work in the federal government.


                     Federal Student Aid Annual Report FY 2015                                         i
                                                                       Table of Contents

      Annual Performance Report (cont’d)


      63      FY 2015 Accomplishments of Federal Student Aid
      66      Legislative and Regulatory Recommendations
      67      Annual Bonus Awards
      68      Report of the Federal Student Aid Ombudsman

77    Financial Section


       79     Message From the Chief Financial Officer
       81     Financial Statements
       85     Notes to the Financial Statements
      118     Required Supplementary Stewardship Information
      120     Required Supplementary Information
      127     Independent Auditors’ Report


145   Other Information


149   Appendices


      151     Appendix A:   Glossary of Acronyms and Terms
      155     Appendix B    Availability of the Federal Student Aid Annual Report




                     Federal Student Aid Annual Report FY 2015                        ii
                                                                      Federal Student Aid at a Glance



                        Federal Student Aid at a Glance
                                  (As of September 30, 2015)



Established as a Performance-Based Organization              1998


Headquarters                                                 830 First Street, NE
                                                             Washington, DC 20202

Website                                                      StudentAid.gov


FY 2014 Administrative Budget                                $1.4 billion


Total Employees                                              1,291 employees


Regional Offices                                             10


Total Applications Processed                                 19.9 million


Total Postsecondary Students Receiving Aid in 2015           11.9 million


Total Federal Student Aid Delivered                          $128.7 billion


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




                                 Federal Student Aid Annual Report FY 2015                         iii
                                                       How Federal Student Aid Benefits the Public



           How Federal Student Aid Benefits the Public

Designated as a Performance-Based Organization in 1998, Federal Student Aid (FSA) performs
a vital service within the system of funding postsecondary education in the United States. As a
principal office of the United States Department of Education (the Department), FSA ensures
that all eligible Americans have access to federal financial assistance for education or training
beyond high school. In Fiscal Year (FY) 2015, FSA supported the funding of billions of dollars
in federal financial aid, which enabled millions of students to attend college or career school.
The list below details some of the ways in which the organization serves the public. FSA
ensures that students and their families benefit from its programs by:

•   Informing students and families of the availability of the federal student aid programs and on
    the process of applying for and receiving aid from those programs;

•   Developing the Free Application for Federal Student Aid (FAFSA®) and processing FAFSA
    submissions;

•   Offering free assistance to students, parents, and borrowers throughout the entire financial
    aid process; and

•   Providing oversight and monitoring of all program participants—schools, financial entities,
    and students—to ensure compliance with the laws, regulations, and policies governing the
    federal student aid programs.

While FSA employees are committed to assisting students in achieving their postsecondary
education goals, they also provide benefits to the community through community service
activities. The ideals of public service are demonstrated through their participation in various
government, Departmental, and FSA-sponsored community service programs. Among the
ways that employees have positively impacted the community are:

•   Tutoring students at local area schools;

•   Conducting Back to School drives for students at local area schools;

•   Contributing to various charities through the Combined Federal Campaign;

•   Donating food to various food banks, through the Feds Feed Families program, a
    government-wide food drive; and

•   Donating holiday gifts to children in local schools though the Operation Santa program.




                                Federal Student Aid Annual Report FY 2015                            iv
                                                             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 one or more 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.

•   Federal Perkins Loans
     o Federal loans made by schools to undergraduate and graduate students who
         demonstrate financial need. Participating schools receive a certain amount of funds
         each year from FSA for distribution under this program, which supplement funds in a

                                Federal Student Aid Annual Report FY 2015                          v
                                                             Guide to Federal Student Aid Programs

         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.

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.

•   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 high-need
        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. It is administered by the schools who 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.




                                Federal Student Aid Annual Report FY 2015                            vi
                                             Introduction to the Federal Student Aid Annual Report



 Introduction to the Federal Student Aid Annual Report

The Federal Student Aid Annual Report FY 2015 (Annual Report) provides financial and
performance information that enables the President, Congress, and the public to assess how
FSA has performed in accomplishing its mission and achieving its goals. The report is
organized into the following sections:

The Management’s Discussion and Analysis section provides an overview of the entire
Annual Report. It includes a synopsis of FSA’s 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 also
contains a discussion of the organization’s systems, controls, and compliance with laws and
regulations. The section concludes with the subsection Limitations of Financial
Statements, which provides the context in which the financial statements should be reviewed.

The Annual Performance Report presents the strategic goals included in the Federal
Student Aid: Strategic Plan, Fiscal Years 2012–16 (FSA Strategic Plan, FY 2012–16) and
discusses the results of the various performance metrics as related to each strategic goal.
Targets established for each performance metric are compared to FSA’s actual performance
during the year. These results demonstrate the organization’s effectiveness in accomplishing
its mission. The Annual Performance Report also presents the fiscal year accomplishments of
the organization and discusses the process by which it provides legislative and regulatory
recommendations to the Department on issues that affect federal student financial aid. The
Annual Performance Report concludes with the following subsections: Annual Bonus
Awards, which details executive compensation in the organization, and the Report of the
Federal Student Aid Ombudsman, which details its processes in assisting borrowers in
obtaining resolutions to federal student aid issues.

The Financial Section provides a detailed view of FSA’s stewardship and accountability for
its resources. The section includes the Message from the Chief Financial Officer, the
audited financial statements, and the accompanying notes to the financial statements. It
concludes with the subsections: Required Supplementary Stewardship
Information, Required Supplementary Information, and the Independent Auditors’
Report.

As part of the Financial Section, the Independent Auditors’ Report subsection presents the
combined audit report issued by the Independent Auditors. The subsection consists of the
Office of Inspector General Audit Transmittal Letter and the combined Independent Auditors’
Report, which includes the Report on the Financial Statements, the Report on Internal Control,
and the Report on Compliance and Other Matters. The subsection concludes with the
Management’s Response to the Audit, which is the official response of FSA’s executive
management to the findings and recommendations contained in the audit report.

The Other Information section includes the Schedule of Spending, which presents an
overview of how and where FSA spent its money during the fiscal year. This section also
provides links to the U.S. Department of Education FY 2015 Agency Financial Report,
which includes a discussion of FSA’s improper payments in compliance with the Improper



                               Federal Student Aid Annual Report FY 2015                         vii
                                            Introduction to the Federal Student Aid Annual Report

Payments Information Act of 2002, as amended. The section concludes with a link to the
Summary of Financial Statement Audit and Management Assurances and a link to FSA’s
Management Challenges.

The Appendices section includes the glossary of acronyms and terms; and the details on the
availability of this Annual Report, the FSA Strategic Plan, FY 2012–16, and previous fiscal
years’ Annual Reports and Strategic Plans.




                              Federal Student Aid Annual Report FY 2015                        viii
                                 Management’s Discussion and Analysis




Management’s Discussion
     and Analysis




        Federal Student Aid Annual Report FY 2015                       1
                                                                                           Management’s Discussion and Analysis


         Fiscal Year 2015 Financial and Performance Highlights of
                            Federal Student Aid
                                                         Operational Highlights

                                                              For the year ended,      For the year ended,                          Percentage
                                                                                                                   Difference
                                                              September 30, 2015       September 30, 2014                            Change

Total Student Aid Loan Portfolio 1                        $            1,212 billion $         1,130 billion   $      82 billion              7.3%

Total Federal Student Loan Borrowers Outstanding                          42 million             41 million            1 million              2.4%

Total Number of Postsecondary Education Institutions                          6,101                    6,142                 (41)          (0.7)%

Audit Opinion                                                           Unmodified         Unmodified          Not applicable       Not applicable%


                                                          Financial Highlights

                                                              For the year ended,      For the year ended,                          Percentage
                    Dollars in Millions                                                                            Difference
                                                              September 30, 2015       September 30, 2014                            Change 2

Total Assets                                              $              1,086,058     $           985,520     $       100,538             10.2%


Total Liabilities                                         $              1,065,750     $           978,850     $        86,900                8.9%


Net Position                                              $                 20,308     $               6,670   $        13,638            204.5%


Net Cost of Operations                                    $                 27,953     $              36,491   $        (8,538)           (23.4)%

Total Budgetary Resources Available for Spending
(Budgetary)                                               $                 69,669     $              64,531   $          5,138               8.0%
Total Budgetary Resources Available for Spending
(Non-Budgetary Credit Reform Financing Accounts)          $                231,957     $           243,151     $       (11,194)            (4.6)%

Total Outlays, Net
(Budgetary)                                               $                 44,605     $              13,238   $        31,367            236.9%
Total Outlays, Net
(Non-Budgetary Credit Reform Financing Accounts)          $                 76,935     $           120,029     $       (43,094)           (35.9)%


                                                         Performance Highlights
                                                                                             FY 2015                 FY 2015        Performance
                               Performance Measures
                                                                                              Target                  Actual          Results
                                                                                                                                        Met
% of first-time FAFSA filers among high school seniors                                     59.1─61.1%                60.5%

                                                                                                                                        Met
Percent of Borrowers>90 Days Delinquent                                                       10.4%                   9.8%

                                                                                                                                        Met
Improper Payment Rate                                                                         1.65%                  1.44%



         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.
         2
           Note that the percentage change is calculated as the FY 2014–FY 2015 difference, divided by the FY 2014 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.

                                                         Federal Student Aid Annual Report FY 2015                                                    2
                                                                     Management’s Discussion and Analysis
                                                                              Mission and Organizational Structure




    Mission and Organizational Structure

Federal Student Aid (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
college or career school.

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 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.




                                                 FSA Fact
    FSA’s mission is “Funding America’s Future, One Student at a Time.” In supporting that mission,
    FSA delivered approximately $128.7 billion in federal financial student aid under the Title IV
    programs. The Title IV programs include the Federal Direct Loan, Federal Pell Grant, and Federal
    Work-Study programs. To learn more about these and other Title IV programs administered by
    FSA, visit StudentAid.gov/Types.

                                       Federal Student Aid Annual Report FY 2015                                3
                                                                       Management’s Discussion and Analysis
                                                                                 Mission and Organizational Structure

Legislative Authority That Determines the Mission of Federal Student Aid
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. Other key pieces of legislation that have influenced FSA’s mission
are detailed in the following table.




                                     Overview of Legislative Authority

   • 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 the Income Based
      Repayment plan.

   • 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 will 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
      Department of Health and Human Services to the Department.




                                       Federal Student Aid Annual Report FY 2015                                   4
                                                                                Management’s Discussion and Analysis
                                                                                        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 the 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
                                            POSTSECONDARY
                                            INSTITUTIONS
                                            Determine students’ aid
                                            packages and disburse f unds.

    THE PRESIDENT,                          FSA supports them by                      FFEL LENDERS
                                            •Monitoring compliance,                   Hold and service outstanding
    ED, & OTHERS IN                         •Educating them regarding                 FFELP loans to students.
    EXECUTIVE                               policy, and
                                            •Assisting them in meeting
    BRANCH                                  requirements.
                                                                                      FSA supports them by
    Set regulatory standards and                                                      •Monitoring compliance,
    policy on student aid f unding.                                                   •Assisting them in meeting
                                                                                      requirements,
    FSA supports it by                                                                • Paying interest and Special
    •Providing data and inf ormation                                                  Allowance Payment, and
    f or decision making, and                                                         •Educating them regarding
    •Providing recommendations for                                                    policy.
    implementation.


                                                   STUDENTS
                                             Receive and repay student aid
                                             to f inance postsecondary
                                             education.

                                             FSA supports them by
                                             •Increasing awareness of
                                                                                      GUARANTY
    CONGRESS                                 f ederal student aid,                    AGENCIES
    Sets statutory standards on
                                             •Providing products, services            Insure FFELP loans and
    student aid f unding and
                                             and tools to ensure consistent,          service their def aulted loan
    appropriate budgets.
                                             accurate messaging about the             portf olio.
                                             importance of pursuing
    FSA supports it by
                                             postsecondary education, and             FSA supports them by
    •Providing data and
                                             •Identif ying students f or whom         •Monitoring compliance,
    inf ormation f or decision
                                             f inancial assistance can make           •Assisting them in meeting
    making, and
                                             a dif f erence.                          requirements,
    •Providing updates on
                                                                                      •Educating them regarding
    operational perf ormance.
                                                                                      policy, and
                                                                                      •Paying def ault claims.




                          FSA-CONTRACTED SERVICERS
                          1. Service Direct Loan portf olio and portions of FFELP portfolio,
                          2. Provide systems and services to support FSA’s core operations (e.g.,
                          applications, disbursement), and
                          3. Recover f unds f rom def aulted loans.

                          FSA supports them by
                          •Acquiring the service,
                          •Setting perf ormance standards, and
                          •Overseeing operations.




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.


                                          Federal Student Aid Annual Report FY 2015                                       5
                                                                 Management’s Discussion and Analysis
                                                                          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.
The Secretary appointed James W. Runcie as the COO on September 15, 2011. The following
graphic illustrates the current functional organizational structure of FSA.




During Fiscal Year (FY) 2015, the organization operated on an annual administrative budget of
approximately $1.4 billion. FSA is staffed by 1,291 full-time employees and is augmented by
contractors who provide outsourced business operations. The workforce is based in Washington,
D.C., 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.




                                   Federal Student Aid Annual Report FY 2015                                6
                                                                                       Management’s Discussion and Analysis
                                                                                                     Mission and Organizational Structure



Federal Student Financial Aid Programs

The federal student financial assistance programs collectively represent the nation’s largest source
of federal financial aid for postsecondary students. In FY 2015, FSA processed more than
19.9 million Free Applications for Federal Student Aid (FAFSA®), resulting in the delivery of
approximately $128.7 billion in Title IV aid to almost 11.9 million postsecondary students and their
families. These students attend 6,101 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. 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 2015 and 2014. A summary of each of the Title
IV student assistance programs is presented in the paragraphs that follow the table.

                       Summary of Federal Aid Disbursed to Students by Program 3
                                                         (Dollars in Millions)

                                                              2015                     2014                                 Percentage
                                                          Aid Disbursed           Aid Disbursed                              Increase/
    Programs                                               to Students             to Students             Difference       (Decrease)
    Loan Programs

    William D. Ford Federal Direct Loan Program          $        95,853      $           99,355       $        (3,502)              (4)%
    Federal Perkins Loan Program                                    1,158                   1,167                   (9)              (1)%
    Subtotal Loan Programs                               $        97,011      $          100,522       $        (3,511)              (3)%
    Grant Programs

    Federal Pell Grant Program                           $        29,909      $           31,554       $        (1,645)              (5)%
    Federal Supplemental Educational Opportunity
    Grant Program                                                     730                     694                    36                5%
    The Teacher Education Assistance for College
    and Higher Education Grant Program                                 91                      97                   (6)              (6)%
    Other Grant Programs/Rounding                                        –                       –                      –           N/A%
    Subtotal Grant Programs                              $        30,730      $           32,345       $        (1,615)              (5)%
    Work-Study Programs
    Federal Work-Study Program                           $            950     $               928      $           (22)                2%

    Rounding                                                           -                       1                     (1)               -%
    Grand Total                                          $       128,691      $          133,796       $        (5,105)              (4)%

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 amounts used to support the President’s Budget. Recipient counts are based on
award year.
                                               Federal Student Aid Annual Report FY 2015                                                   7
                                                                           Management’s Discussion and Analysis
                                                                                    Mission and Organizational Structure

Federal Loan Programs
In fulfilling its program responsibilities, FSA directly manages or oversees more than $1.2 trillion in
outstanding loans—representing more than 193 million student loans to approximately 42 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
U.S. Department of the Treasury (Treasury) borrowings, as well as an appropriation for subsidy
costs. As of September 30, 2015, FSA’s portfolio of Direct Loans included $880.6 billion in credit
program receivables, net of a negative subsidy allowance in the amount of $35.5 billion. In
FY 2015, the Department made $95.9 billion 4 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 at least 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 $ 363.6 billion, as of September 30, 2015. In
FY 2015, FSA made gross payments of approximately $0.9 billion to lenders for interest and special
allowance subsidies and $7.3 billion to guaranty agencies for reinsurance claims and fees paid for
account maintenance, default aversion, and collection activities.

The Ensuring Continued Access to Student Loans Act of 2008 (ECASLA) authorized the
Department to implement a number of programs to ensure 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; as a result, loan purchase
commitments and purchases of loan participation interests concluded. Although these programs
were closed-out successfully on October 15, 2010, FFEL Program loans purchased under the
ECASLA authorization are owned and continue to be serviced by FSA.

A third program the Department implemented under the authority of ECASLA was the Asset-
Backed Commercial Paper (ABCP) Conduit Program (Conduit). Under this program, which began
operations in mid-2009, the Department entered into forward purchase commitments with a
Conduit. The Conduit issued commercial paper backed by qualifying student loans made between
October 1, 2003, and September 30, 2009. If no other financing was available to retire this paper
as it matured, the Department committed to providing the needed funds by purchasing the
underlying student loans, thereby providing a federal subsidy that had the effect of providing low
cost capital to private lenders. Lenders were able to place loans into the Conduit until
June 30, 2010. The option to sell loans to the Department ended in January 2014.




4
    Excludes consolidation loans of $46.3 billion.
                                              Federal Student Aid Annual Report FY 2015                               8
                                                                  Management’s Discussion and Analysis
                                                                           Mission and Organizational Structure

The Federal Perkins Loan 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 low-interest loans to students based on financial need. In
FY 2015, approximately $1.2 billion were disbursed through approximately 527,000 Perkins awards.

The Federal Perkins Loan program officially ended on September 30, 2015. However, if schools
made the first disbursement of a Federal Perkins Loan to a student for the 2015–2016 award year
prior to October 1, 2015, the school may make any remaining disbursements of that 2015–2016
loan after September 30, 2015. In addition, there is a narrow “grandfathering” provision that allows
schools to make Federal Perkins Loans to certain students for up to five additional years (through
September 30, 2020) to enable students who received loans for award years that end prior to
October 1, 2015 to continue or complete courses of study.

The Health Education Assistance Loan (HEAL) Program was transferred to the Department
from the U.S. Department of Health and Human Services 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,
or chiropractic, or in programs in health administration and clinical psychology to obtain federally
insured loans through participating lenders. As of September 30, 1998, no new loans were
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 $123.0 million for FY 2015.

Federal Grant Programs
In its responsibility for administering Title IV aid, FSA oversaw the disbursement of $30.7 billion in
grants to 7.1 million recipients. The following provides a summary for each grant program,
including aid disbursed for FY 2015.

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 2015, the Department disbursed
$29.9 billion in Pell Grants averaging approximately $3,679 to more than 7.0 million students. The
maximum Pell Grant award was $5,730 for the 2014–15 award year and increased to $5,775 for the
2015–16 award year.

The Federal Supplemental Educational Opportunity Grant 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 grants to students based on
need. In FY 2015, approximately $730.0 million were disbursed through approximately 1.6 million
campus-based awards.




                                    Federal Student Aid Annual Report FY 2015                                9
                                                                 Management’s Discussion and Analysis
                                                                          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, 2014 and before October 1, 2015, were reduced by 7.3 percent from the award amount
for which a recipient would otherwise have been eligible. The maximum award of $4,000 was
reduced by approximately $292, resulting in a maximum award amount of $3,708. If students fail to
fulfill the service requirements, 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 2015, the Department disbursed approximately 25,500 grants totaling
$90.8 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, 2014 and before October 1, 2015 were reduced by 7.3 percent from the award amount
for which a recipient would otherwise have been entitled. For example, the 2014–15 maximum
award of $5,730 was reduced by approximately $418, resulting in a maximum award amount of
$5,312. The Department disbursed approximately $294,700 to support more than 100 awards in
FY 2015.

Federal Work-Study Program
The Federal Work-Study (FWS) 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 2015,
approximately $950.0 million were disbursed through approximately 703,100 campus-based
awards.




                                              FSA Fact

  The Federal Pell Grant has enabled millions of students to go to college. Almost $30 billion were
  disbursed for Pell Grants during FY 2015. For more information about obtaining a Pell Grant, go
  to StudentAid.gov/types/grants-scholarships/Pell.

                                    Federal Student Aid Annual Report FY 2015                             10
                                                                   Management’s Discussion and Analysis
                                                                            Mission and Organizational Structure

Vision, Mission, and Core Values
FSA’s vision and mission focus on students and position FSA as not only a provider of federal
student financial aid and services, but also as a trusted source of information to help students and
families make better decisions about their postsecondary education funding options. The core
values reflect FSA employees’ desire to create a high-performing organization and work
environment while improving operations and services.




        Vision

        To be the most trusted and reliable source of student financial aid, information, and
        services in the nation.



        Mission

        Funding America’s Future, One Student at a Time



        Core Values

        •   Integrity             •    Customer Service        •   Excellence
        •   Respect               •    Stewardship             •   Teamwork




As discussed in detail in the next section, FSA has translated this vision into a set of clearly defined
strategic goals and objectives and related measurable performance metrics. The realization of these
goals will enable the organization to accomplish its mission successfully.




                                      Federal Student Aid Annual Report FY 2015                             11
                                                             Management’s Discussion and Analysis
                                                                               Performance Management




    Performance Management

This section of the Federal Student Aid Annual Report FY 2015 (Annual Report) provides a general
overview of the performance management processes at FSA; a summary of FSA’s FY 2015
performance metrics, objectives, and results; discussion of FSA’s Agency Priority Goal; and
discussion of FSA’s efforts to validate the quality of performance data reported.

Performance Management Processes at Federal Student Aid
FSA uses three tools to establish goals, and to communicate, measure, and report performance.
These tools are the following:

•    Five-Year Strategic Plan;
•    Annual Performance Report; and
•    Annual Organizational Performance Review (OPR).

Five-Year 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 long-term 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 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 Federal Student Aid: Strategic Plan, FY 2012–16 (FSA Strategic Plan,
FY 2012–16).




                                   Federal Student Aid Annual Report FY 2015                             12
                                                             Management’s Discussion and Analysis
                                                                               Performance Management

               Key Components of the FSA Strategic Plan, FY 2012–16

                 Key Component                                         Description



                                                     Statements of long-term purpose outlined in the
                                                     FSA Strategic Plan, FY 2012–16 that define
 Strategic Goals                                     how FSA will accomplish its mission. These
                                                     goals are aligned to FSA’s responsibilities as a
                                                     PBO.
                                                     Statements that describe the tactical activities
 Objectives                                          FSA will perform to achieve the associated
                                                     strategic goal.
                                                     Levels of performance over a period of time
                                                     used to gauge FSA’s success in reaching its
 Performance Metrics
                                                     strategic goals. These metrics include targets
                                                     and timeframes.
                                                     Indicators of the desired performance levels or
                                                     specific desired results targeted for a given
 Targets                                             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 Department’s Strategic Plan, Agency Priority Goals, 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 principle
offices an opportunity to establish specific milestones. FSA tracks the status of its OPR metrics and
reports on its progress to the Department.




                                   Federal Student Aid Annual Report FY 2015                            13
                                                              Management’s Discussion and Analysis
                                                                                 Performance Management

FY 2015 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 Strategic Plan, FY 2012–16, builds upon the most recent goals
established in the previous year’s strategic plan, by clarifying the organization’s objectives and
updating performance standards to reflect more clearly the progress made in meeting the stated
objectives. As part of the process of developing this plan, FSA identified the key strategic drivers
listed in the following table. In FY 2016, FSA will be unveiling a new Strategic Plan, the FSA
Strategic Plan, FY 2015–19, which will update the Strategic Goals found in this section.


                                                  Relevance to FSA’s Strategic Planning
            Key Strategic Driver
                                                                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     Indicates student aid environment within which
 aid environment                                 FSA must operate. Listed below are key
                                                 trends that may affect the financial aid
                                                 environment.

                                                    •   Rising cost of attendance for
                                                        postsecondary education.
                                                    •   Decline in availability of nonfederal
                                                        sources of postsecondary education
                                                        funding.
                                                    •   Anticipated increase in enrollment.
                                                    •   Increase in enrollment at two-year and
                                                        proprietary institutions, and distance
                                                        learning.
                                                    •   Increased role of the federal
                                                        government in providing funding for
                                                        postsecondary education.




                                     Federal Student Aid Annual Report FY 2015                            14
                                                                  Management’s Discussion and Analysis
                                                                                      Performance Management


                                                     Relevance to FSA’s Strategic Planning
               Key Strategic Driver
                                                                   Process


    The Department’s Five-Year Strategic Plan       Requires FSA’s support of the Department’s
                                                    strategic goals related to postsecondary
                                                    education.
    President Obama’s higher education goal         Requires the Department’s and FSA’s support
    that, by 2020, America will have the highest    to achieve the goal.
    proportion of college graduates in the world
    The Office of Inspector General’s               Requires the Department and FSA senior
    Management Challenges                           management’s consideration for establishing
                                                    priorities. The Office of Inspector General’s
                                                    Management Challenges for FY 2015 include:
                                                         • Improper Payments;
                                                         • Information Technology Security;
                                                         • Oversight and Monitoring;
                                                         • Data Quality and Reporting; and
                                                         • Information Technology System
                                                              Development and Implementation.
    The Office of Inspector General and             Requires FSA senior management’s
    Government Accountability Office audits         consideration for establishing priorities to
                                                    address findings and recommendations.

    Federal financial management laws and           Prescribes financial management
    regulations                                     requirements.
    Federal performance reporting legislation       Prescribes performance and reporting
    and requirements                                requirements.
    Federal budget deficits                         Requires FSA to look for opportunities to
                                                    reduce operating costs through improved
                                                    efficiency.


FSA identified the following five Strategic Goals based upon analysis of the above key strategic
drivers:

•     Strategic Goal A: Provide superior service and information to students and borrowers.
•     Strategic Goal B: Work to ensure that all participants in the system of funding postsecondary
      education serve the interests of students, from policy to delivery.
•     Strategic Goal C: Develop efficient processes and effective capabilities that are among the best
      in the public and private sectors.
•     Strategic Goal D: Ensure program integrity and safeguard taxpayers’ interests.
•     Strategic Goal E: Strengthen FSA’s performance culture and become one of the best places to
      work in the federal government.

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.

                                        Federal Student Aid Annual Report FY 2015                              15
                                                                   Management’s Discussion and Analysis
                                                                                  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 this 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, followed by a table that details, for each performance
    metric, the prior year actual results, the current reporting period target, the actual result, and the
    page reference to the detail contained 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 met or exceeded the             Met
                       target.

                       Performance result did not meet the              Not met
                       target.

                       Performance result is not applicable
                       because the performance metric was not             N/A
                       developed, the performance metric was
                       not implemented, or the required data
                       were not available in time for inclusion.


The performance metric results reported are as of fiscal year-end (i.e., September 30, 2015) 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.).




                                               FSA Fact
    In FY 2015, more than 5,500 financial aid professionals attended the FSA’s Annual Training
    Conference to obtain the latest information related to FSA policies and procedures.

                                     Federal Student Aid Annual Report FY 2015                               16
                                                              Management’s Discussion and Analysis
                                                                                Performance Management



Strategic Goal A: Provide superior service and information to students and borrowers.


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 provides information about funding options for eligible
students to help them and their families make well-informed decisions. As a customer-facing
organization, FSA also has an obligation to uphold the highest standards of service when interacting
with its customers: students and their families.

Strategic Goal A aims to actively inform all eligible individuals of their funding options, help
customers make well-informed decisions, provide better services, and improve customer experience.

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: Take a data-driven approach to better understand our customers and develop
    insights from these customers.
•   Objective 2: Reach out to potential students more effectively to expand access to
    postsecondary education.
•   Objective 3: Aggregate and distribute information on the costs and benefits of postsecondary
    education programs and on funding options to improve financial literacy and support the
    customers’ decision-making.
•   Objective 4: Identify students for whom financial assistance can make a difference in
    completing a degree or credential and develop a plan to support the President’s 2020 college
    completion goal.
•   Objective 5: Enhance customer-facing processes to improve the customer experience.

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 2015
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 four performance metrics and did not meet the target for one performance
metric under this strategic goal.




                                    Federal Student Aid Annual Report FY 2015                            17
                                                                     Management’s Discussion and Analysis
                                                                                             Performance Management



                               Performance Summary for Strategic Goal A




                                FY 2013        FY 2014         FY 2015         FY 2015         Result    Reference
Performance Metrics
                                 Actual         Actual          Target          Actual                     Page



% of first-Time FAFSA filers                                                                     Met
                                 59.2%          60.1%        59.1%─61.1%        60.5%                        50
among high school seniors

Persistence among first-                                                                         Met
                                  ─             79.6%        78.6%─80.6%        79.5%                        51
time filing aid recipients

Customer Visits to                                                                               Met
                                  ─           32.7 million   >=32.7 million   43.3 million                   52
StudentAid.gov

Social Media Channel                                                                             Met
                                  ─             368,042       >=368,000        454,066                       53
Subscribership

Customer Satisfaction                                                                          Not met
                                 78.4            78.4         77.4─79.4          77.2                        54
Score (ACSI)




                                                   FSA Fact
 In addition to its website, StudentAid.gov, FSA has also increased its presence in social media. To
 get the latest information updates on federal student financial aid, like FSA on Facebook; follow
 FSA on Twitter @FAFSA or find it on YouTube.


                                         Federal Student Aid Annual Report FY 2015                                    18
                                                              Management’s Discussion and Analysis
                                                                                Performance Management



Strategic Goal B: Work to ensure that all participants in the system of funding
                  postsecondary education serve the interests of students, from policy to
                  delivery.


FSA plays a vital role within the system of postsecondary education funding in the United States.
While the Department’s Office of Postsecondary Education is responsible for any matters related to
the setting of postsecondary education policy and regulation, FSA collaborates with its colleagues
across the Department and Congress to inform policy and regulations relating to student financial
assistance. Specifically, FSA provides timely and relevant information to the Department and
policymakers to support their decision-making processes concerning issues related to funding
postsecondary education. In addition, FSA has a leadership role in the universe of postsecondary
education funding to ensure that all system participants effectively serve the interests of students.

To execute delivery of financial assistance, FSA works closely with partners: it coordinates the
activities of different contractors, including servicers and private collection agencies; it provides
oversight of postsecondary institutions; guaranty agencies and lenders; and it directly interacts with
students and their families.

Strategic Goal B aims to increase FSA’s role in working with postsecondary institutions, contractors,
and other major participants in the overall aid delivery system, to fulfill the organization’s mission
more effectively and consistently champion the promise of postsecondary education for all
Americans.

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: Improve FSA’s support, communications, and processes for postsecondary and
    financial institutions.
•   Objective 2: Provide ideas, data, and analyses to inform policymakers about opportunities and
    challenges in postsecondary education funding.
•   Objective 3: Support system participants in implementing legislative, regulatory, executive, and
    other requirements.

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 2015
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 one performance metric and did not meet the target for one performance
metric under this strategic goal.




                                    Federal Student Aid Annual Report FY 2015                            19
                                                                     Management’s Discussion and Analysis
                                                                                         Performance Management



                              Performance Summary for Strategic Goal B



                                              FY 2013   FY 2014    FY 2015     FY 2015     Result   Reference
Performance Metrics
                                               Actual    Actual     Target      Actual                Page



Ease of Doing Business school survey                                                      Not met
                                                 74        77      75.9─77.9    75.8                    55
(1-100 scale)

                                                                                            Met
Percent of Borrowers > 90 days Delinquent        ─        9.9%      10.4%       9.8%                    56




                                                      FSA Fact
   The Pay as You Earn Plan, recently made available for eligible borrowers, enables borrowers with
   eligible loans to limit monthly payments to 10 percent of their discretionary income. For more
   information on this repayment option, visit StudentAid.gov/repay-loans/understand/plans/pay-as-
   you-earn.

                                            Federal Student Aid Annual Report FY 2015                             20
                                                              Management’s Discussion and Analysis
                                                                                Performance Management



Strategic Goal C: Develop efficient processes and effective capabilities that are among the
                  best in the public and private sectors.


FSA is responsible for managing the operational functions associated with delivering Title IV grants,
work-study, and loan programs, while continually improving operating efficiency. To maintain
credibility and confidence in the overall student aid delivery system, it is important for FSA to
anticipate and plan for changes in volume that impact capacity requirements. As part of the ability to
respond to changing demands, FSA must consider budgetary resources available to support
increasing capacity. Historically, FSA’s budget has not grown proportionally to the increase in the
volume of aid, and that is likely to remain true going forward. As a result, FSA will need to pursue
further efficiencies in order to fund the initiatives outlined in its strategic plan.

FSA will also continue to improve its internal efficiency and capabilities across key functions,
particularly in technology, acquisition, risk management, and business management, by comparing
the current state of these functions with best practices and benchmarks across public and private
sectors. The objectives under this goal will build the foundation and capability to support the first two
strategic goals, providing better service and information to FSA customers and playing an integral
role in the overall student aid delivery system.

Strategic Goal C aims to pursue further efficiencies to free up additional resources in the operating
budget by integrating systems, improving acquisition processes, improving risk management, and
improving project management.

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: Deliver funds to students accurately, efficiently, and promptly, to create high levels
    of customer satisfaction.
•   Objective 2: Strengthen FSA’s Information Technology (IT) function to achieve systems
    modernization and active management of technology to ensure that FSA’s delivery systems are
    secure and privacy of personal information is maintained.
•   Objective 3: Continuously refine and manage FSA’s acquisition strategy and contract
    performance to realize cost savings and operating efficiencies, and mitigate risk.
•   Objective 4: Improve the organizational capacity to anticipate and manage external change.
•   Objective 5: Enhance the risk management organization, systems, and processes.
•   Objective 6: Develop a methodology to measure and track cost reductions to increase
    efficiency and productivity.
•   Objective 7: Build stronger business management capabilities and increase operational
    transparency to improve cross-functional coordination.

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 2015
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.

                                    Federal Student Aid Annual Report FY 2015                             21
                                                              Management’s Discussion and Analysis
                                                                                 Performance Management




                               Performance Summary for Strategic Goal C




                                      FY 2013   FY 2014   FY 2015     FY 2015      Result    Reference
Performance Metrics
                                       Actual    Actual    Target      Actual                  Page



                                                                                     Met
Aid Delivery Costs per Application    $11.16     $11.43    $12.28      $10.73                    57


                                                                                     Met
Loan Servicing Costs per Borrower     $21.42     $21.59    $22.47      $22.36                    58




                                                FSA Fact
 The Direct PLUS Loan Program can be used to help pay for an undergraduate, graduate, or
 professional education. For more information on the Direct PLUS Loan program, go to
 StudentAid.gov/types/loans/PLUS.

                                     Federal Student Aid Annual Report FY 2015                            22
                                                               Management’s Discussion and Analysis
                                                                                  Performance Management



Strategic Goal D: Ensure program integrity and safeguard taxpayers’ interests.


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 $120 billion in aid
and administers a loan portfolio valued at more than $1.2 trillion. Even small variances in the
financial performance of this portfolio can have a large impact on the U.S. federal budget. FSA is
committed to upholding the highest standards of integrity with the Title IV Programs and continues to
work with institutions on increased monitoring and oversight efforts.

FSA will strive to better manage taxpayer resources and minimize program costs. As part of this
goal, FSA will concentrate its limited resources on those areas that have been identified as having
the greatest potential risk for fraud and abuse. In addition, FSA will focus on data gathering and
analysis to better understand and manage FSA’s growing student aid portfolio. Through these
efforts, FSA will be able to better identify, understand, and mitigate all enterprise risks, including the
student aid portfolio risk.

Strategic Goal D aims for continuous improvement of FSA’s oversight functions to maintain program
integrity and safeguard taxpayers’ interests by using program dollars effectively and efficiently. FSA
has oversight and enforcement responsibility for 6,101 schools and 1,548 financial institutions. FSA
must, therefore, leverage and focus its resources to optimize oversight and monitoring activities; and
its administrative, sanction, and enforcement actions when warranted.

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: Improve quality control and reduce errors, waste, fraud, abuse, and
    mismanagement in the delivery of Title IV aid.
•   Objective 2: Manage funds owed to the Department and provide transparency about student
    aid portfolio risk exposure.

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 2015
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 each of these performance metrics.




                                     Federal Student Aid Annual Report FY 2015                               23
                                                                         Management’s Discussion and Analysis
                                                                                              Performance Management



                                     Performance Summary for Strategic Goal D




                                        FY 2013      FY 2014         FY 2015        FY 2015      Result      Reference
    Performance Metrics                                               Target
                                         Actual       Actual                         Actual                    Page



                                       Pell Grant
                                        2.26%

                                       Direct Loan                                                 Met
    Improper Payment Rate                             1.54%           1.65%           1.44%                      59
                                          1.03%

                                         FFEL
                                        <0.005%

    Percentage of contract dollars                                                                 Met
                                           ─          88.7%       87.7%─89.7%         90.3%                      60
    competed by FSA


                      5                                                                            Met
    Collection rate                      $41.57       $35.90          $36.56         $51.58                      61




                                                      FSA Fact
     The Income-Based Repayment/Pay As You Earn/Income-Contingent Repayment Plan Request is
     an online application, which enables borrowers with eligible loans to apply for repayment options
     with greater ease and accuracy. For more information on repayment through Income-Driven
     Repayment Plans, visit StudentAid.gov/repay-loans/understand/plans/income-based.

5
 Collection Rate for the purpose of Performance Metric D.3 is defined as the amount of dollars collected from borrowers in
the fiscal year per dollar spent to collect.

                                             Federal Student Aid Annual Report FY 2015                                       24
                                                               Management’s Discussion and Analysis
                                                                                  Performance Management



Strategic Goal E: Strengthen FSA’s performance culture and become one of the best places
                  to work in the federal government.


FSA achieved substantial improvement in operational performance after its transformation to a PBO
in 1998, successfully and reliably delivering aid under changing legislative conditions. Despite these
improvements, FSA’s workforce still faces several challenges today. For example, the results of the
previous Federal Employee Viewpoint Surveys (FEVS) highlighted additional areas in need of
improvement and a significant number of FSA’s staff is eligible for retirement over the next several
years. In order to meet the performance challenges facing FSA and to fulfill its rapidly expanding
role, the organization will have to rebuild its human capital foundations.

Strategic Goal E aims to meet the performance challenges facing FSA. To do so, FSA will need to
empower its employees to accept new challenges, while ensuring the knowledge accumulated by
the retirement of experienced staff is not lost upon their departure.

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: Improve the integrity of core human capital processes to attract, develop, and
      retain talented FSA employees from diverse backgrounds; help them achieve their full
      performance potential and recognize their contribution to FSA’s mission.
•     Objective 2: Further develop a student-centric culture among all managers and employees that
      will fully deliver on FSA’s mission, vision, and strategy.

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, FY 2015 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 the target for this performance metric.


                                Performance Summary for Strategic Goal E




                                   FY 2013   FY 2014       FY 2015     FY 2015      Result   Reference
    Performance Metrics
                                    Actual    Actual        Target      Actual                 Page



                                                                                     Met
    Employee Engagement Index          ─       67.7%     66.7%─68.7%     67.9%                   62




                                      Federal Student Aid Annual Report FY 2015                            25
                                                             Management’s Discussion and Analysis
                                                                               Performance Management

Agency Priority Goal

An Agency Priority Goal is a measurable commitment to a specific result the federal government will
deliver for the American people. These goals represent high priorities for both the administration
and the Department, have high relevance to the public or reflect the achievement of key agency
missions, and will produce significant results over a 24-month period. As required by OMB’s
guidance for implementing the Government Performance and Results Modernization Act of 2010
(Pub. L. 111-352), the Department identified a limited number of Priority Goals for FY 2014–15
during the budget, policy, and strategic planning processes.

These Priority Goals reflect the importance of teaching and learning at all levels of the education
system. Because they reflect a limited number of priorities, they do not fully reflect the agency’s
strategic goals nor cover the entire agency mission. Consequently, FSA is not responsible for one
specific Priority Goal for FY 2014–15. Instead, FSA will continue to provide support as needed to the
Department in accomplishing the Departmental Priority Goals. For more information on the
Department’s Priority goals, see The Department's FY 2014–15 Priority Performance Goals.




                                            FSA Fact

FSA offers a publication titled, College Preparation Checklist, to assist students and parents in
preparing for college. This publication provides several checklists with suggested steps that will
prepare students (of all age levels) both academically and financially for college. To download a
copy of the College Preparation Checklist, visit StudentAid.gov/sites/default/files/college-prep-
checklist.pdf


                                   Federal Student Aid Annual Report FY 2015                            26
                                                              Management’s Discussion and Analysis
                                                                                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 of this
Annual Report.




                                    Federal Student Aid Annual Report FY 2015                              27
                                                                  Management’s Discussion and Analysis
                                                                 Financial Management Discussion and Analysis



Financial Management Discussion and Analysis

The financial management discussion and analysis provides an overview of FSA’s financial results for
FY 2015. This section is included to assist 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 discussion 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 2015, FSA achieved an unmodified audit opinion on its financial
statements for the fourteenth consecutive year.

FSA presents its financial statements and notes in the format required by the OMB Circular A-136,
Financial Reporting Requirements. For the comparative fiscal years, FY 2015 and FY 2014, 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. The Independent Auditors’ Report on these statements, which includes the Report on the
Financial Statements, the Report on Internal Control, and the Report on Compliance and Other
Matters, can be found in the subsection Independent Auditors’ Report.

Federal Student Aid has oversight responsibilities for over $1.2 trillion in federal student loans, of
which approximately $979.0 billion is directly owned and managed by FSA. As described in Note
1 and Note 6, FSA reports this portfolio on its Balance Sheet as the line item Credit Program
Receivables, net of allowances for loss, accrued grant liability and subsidy cost, that adjust the
portfolio amount to its present value. As of September 30, 2015, FSA reported $1.0 trillion in Credit
Program Receivables, Net including a negative allowance for subsidy cost of approximately
$37.4 billion. In practical terms, a negative subsidy occurs when the interest rate and/or fees charged
to the borrower are more than sufficient to cover the costs of the risk of default. FSA’s portfolio
of Credit Program Receivables, Net has seen significant growth, increasing by 10.2 percent over the
FY 2014 net portfolio balance. This growth continues to be driven by the expansion of the Direct Loan
program. 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.




                                   Federal Student Aid Annual Report FY 2015                             28
                                                                                                   Management’s Discussion and Analysis
                                                                                                   Financial Management Discussion and Analysis

       The FY 2015 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 2011 and
       the percentage change between the prior and current fiscal years as of September 30, 2014 and 2015
       respectively.
                                               FSA Financial Highlights
                                             Condensed Balance Sheet
                                                 Fiscal Years 2011–15
                                                                                                                                                 Percentage
           (Dollars in millions)                FY 2011             FY 2012              FY 2013                 FY 2014           FY 2015
                                                                                                                                                  Change 6
Fund Balance with Treasury                  $       62,214     $          78,452     $         69,997        $       61,506    $       67,985             10.5%
Credit Program Receivables, Net                    529,965               672,835              825,660               922,418         1,016,425             10.2%
Remaining Assets                                     1,815                 1,451                1,588                 1,596             1,648              3.3%
    Total Assets                            $      593,994     $         752,738     $        897,245     $         985,520    $    1,086,058             10.2%

Debt                                        $      546,264     $         714,324     $        851,258     $         965,362    $    1,050,344              8.8%
Other Intragovernmental Liabilities   7
                                                    10,025                 7,009                8,786                 6,382             8,684             36.1%
Remaining Liabilities                               19,402                 8,632                7.207                 7,106             6,722             (5.4)%
    Total Liabilities                       $      575,691     $         729,965     $        867,251     $         978,850    $    1,065,750               8.9%

Unexpended Appropriations                   $       21,441     $          30,361     $         33,595        $        30,485   $       28,325         (7.1)%
Cumulative Results of Operations                    (3,138)               (7,588)              (3,601)              (23,815)           (8,017)       (66.3)%
   Net Position                             $       18,303     $          22,773     $         29,994        $         6,670   $       20,308        204.5%
    Total Liabilities & Net Position        $      593,994     $         752,738     $        897,245        $      985,520    $    1,086,058          10.2%


                                                                  Cost Summary
                                                               Fiscal Years 2011–15
                                                                                                                                                 Percentage
           (Dollars in millions)                FY 2011            FY 2012               FY 2013                 FY 2014           FY 2015
                                                                                                                                                  Change6
Gross Cost                                  $       16,839    $           35,989    $          13,266    $           65,470    $       59,500          (9.1)%
Less: Earned Revenue                              (20,212)              (25,306)             (26,688)              (28,979)          (31,547)           8.9 %
    Net Cost of Operations                 $       (3,373)    $           10,683    $        (13,422)    $           36,491    $       27,953         (23.4)%


       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
       $1.1 trillion as of September 30, 2015, an increase of $100.5 billion, or 10.2 percent over the
       September 30, 2014 total assets balance of $985.5 billion. The difference resulted primarily from an
       increase in net Credit Program Receivables ($94.0 billion), together with an increase in Fund Balance

       6
         Note that the percentage change is calculated as the FY 2014–15 difference, divided by the FY 2014 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
         The FY 2011 Liability for Loan Guarantees are presented in the liability section of the FSA’s Balance Sheet, while the FY 2012–15 Liability
       for Loan Guarantees are presented in the Credit Program Receivables. During FY 2013, as required by Treasury and Departmental
       guidance, excess collections from pre-1992 FFEL loan guarantees, which are payable to Treasury, were reported for the first time as non-
       current liabilities not covered by budgetary resources. This reclassification resulted in a $3 billion reduction of the FY 2012 reported balance
       of Intragovernmental Accounts Payable and a corresponding increase in the FY 2012 reported Other Liabilities balance

                                                        Federal Student Aid Annual Report FY 2015                                                   29
                                                                                       Management’s Discussion and Analysis
                                                                                       Financial Management Discussion and Analysis

with Treasury ($6.5 billion). Together, FSA’s Fund Balance with Treasury and its net Credit Program
Receivables accounted for almost 99.9 percent of Total Assets as of September 30, 2015, as illustrated
in the Composition of Assets chart below. Following the Composition of Assets chart is the
Comparison of Assets chart that presents the growth of these two principal Balance Sheet line items
over the past five fiscal years.

           Composition of Federal Student Aid’s Assets as of the end of Fiscal Years 2011–15
    100%

     90%

     80%
                                                                                                               Credit Program
     70%                                                                                                       Receivables, Net

     60%
               89.2%                89.4%              92.0%               93.6%           93.6%
                                                                                                               Fund Balance with
     50%                                                                                                       Treasury
     40%
                                                                                                               Remaining Assets
     30%

     20%

     10%
               10.5%                10.4%               7.8%               6.2%            6.3%
      0%        0.3%                 0.2%               0.2%               0.2%            0.1%
              FY 2011              FY 2012           FY 2013             FY 2014         FY 2015


           Comparison of Federal Student Aid’s Assets as of the end of Fiscal Years 2011–15
                                         (Dollars in Billions)
 $1,200

 $1,000

   $800

   $600
                                                                                                               $1,016.4
                                                                                       $922.4
   $400                                                        $825.7
                                    $672.8
           $530.0
   $200
                    $62.2                    $78.5                      $70.0                   $61.5                 $68.0
                            $1.8                     $1.4                       $1.5                    $1.6                  $1.7
     $0
              FY 2011                   FY 2012                   FY 2013                  FY 2014                  FY 2015

                        Credit Program Receivables, Net                     Fund Balance with Treasury
                        Remaining Assets                                    Total Assets




                                             Federal Student Aid Annual Report FY 2015                                               30
                                                                                                      Management’s Discussion and Analysis
                                                                                                      Financial Management Discussion and Analysis

Credit Program Receivables, Net. With a $1.0 trillion balance as of September 30, 2015, Credit
Program Receivables, Net represent FSA’s most important asset category and accounted for
93.6 percent of Total Assets. This balance included $979.0 billion in principal, interest, and fees
relating to Direct Loans, TEACH Grants, Perkins loans, HEAL loans and FFEL loans acquired under
the Conduit, Loan Participation Purchase, Loan Purchase Commitment, and defaulted guaranteed
loan programs, together with a negative allowance for subsidy cost of approximately $37.4 billion that
adjusted the loan portfolio to its estimated present value. The Direct Loan Credit Program receivables
continue to be the major component of this portfolio and as of September 30, 2015 comprised
86.6 percent of the net balance, for a total of $880.6 billion. This total included $845.1 billion in
principal, interest, and fees, net of a negative subsidy allowance in the amount of $35.5 billion. Of the
$845.1 billion in receivables, $44.1 billion (5.2 percent) in loan principal was in default and had been
transferred to the Department’s defaulted loan servicer, compared to $33.9 billion (4.6 percent) as of
September 30, 2014.

           Total Federal Student Aid Loan Portfolio as of the end of Fiscal Years 2011–15
                                                                              (Dollars in Billions)
                                                          $1,200
                        Credit Program Receivables, Net




                                                          $1,000

                                                           $800

                                                           $600

                                                           $400

                                                           $200

                                                             $0
                                                                      FY 2011           FY 2012       FY 2013      FY 2014        FY 2015
                    Other Programs                                     $0.5              $0.7          $0.8          $1.0           $1.1
                    FFEL, Guaranteed*                                  $32.3             $32.3         $37.4         $39.9         $40.5
                    FFEL, ECASLA**                                    $115.7            $113.8        $108.4        $103.0         $94.2
                    Direct Loans                                      $381.5            $526.0        $679.1        $778.5         $880.6
                    Total                                             $530.0            $672.8        $825.7        $922.4        $1,016.4




*FFEL Guaranteed (Non-ECASLA) Program
**FFEL ECASLA Acquired Loan Program

The majority of the $94.0 billion increase in net Credit Program Receivables during the 12 months
ended September 30, 2015 was also due to the Direct Loan Program, which increased $102.1 billion
or 13.1 percent. Of this increase, $113.9 billion was due to growth in the outstanding amount owed by
borrowers, driven mainly by new loan originations ($95.9 billion) and new consolidated loan
disbursements ($46.3 billion), and interest and fee accruals and adjustments ($39.8 billion), offset by
collections of principal, interest and fees from borrowers. This increase in the borrower-owed amount
was offset by a $11.9 billion reduction in the negative subsidy allowance that reduced Credit Program
Receivables, Net by the same amount, which is explained in more detail in Note 6.

                                                                   Federal Student Aid Annual Report FY 2015                                  31
                                                                      Management’s Discussion and Analysis
                                                                      Financial Management Discussion and Analysis

The increase in net Direct Loan Credit Program Receivables was offset by a reduction of $8.2 billion in
the net FFEL Credit Program Receivables to $134.7 billion, a 5.7 percent decrease compared to the
September 30, 2014 balance. The changes observed in both the Direct Loan and FFEL net credit
program receivables 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, and also due to continued loan consolidations that allow borrowers to take advantage of lower
interest rates. In addition, the increase in direct loans, and offsetting decrease in FFEL receivables,
can also be partially attributed to an increase in borrowers taking advantage of income based or
income contingent repayment plans

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 of September 30, 2015, FSA reported a Fund Balance with Treasury amount of
$68.0 billion of which $30.4 billion represented general funds. Revolving funds accounted for a further
$37.5 billion, derived from borrowings, as well as collections from the public and other federal
agencies. FSA also reported $15.0 million in Special funds (including fees collected on delinquent or
defaulted Perkins loans). Please refer to Note 3 for more details.

                   Fund Balance with Treasury as of the end of Fiscal Year 2015
                                                      Special Funds
                                                           0%




                                                            General Funds
                                                                45%
                                 Revolving Funds
                                      55%




The September 30, 2015 Fund Balance with Treasury amount was 10.5 percent above the FY 2014
year-end balance, a $6.5 billion increase. The increase was principally attributable to activities in the
Direct Loan and FFEL programs, which increased by $5.7 billion and $3.1 billion respectively. The
Direct Loan Program contributed to the increase because of new borrowings ($107.0 billion) and
collections ($64.4 billion) offset by disbursements to borrowers ($142.2 billion), net interest payments
to Treasury ($23.4 billion) and other costs to maintain the Direct Loan Program. The increase due to
the FFEL Program was the net result of where default claim payments ($7.1 billion), debt repayments



                                    Federal Student Aid Annual Report FY 2015                                 32
                                                                          Management’s Discussion and Analysis
                                                                          Financial Management Discussion and Analysis

($8.6 billion), interest payments to Treasury ($5.3 billion) and subsidy-related transactions
($4.7 billion), were offset by collections of principal, interest, and fees ($27.8 billion), subsidy
appropriations/borrowings ($3.9 billion) and other activity ($3.0 billion).

Offsetting these increases were reductions that were mostly in the combined Perkins Loan and Grants
Programs ($2.3 billion), primarily attributable to a decrease in funding due to the sequestration order
required by the Budget Control Act of 2011, net of a decrease in Pell Grant Disbursements during
FY 2015.

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, 2015, FSA had total
liabilities of $1.1 trillion, an increase of $86.9 billion or 8.9 percent over the September 30, 2014 total,
a lower rate of increase than the 10.2 percent growth in total assets.

Debt. With a September 30, 2015 ending balance of $1.1 trillion, FSA’s debt represented the primary
component of its liabilities and was $85.0 billion (8.8 percent) above the September 30, 2014
amount. This increase was primarily a result of new borrowings to support the growing loan volume in
the Direct Loan Program, and for subsidy related costs affecting the entire portfolio of credit program
receivables. Overall, the Direct Loan portion of FSA’s debt increased by $90.9 billion (11.1 percent) to
$909.9 billion as of September 30, 2015, representing 86.6 percent of FSA’s total debt balance. Over
the same period, FFEL-related debt decreased by $6.0 billion (4.1 percent) to $139.8 billion. These
changes, like those in the Credit Program Receivable, Net portfolio discussed above, reflect the
impact of the SAFRA Act on disbursements, interest-rate driven loan consolidations, and related
changes in estimated subsidy costs for the two programs that all affect program borrowings. As
illustrated in the following chart, this trend has continued throughout the past five years, with the
annual rate of increase in Direct Loan related debt averaging 19.2 percent throughout that period
compared to an overall rate of debt increase of 15.3 percent.

            Comparison of Federal Student Aid Debt as of the end of Fiscal Years 2011–15
                                               (Dollars in Billions)
                $1,200
                $1,000
                     $800
                     $600
                     $400
                     $200
                       $0
                             FY 2011          FY 2012           FY 2013           FY 2014          FY 2015
        TEACH                 $0.3             $0.4              $0.5              $0.6             $0.6
        FFEL, Guaranteed*     $29.5            $43.3             $43.3             $43.3            $43.3
        FFEL, ECASLA**       $124.1           $121.4             $109.2            $102.5           $96.5
        DL Program           $392.4           $549.3             $698.4            $819.0           $909.9
        Total Debt           $546.3           $714.3             $851.3            $965.4          $1,050.3

*FFEL Guaranteed (Non-ECASLA) Program
**FFEL ECASLA Acquired Loan Program




                                       Federal Student Aid Annual Report FY 2015                                  33
                                                                             Management’s Discussion and Analysis
                                                                             Financial Management Discussion and Analysis

Other Intragovernmental Liabilities. Other Intragovernmental Liabilities increased by $2.3 billion or
36.1 percent, from $6.4 billion to $8.7 billion of which $1.3 billion was attributable to Direct Loan
activity and a further $0.9 billion was related to the FFEL program. As detailed in Note 11, these
changes result principally from a $1.7 billion increase in current liabilities in miscellaneous receipt
accounts covered by budgetary resources. These represent an increased liability for downward
subsidy re-estimates resulting from updated economic assumptions, including probabilistic estimating,
discount rates, and interest rates. When executed, the remaining $5.5 billion in downward subsidy re-
estimates will be paid to Treasury’s General Fund. Please refer to Note 11 for further details.


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 revenues
earned from its activities.

                          Composition of FSA Net Cost for Fiscal Years 2011–15
                                                (Dollars in Billions)
                     $50.000
                     $40.000
                     $30.000
                     $20.000
                     $10.000
                          $-
                    $(10.000)
                    $(20.000)
                    $(30.000)
                    $(40.000)
                    $(50.000)
                    $(60.000)
                                    FY 2011          FY 2012      FY 2013           FY 2014        FY 2015
               DL Program           $(28.631)        $(10.720)    $(39.557)          $8.126        $(0.892)
               FFEL Program         $(14.825)        $(14.018)    $(8.753)          $(5.994)       $(3.947)
               Grants Programs*     $38.947          $34.224      $33.508           $33.052        $31.408
               Other Programs        $1.109           $1.174       $1.380            $1.307         $1.384
               Recovery Act          $0.027           $0.023            $-             $-             $-
               Total FSA Net Cost   $(3.373)         $10.683      $(13.422)         $36.491        $27.953

*Includes Federal Perkins Loan and Grants Programs

FSA reported net costs for the year ended September 30, FY 2015 of $28.0 billion, compared to
$36.5 billion for the twelve months ended September 30, FY 2014. In other words, FSA’s total costs
exceeded its revenues in both years, but by a smaller margin in FY 2015. The net change was the
result of a $6.0 billion decrease in Gross Costs (of which $6.3 billion was attributable to the Direct
Loan Program) offset by a $2.6 billion increase in Earned Revenue (of which $2.7 billion was
attributable to the Direct Loan Program). Therefore the Direct Loan Program, which reported an

                                        Federal Student Aid Annual Report FY 2015                                    34
                                                                    Management’s Discussion and Analysis
                                                                    Financial Management Discussion and Analysis

FY 2015 negative net cost where revenues exceeded costs by $0.9 billion, accounted for $9.0 billion
of the $8.5 billion overall reduction in net costs, a 111.0 percent decrease over the prior year Direct
Loan net cost of $8.1 billion.

This overall change 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. As discussed in Note 6, 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.

The net impact of these various factors in FY 2015 was a $4.6 billion downward adjustment of Direct
Loan re-estimated subsidy cost compared to a $30.2 billion upward adjustment for the prior year, an
overall decrease in the Direct Loan Program subsidy cost of $34.8 billion. As described more fully
in Note 6, a variety of offsetting factors caused this overall effect, including changes to the subsidy
estimation model and updated discount rates in FY 2015 that tended to reduce costs, while costs were
increased by large increases in the use of income dependent repayment plans ($15 billion) among
other factors. Offsetting these reductions to net costs, was a $15.9 billion cost increase due to current
year Direct Loan subsidy transfers, primarily attributable to the interest rate differential, together with a
$9.9 billion additional cost due to loan modifications. Please refer to Note 6 and Note 15 for more
details.


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.

FSA’s net position as of September 30, 2015 was $20.3 billion, an increase of $13.6 billion, or
204.5 percent compared to the previous September 30 net position of $6.7 billion. The difference
reflects an increase in the cumulative results of operations by the amount of $15.8 billion, from
$(23.8) billion, to $(8.0) billion, of which $15.6 related to the Direct Loan Program, primarily attributable
to changes in the unfunded liability for Direct Loan upward subsidy re-estimates. In addition, there
was an overall decrease in unexpended appropriations of $2.2 billion that mainly related to the Perkins
Loan and Grants Programs, mostly attributable to a decrease in funding as a result of the
sequestration order required by the Budget Control Act of 2011, and to a decrease in Pell Grant
disbursements. Please refer to Note 13 for more details.




                                     Federal Student Aid Annual Report FY 2015                              35
                                                                 Management’s Discussion and Analysis
                                                                 Financial Management Discussion and Analysis



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, 2015, FSA had $301.6 billion in combined budgetary
resources, of which $15.9 billion remained unobligated and unapportioned. This compared to
$307.7 billion in budgetary resources twelve months earlier of which $11.8 billion were unobligated
and unapportioned. The $6.1 billion change in budgetary resources represented a 2.0 percent
decrease. The FFEL Program accounted for $3.3 billion of this reduction in budgetary resources,
mainly due a $2.6 billion decrease in unobligated balance brought forward. There was another
$1.5 billion reduction attributable to the Perkins Loan and Grants Programs, due primarily to a
decrease in the unobligated balance brought forward, with a further $1.3 billion decrease attributable
to the Direct Loan.

FSA’s Net Outlays after Distributed Offsetting Receipts as of September 30, 2015 were $121.5 billion,
a decrease of $11.7 billion or 8.8 percent compared to the prior September 30 amount of
$133.3 billion. The Direct Loan Program accounted for $6.4 billion of this change, with additional
reductions attributable to FFEL Program, and to the combined Perkins Loan, and Grants Programs of
$3.8 billion and $1.6 billion respectively. Additional information is provided in Note 16.

More details on FSA’s sources of funds and spending are presented in the Schedule of Spending
located in the Other Information section. This schedule includes the sections, “What Money is
Available to Spend” and “How Was the Money Spent”.




                                   Federal Student Aid Annual Report FY 2015                             36
                                                                 Management’s Discussion and Analysis
                                                                 Financial Management Discussion and Analysis

Financial Management Risks

As mentioned previously, FSA must mitigate several financial management risks in order to protect
borrower and taxpayer interests. While not directly reflected on the financial statements as detailed,
they are overarching risks going forward that cannot be ignored. These risks include:

System/Service Implementations. Recent major financial system implementation efforts continue to
be very successful, including the re-compete of Title IV origination and disbursement processes, the
implementation of an Enterprise Data Warehouse, and the implementation of a new Person
Authentication Service. Over the next few years, FSA will continue to re-compete contracts
associated with several of its major business processes, primarily those that focus on application
processing, loan servicing, and its technology infrastructure. Managing multiple re-competes and new
system implementations at the same time creates a number of risks. To mitigate risks of these large
and complex implementations, FSA must be vigilant in many ways, including the following.

•   Ensure that knowledgeable staff have sufficient time to work on all of the relevant implementations,
    given FSA’s large and complex operating environment.

•   Ensure that FSA’s tightly integrated systems that are in the process of changing at the same time
    do not implement conflicting requirements.

•   Ensure that project and portfolio management practices are in place to maintain effective
    management control over all of the implementations.

Exacerbating this risk associated with contract re-competes are the numerous program
changes that FSA has been asked to implement in recent years, and which will continue to be
required of FSA into the foreseeable future.

FSA continues to manage the risks associated with system/service implementations through
a robust and dynamic investment management process. This includes the use of an active
investment review board, the application of a lifecycle management methodology, and at
least monthly reviews of the investment portfolio’s performance. In addition, FSA is
expanding needed oversight and monitoring capacity throughout its operating environment.

Improper Payments. Based on OMB criteria, risk susceptible programs administered by FSA include
the Direct Loan Program and the Pell Grant Program. FY 2015 outlays for these programs were as
follows:

•   Direct Loan Program – $98.8 billion
•   Pell Grant Program – $29.9 billion
In FY 2015, FSA documented and assessed 292 improper payment related controls in its internal
control framework and found that the risk of improper payments is effectively mitigated. FSA has
implemented a framework of continuous controls monitoring and process evaluation, striving for zero
improper payments. While zero percent improper payments is infeasible, that continues to be the goal
until the Department, working with OMB, can establish the appropriate risk tolerance threshold.




                                   Federal Student Aid Annual Report FY 2015                             37
                                                                 Management’s Discussion and Analysis
                                                                 Financial Management Discussion and Analysis

For more information regarding FSA’s assessment of improper payment risk and planned strategies to
mitigate this risk, please refer to the Improper Payments Reporting Details narrative in the Other
Information section located in the U.S. Department of Education FY 2015 Agency Financial Report
(AFR).

Debt Collection. As of September 30, 2015, the Department managed a Net Credit Program
Receivable portfolio of approximately $1,016.4 billion, an increase of 10.2 percent from FY 2014. 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. As of September 30, 2014, the
Department was responsible for administering 82 percent of the net loans receivable for the federal
government and that percentage will likely grow from year to year. 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 what can sometimes appear to be opposing outcomes of maximizing collections, while
minimizing negative borrower impacts. During FY 2015, FSA saw a decline in the portfolio’s 3-year
default rate, from 13.7 percent to 11.8 percent and an increase in its collection rate from $35.90 to
$51.58. This demonstrates continued progress in default rate reductions, 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, can be found in
the Annual Performance Report section of this Annual Report.

While FSA is proud of these outcomes, 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, FSA has been working with other offices in the Department,
Treasury, and OMB to implement and monitor more effective performance metrics. Through
coordinated efforts with an OMB/Treasury Debt Collection working group, FSA has clarified the
requirements of the Treasury Report on Receivables and continues to implement those clarified
requirements with 13 of its loan-servicing contractors. These more detailed and consistent
performance metrics will assist FSA, the Department, and the federal government in making more
informed debt collection decisions.

Guaranteed Loan Portfolio. As of September 30, 2015, the $277.7 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 7.9 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. While FSA understands the need to
remain constantly vigilant, there have been no losses of federal funds, it is not aware of any lender
claims being paid untimely, nor is it aware of any instance where an insufficient Operating Fund level
has caused a FFEL borrower to not receive the services to which the borrower was entitled.




                                   Federal Student Aid Annual Report FY 2015                             38
                                                                   Management’s Discussion and Analysis
                                                                   Financial Management Discussion and Analysis

Administrative Budget. Many of the organization’s costs are driven by volume activities, such as
grant or loan origination and disbursement, and loan servicing. For example, loan-servicing costs are
driven by the number of borrower accounts, the repayment status of a borrower’s loan(s), and the
timing of the borrowers’ loan disbursements. The number of grant and loan origination and
disbursement transactions drives the origination and disbursement costs. The budgeting formulation
process generally sets the initial administrative budget for a fiscal year 18 months before the start of
that fiscal year. However, even a small variation in any of FSA’s volumes can significantly impact its
budget. This places all 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.

As of the end of this fiscal year, Federal Student Aid is facing potential budgets from the House and
Senate at levels $135 million and $220 million below the 2016 President’s Budget level. This level of
funding would have devastating impacts on the operations of Federal Student Aid. A few examples
are listed below:

•   Increases the likelihood of a data breach or system intrusion, which would place personally
    identifiable information of nearly 11.9 million students and borrowers at risk;

•   Increases the risk of school oversight failures and limits the ability to address school oversight
    challenges for over 6,100 schools;

•   Decreases ability to provide loan servicing oversight necessary to protect over 42 million borrowers
    and limits the ability to address contractor oversight and system implementation issues;

•   Increases the risk of a systems infrastructure failure and limits the ability to manage system
    change, which would jeopardize the delivery of over $128.7 billion of aid annually;

•   Decreases transparency to the public and limits the ability to support policy decisions with data;

•   Decreases the outreach and awareness efforts to tens of thousands of students that are most in
    need of assistance; and

•   Eliminates plans to address thousands of Office of Inspector General (OIG) fraud referrals. In
    January 2013, OIG estimated there was $187 million in fraud from student aid fraud rings between
    Award Years 2009 and 2012.




                                    Federal Student Aid Annual Report FY 2015                              39
                                                                                Management’s Discussion and Analysis
                                                                          Analysis of Systems, Controls, and Legal Compliance




Analysis of Systems, Controls, and Legal Compliance

  FSA management adheres to the Government Accountability Office (GAO) 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
  that are 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 control should provide reasonable assurance that the objectives of the agency are
  being achieved in the following categories:

  •   Effectiveness and efficiency of operations, including the use of the entity’s resources;
  •   Reliability of financial reporting, including reports on budget execution, financial
      statements, and other reports for internal and external use; and
  •   Compliance with applicable laws and regulations. 8

  FSA management is responsible for establishing and maintaining effective internal control
  and financial management systems that meet the objectives of the Federal Managers’
  Financial Integrity Act of 1982. FSA conducted its assessment of 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
  Internal Control (OMB Circular A-123). Based on the results of this assessment, FSA
  reported to the Department’s management that its internal control over operations and
  compliance with applicable laws and regulations, as of September 30, 2015, was operating
  effectively, except where noted in the Legal Compliance section of the Department’s AFR.

  In addition, FSA, working with the Department’s management, conducted its current year
  assessment of the effectiveness of internal control over financial reporting in accordance
  with the requirements of Appendix A of OMB Circular A-123. 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:




  8
   Government Accountability Office Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1,
  November 1999, p. 4-5.


                                               Federal Student Aid Annual Report FY 2015                                        40
                                                             Management’s Discussion and Analysis
                                                        Analysis of Systems, Controls, and Legal Compliance




•   Debt Collection*
•   FFEL – Financial Partner Invoicing (Lender Reporting System 799 and Monthly
    Consolidation Rebate Fees, Guaranty Agencies Invoicing and Payment Process)
•   Student Eligibility Service Group
•   Financial Institution Oversight Service Group
•   Direct Loan Origination
•   Grant Program Operations (Pell Grant and TEACH*)
•   Student Eligibility
•   Operations Performance Division Forms 2000
•   Financial Reporting (Analytics, Monthly Reconciliations, Journal Entries, Month-End
    Close, Preparation of FSA Annual Report, Year-End Closing, Treasury Report on
    Receivables Compilation Process)
•   Funds Control Management (Automated Budget Entries, Budget Execution, Budget
    Formulation, Cross Validation Rules, Summary Templates, Segment Value Updates)
•   Procurement Management (Contract Acquisition, Invoice Processing, Monthly Contract
    Accruals)
•   Human Resource Management (Time and Attendance, Personnel Transactions)
•   Total and Permanent Disability (TPD)
•   Servicing of Direct Loans and ECASLA-acquired FFEL Program Loans by four Title IV
    Additional Servicers (TIVAS)* and seven Not-For-Profits (NFPs)*
•   Servicer Oversight
•   Federal Perkins Loans*
•   HEAL
•   Entity-Level controls
•   IT Controls over the following systems: Financial Management System, Debt
    Management and Collections System*, Central Processing System, National Student
    Loan Data System (NSLDS), Common Origination Disbursement*, the Virtual Data
    Center*, four TIVAS Servicing Systems*, seven NFP Servicing Systems*, and the
    Federal Perkins Loan Servicing System*.

In FY 2015, 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 16, Reporting on Controls at a Service Organization. In the
list above, an asterisk (*) indicates full or partial reliance on SSAE16 Service Organization
Control 1 (SOC1) reports for relevant process and IT controls.

With this reliance on SSAE 16 SOC1s, the number of key process controls assessed in
FY 2015 was 1,292 process and entity level controls, and demonstrates an increase from
prior year totals. As illustrated below, the breakdown of this total number of key process
controls assessed includes 822 controls covered by SSAE 16 SOC1s and 470 tested by
the FSA self-assessment team. While the number of controls assessed increased, the total
number of deficiencies identified in FY 2015 decreased in total number, and as a
percentage of total controls assessed, from FY 2014. The number of deficiencies depicted
below for FY 2015 (66) includes deficiencies identified from both SSAE16 SOC1 reports
(38) and A-123A testing (28). These deficiencies individually and taken together do not
materially affect financial reporting. Corrective actions have been and are being
established to prevent reoccurrence and ensure control objectives are achieved.

                                   Federal Student Aid Annual Report FY 2015                                  41
                                                              Management’s Discussion and Analysis
                                                        Analysis of Systems, Controls, and Legal Compliance

                                FSA FY 2013–15
        A-123A Process and Entity Level Controls and Deficiencies Analysis

1400

1200

1000
                                                                          822
 800
                                           623
            578
 600

 400

 200                                       413                            470
            356
                           60                            33                                 38
   0                       40                            47                                 28
          FY 2013                      FY 2014                          FY 2015
    Controls Tested   A-123 Deficiencies    Number of Process Controls     SSAE16 SOC1 Findings
    by A-123A Team    Identified            Covered by SSAE16 SOC1s        (12/31 and 6/30 reports)

As illustrated in the chart below, the total number of IT controls subject to assessment
decreased from FY 2014 to FY 2015. This reduction is the result of a modified Federal
Information Systems Controls Audit Manual (FISCAM) approach that focuses on testing
high-risk controls within each FISCAM control family and scoping out secondary/low-risk
controls. As part of the modified FISCAM approach, 88 FISCAM controls were assessed
per in-scope system rather than 126 controls, as was the case in FY 2014. The total
number of IT controls assessed was 1,584 and includes 1,258 controls covered by SSAE16
SOC1s and 326 tested by the FSA self-assessment team. The number of deficiencies
depicted below for FY 2015 (42) includes deficiencies identified from both SSAE16 SOC1
reports (26) and A-123A testing (16). These deficiencies individually and taken together do
not materially affect financial reporting. Corrective actions have been and are being
established to prevent reoccurrence and ensure control objectives are achieved.




                                  Federal Student Aid Annual Report FY 2015                                   42
                                                                    Management’s Discussion and Analysis
                                                             Analysis of Systems, Controls, and Legal Compliance



                                      FSA FY 2013–15
                          A-123A IT Controls and Deficiency Analysis


 3000

 2500
                  233
 2000
                                                    401
         3320
 1500
                                           2797                                           326

 1000             2114
                                                                                1848
                                                    1607
                                                                                         1258
  500
                             84                                44                                   42
    0
                FY 2013                            FY 2014                             FY 2015

         Total Controls     IT Controls Assessed     IT Controls Tested       A-123 Deficiencies
                            by SSAE16 SOC1           by A-123A Team           Identified


Based on the results of this evaluation, FSA provided reasonable assurance to the
Department's management that its internal control over financial reporting as of
June 30, 2015 was operating effectively.

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.




                                     Federal Student Aid Annual Report FY 2015                                     43
                                                              Management’s Discussion and Analysis
                                                                         Limitations of Financial Statements

4

    Limitations of Financial Statements
Management has prepared the accompanying financial statements to report the financial
position and operational results for FSA, for FY 2015 and FY 2014 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.




                                   Federal Student Aid Annual Report FY 2015                               44
                                                    Annual Performance Report




Annual Performance Report




        Federal Student Aid Annual Report FY 2015                        45
                                                                                               Annual Performance Report



         FY 2015 Performance Highlights of Federal Student Aid

                  Performance Metrics                           FY 2015           FY 2015          Result        Reference
                                                                 Target            Actual                          Page
Strategic Goal A: Provide superior service and information to students and borrowers.

% of first-time FAFSA filers among high school                                                      Met
                                                             59.1%–61.1%           60.5%                             50
seniors
                                                                                                    Met
Persistence among first-time filing aid recipients           78.6%–80.6%           79.5%                             51

                                                                                                    Met
Customer Visits to StudentAid.gov                            >=32.7 million     43.3 million                         52

                                                                                                    Met
Social Media Channel Subscribership                            >=368,000          454,066                            53

                                                                                                  Not met
Customer Satisfaction Score (ACSI)                             77.4–79.4            77.2                             54

Strategic Goal B: Work to ensure that all participants in the system of funding postsecondary education
                  serve the interests of students, from policy to delivery.
                                                                                                  Not met
Ease of Doing Business school survey                           75.9–77.9            75.8                             55

                                                                                                    Met
Percent of borrowers > 90 days delinquent                        10.4%             9.8%                              56

Strategic Goal C: Develop efficient processes and effective capabilities that are among the best in the
                  public and private sectors.
                                                                                                    Met
Aid delivery costs per application                               $12.28           $10.73                             57

                                                                                                    Met
Loan servicing costs per borrower                                $22.47           $22.36                             58

Strategic Goal D: Ensure program integrity and safeguard taxpayers’ interests.

                                                                                                    Met
Improper Payment rate                                            1.65%             1.44%                             59

                                                                                                    Met
Percent of contract dollars competed by FSA                  87.7%–89.7%           90.3%                             60

                  9                                                                                 Met
Collection rate                                                  $36.56           $51.58                             61

Strategic Goal E: Strengthen FSA’s performance culture and become one of the best places to work in the
                  federal government.
                                                                                  Met
Employee Engagement Index                        66.7%–68.7%      67.9%                         62



     9
      The Collection Rate for the purpose of Performance Metric D.3 is defined as the amount of dollars collected from
     borrowers in the fiscal year per dollar spent to collect.

                                          Federal Student Aid Annual Report FY 2015                                       46
                                                                               Annual Performance Report
                                                                   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 current strategic plan, FSA Strategic Plan, FY 2012–16 was implemented at the beginning of
FY 2012. 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 as follows:

•   Strategic Goal A: Provide superior service and information to students and borrowers.
•   Strategic Goal B: Work to ensure that all participants in the system of funding postsecondary
    education serve the interests of students, from policy to delivery.
•   Strategic Goal C: Develop efficient processes and effective capabilities that are among the
    best in the public and private sectors.
•   Strategic Goal D: Ensure program integrity and safeguard taxpayers’ interests.
•   Strategic Goal E: Strengthen FSA’s performance culture and become one of the best places
    to work in the federal government.

To gauge its success in meeting these strategic goals, FSA identified 13 performance metrics. For
more information on FSA’s strategic goals and its performance metrics, click on the following link to
go directly to the FSA Strategic Plan, FY 2012–16.

                          StudentAid.gov/strategic-planning-reporting

In FY 2016 and beyond, FSA will base its performance on new Strategic Goals and Objectives
identified in the forthcoming FSA Strategic Plan, FY 2015–19.




                                          FSA Fact
FSA, the first federal government office designated as a PBO, focuses on providing tangible
results and efficient management. For more information about FSA’s performance as a PBO,
visit StudentAid.gov/strategic-planning-reporting.


                               Federal Student Aid Annual Report FY 2015                              47
                                                                                      Annual Performance Report
                                                                          Introduction to the Annual Performance Report


The following table provides a summary of results, by Strategic Goal, as measured by the FY 2015
performance metrics.

                     Summary of Performance Results by Strategic Goal

 Strategic Goal                                                    Met   Not met No target        N/A      Total
 Goal A:
 Provide superior service and information to students and           4       1           –          –         5
 borrowers.
 Goal B:
 Work to ensure that all participants in the system of funding
 postsecondary education serve the interests of students, from      1       1           –          –         2
 policy to delivery.
 Goal C:
 Develop efficient processes and effective capabilities that are    2       –           –          –         2
 among the best in the public and private sectors.
 Goal D:
 Ensure program integrity and safeguard taxpayers’ interests.       3       –           –          –         3

 Goal E:
 Strengthen FSA’s performance culture and become one of the         1       –           –          –         1
 best places to work in the federal government.

 Total                                                             11       2           –          –        13




                                                FSA Fact
 The College Scorecard assists students and their families in making educated decisions about
 college by providing information such as college’s graduation rate, net costs, average amount
 borrowed, etc. The College Scorecard can be accessed at
 whitehouse.gov/issues/education/higher-education/college-score-card.

                                     Federal Student Aid Annual Report FY 2015                               48
                                                                                     Annual Performance Report
                                                                                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 met or exceeded the           Met
                         target.
                         Performance result did not meet the            Not met
                         target.
                         Performance result is not applicable
                         because the performance metric was not           N/A
                         developed, the performance metric was
                         not implemented, or the required data
                         were not available in time for inclusion.


    The performance metric results reported are as of fiscal year-end (i.e., September 30, 2015)
    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.



                                 Federal Student Aid Annual Report FY 2015                                 49
                                                                                     Annual Performance Report
                                                                               Performance Results by Strategic Goal

Strategic Goal A: Provide superior service and information to students and
                      borrowers.
 Strategic Goal A: Provide superior service and information to students and borrowers.
Performance Metric A.1: % of first-time FAFSA filers among high school seniors


                          FY 2011           FY 2012        FY 2013       FY 2014                 FY 2015
Fiscal Year
                           Actual            Actual         Actual        Actual           Target         Actual
Performance                 58.7%            58.4%          59.2%          60.1%        59.1%–61.1%        60.5%
                             Met              Met            Met               Met                  Met
Performance Result


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.

Analysis of Progress:
FSA met its target for this metric with a result of 60.5 percent.

FSA's record of improving year-over-year performance on this metric demonstrates the success of
the programs designed to increase the percent of Americans who attend institutions of higher
education. In particular, improvements to the FAFSA Completion Tool, strategic partnerships with
external stakeholders, and targeted engagement campaigns have helped FSA achieve continued
progress.

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 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; incoming freshmen, with
or without previous college attendance; age 18 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 and Washington, DC.




                                   Federal Student Aid Annual Report FY 2015                               50
                                                                                  Annual Performance Report
                                                                             Performance Results by Strategic Goal


Performance Metric A.2: Persistence among first-time filing aid recipients


                          FY 2011        FY 2012         FY 2013    FY 2014               FY 2015
Fiscal Year
                          Actual          Actual          Actual    Actual          Target         Actual
Performance             Performance metric established in FY 2014    79.6%       78.6%–80.6%        79.5%

                                                                      Met                    Met
Performance Result             Prior-year data not available



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. The metric provides FSA with a key contribution to the President’s 2020 Goal
attainment progress and calculation methodology.

Analysis of Progress:
FSA met its target with a result of 79.5 percent.

FSA has undertaken various initiatives to improve persistence levels among aid filers, including the
expansion of the FAFSA Completion Initiative, the development of sophisticated outreach and digital
engagement campaigns, and the initiation of partnerships with external stakeholders.

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 2014–15 return applicants (by September 30 of the first year of the
application cycle) that were identified in the denominator.




                                             FSA Fact
  As a result of FSA’s continuous effort to make the process of completing the FAFSA easier and
  more efficient, the time to complete the FAFSA online continues to be reduced. This effort has
  resulted in fewer paper FAFSAs being submitted.


                                Federal Student Aid Annual Report FY 2015                               51
                                                                                       Annual Performance Report
                                                                                  Performance Results by Strategic Goal

Performance Metric A.3: Customer Visits to StudentAid.gov


                         FY 2011         FY 2012        FY 2013     FY 2014                   FY 2015
Fiscal Year
                          Actual          Actual         Actual     Actual              Target          Actual

Performance            Performance metric established in FY 2014   32.7 million      >=32.7 million    43.3 million


                                                                      Met                        Met
Performance Result            Prior-year data not available



Target Context:
By focusing on overall customer visits to FSA’s premier site, 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 with a result of 43.3 million.

FSA greatly exceeded its target on this metric again in FY 2015 with a result of 43.3 million customer
visits. This represents a more than 32 percent increase in visits over the prior year.

FSA’s performance on this metric is a testament to the success of its effort to consolidate disparate
sites and systems into a single integrated student experience. Since its launch in
2012, Studentaid.gov has evolved into FSA’s premier information interface for 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).
.




                                             FSA Fact
 The Repayment Estimator is a tool that is available on StudentAid.gov. Borrowers can use the
 Repayment Estimator to estimate the monthly payments on their loans under each repayment
 plan and make informed decisions about the repayment of their loans. To use the Repayment
 Estimator, visit StudentAid.gov


                                   Federal Student Aid Annual Report FY 2015                                   52
                                                                                  Annual Performance Report
                                                                             Performance Results by Strategic Goal

Performance Metric A.4: Social Media Channel Subscribership


                         FY 2011       FY 2012          FY 2013    FY 2014                FY 2015
Fiscal Year
                         Actual         Actual           Actual    Actual          Target           Actual

Performance            Performance metric established in FY 2014   368,042        >=368,000         454,066

                                                                     Met                      Met
Performance Result            Prior-year data not available



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 student aid information across the organization’s digitally engaged
customer base.

Analysis of Progress:
FSA met its target with a result of 454,066.

FSA greatly exceeded its target on this metric for the second year in a row, with a result of 454,066
subscribers to Facebook, Twitter, and YouTube social media channels.

In today’s information age, digital media techniques are becoming increasingly critical for effective
customer engagement. Over 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:
This metric is calculated as the aggregate sum of likes, followers, and subscribers across Facebook,
Twitter, and YouTube.




                                Federal Student Aid Annual Report FY 2015                                53
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                                                                            Performance Results by Strategic Goal

Performance Metric A.5: ACSI Aid Life Cycle Surveys


                             FY 2011         FY 2012        FY 2013       FY 2014              FY 2015
Fiscal Year
                             Actual          Actual         Actual          Actual        Target      Actual
Performance                    78.0            78.5           78.4           78.4        77.4–79.4        77.2

                               Met             Met            Met            Met                Not met
Performance Result


Target Context:
To measure the overall customer satisfaction level throughout the student aid lifecycle, FSA
calculates a weighted score for the ACSI surveys for applicants, students in school, and borrowers in
repayment. This performance metric measures how FSA is improving in terms of streamlined
processes for customer interaction and the accessibility of information FSA provides to customers.

Analysis of Progress:
FSA did not meet its target on this metric in FY 2015, with a final score of 77.2.

The score incorporates the following sub-scores: the FAFSA On The Web (FOTW) score, the
borrowers score, and the aid recipients score. Three mitigating factors impacted the A5
average. First, the FOTW ACSI score is down from FY 2014, primarily due to changes relating to
the implementation of the FSA ID. Second, the total number of applicants is down from FY 2014;
because the A5 metric is a weighted average, and the FOTW score (for applicants) is the highest of
the three scores, the reduction in weight for this component lowered the overall score. Third, the
borrower score, which is weighted most heavily, came in just below the score in FY 2014.

It is also possible that the addition of delinquent borrowers, who were previously not incorporated in
the borrowers score, negatively impacted the score, as delinquent borrowers report a lower ACSI
score than their non-delinquent counterpart. Due to the methodology used, the decrease in overall
score as a result of this change was eliminated in rounding.

In order to improve FSA’s performance on this score in FY 2016 and beyond, FSA is making
enhancements to the FSA ID online experience and the associated communications strategy to
reverse the downward trend in the FY 2015 FOTW score.

Data Quality and Limitations:
The ACSI survey is conducted annually on 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.

Some changes to the survey will be made in FY 2016 in order to improve accuracy. These changes
will be reflected in the targeting and calculation for FY 2016 and beyond.




                                Federal Student Aid Annual Report FY 2015                                 54
                                                                                  Annual Performance Report
                                                                            Performance Results by Strategic Goal

Strategic Goal B: Work to ensure that all participants in the system of
                  postsecondary education funding serve the interests of
                  students, from policy to delivery.

Performance Metric B.1: Ease of doing business school survey (1-100 scale)


                            FY 2011         FY 2012       FY 2013      FY 2014              FY 2015
 Fiscal Year
                             Actual          Actual        Actual       Actual        Target       Actual
                             Survey
 Performance                launched
                                               74            74             77       75.9–77.9         75.8

                               Met             Met          Met             Met              Not met
 Performance Result


Target Context:
FSA works closely with postsecondary institutions to provide millions of 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 every quarter to gauge the “ease of doing business with FSA.” The first
year for the survey was FY 2011.

Analysis of Progress:
FSA did not meet its target with a result of 75.8.

FSA’s score on this metric reflects the impact of a number of major policy or process changes over
the past year that directly affected school operations. These changes—which include the
150 percent limitation on Stafford Loan subsidy, new enrollment reporting requirements, and gainful
employment and scorecard reporting—have imposed significant new burdens on school financial aid
and business offices and their private software providers. FSA has taken a number of steps over the
past year to help schools with these and other requirements, including extensive training and
technical support, the implementation of system edits to simplify 150 percent processing, and
streamlined PLUS loan processing. Given the volume of new requirements over the past year, the
small reduction in the score on this metric—a statistically insignificant change from the previous
year’s score—is an indication of the success of FSA’s outreach and support efforts.

Data Quality and Limitations:
A survey of 10-12 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.




                                Federal Student Aid Annual Report FY 2015                                55
                                                                                    Annual Performance Report
                                                                               Performance Results by Strategic Goal

Performance Metric B.2: Percent of Borrowers > 90 Days Delinquent


                             FY 2011           FY 2012          FY 2013        FY 2014          FY 2015
 Fiscal Year
                              Actual           Actual            Actual        Actual      Target         Actual

 Performance                   Performance metric revised in FY 2015            9.9%        10.4%         9.8%

                                                                               Revised              Met
 Performance Result      Prior-year data not available under revised method.
                                                                                metric


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 with a result of 9.8 percent.

Reducing the percent of borrowers with loans in a delinquent status has been a major goal of FSA,
and success in this metric reflects FSA’s accomplishments in this area. In particular, efforts to
encourage borrowers to leverage income-based repayment programs, as well as engaging in
targeted communications efforts designed to spread awareness of options to remain out of
delinquency, greatly helped to reduce the delinquency rate since FY 2014.

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 over 90 days
delinquent relative to all accounts where payments are anticipated. The previous FY 2014 target
and result were both 8.1 percent.




                                            FSA Fact
 Borrowers who work full-time in a public service job and have a Direct Loan or a Direct
 Consolidation Loan may qualify for the Public Service Loan Forgiveness Program. To find
 more about the Public Service Loan Forgiveness Program, go to StudentAid.gov/repay-
 loans/forgiveness-cancellation/charts/public-service.

                                Federal Student Aid Annual Report FY 2015                                   56
                                                                                  Annual Performance Report
                                                                            Performance Results by Strategic Goal

Strategic Goal C: Develop efficient processes and effective capabilities that
                  are among the best in the public and private sectors.

Performance Metric C.1: Aid delivery costs per application


                            FY 2011           FY 2012     FY 2013       FY 2014             FY 2015
 Fiscal Year
                             Actual           Actual       Actual        Actual        Target          Actual
 Performance                  $9.89           $10.85       $11.16        $11.43         $12.28         $10.73
                                                Met         Met             Met                  Met
 Performance Result         Baseline



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. The FY 2015 target was expected to
be higher than previous years because a major cost component was forecasted to increase.
Historically, the Base Fixed Cost portion of the originations contract comprised about half of the total
contract cost and had increased 4-8 percent annually from FY 2012–14. Since this was built into the
multi-year contract, it had driven up the measure’s targeted result.

Analysis of Progress:
FSA met its target with a result of $10.73.

Actual costs were 12 percent lower than projected, as a result of favorable contract negotiations. In
addition, the number of applications was 0.4 percent higher than forecast, which further decreased
the unit cost.

Data Quality and Limitations:
The cost data for this metric are derived from general ledger data uploaded to FSA’s Activity-Based
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 Central Processing System, FSA’s system for processing student aid applications.




                                Federal Student Aid Annual Report FY 2015                                 57
                                                                                 Annual Performance Report
                                                                            Performance Results by Strategic Goal

Performance Metric C.2: Loan servicing costs per borrower


                            FY 2011           FY 2012    FY 2013       FY 2014               FY 2015
 Fiscal Year
                             Actual           Actual      Actual        Actual         Target         Actual
 Performance                 $18.15           $18.94      $21.42        $21.59         $22.47         $22.36

                                                Met      Not met        Not met                 Met
 Performance Result         Baseline



Target Context:
The second measure developed to gauge the efficiency of aid delivery is the loan servicing-related
cost per borrower. This unit cost tracks the overall costs of loan servicing operations and
maintenance, including labor, non-labor, and contracts.

In general, borrower accounts in FSA’s portfolio of federal student loans have matured, with a higher
proportion of borrowers moving from the in-school/grace status into repayment. Because servicing
costs for loans in repayment are higher, this change in the portfolio mix has driven the average loan
servicing cost per borrower upwards. In addition, a new pricing schedule was recently implemented
that further increased the servicing costs for loans in repayment while decreasing servicing costs for
loans in other statuses. While incentivizing servicers to better manage borrowers toward repayment,
this has also furthered the upward trend in loan servicing costs per borrower.

Analysis of Progress:
FSA met its target with a result of $22.36.

Actual costs were 2 percent lower than targeted costs because 2 percent fewer borrowers were in
repayment status than had been projected. Because borrowers in the repayment loan status are the
most costly to service, the lower than forecasted volumes led to the lower unit cost.

Data Quality and Limitations:
The measure is defined as the total direct costs for servicing in the year ending June 30, divided by
the average number of borrowers in servicing for the year.

Data for this measure are derived from FSA’s Activity-Based 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.




                                          FSA Fact
FSA provides a fact sheet, entitled Repay Your Federal Student Loans. This fact sheet shares
basic information on the repayment of subsidized loans and unsubsidized loans, as well as
PLUS loans for graduate and professional students. It lists information such as, repayment
plans loan types, monthly payment amounts, etc. To obtain a copy of this sheet, visit
StudentAid.gov/repay-loans.

                                Federal Student Aid Annual Report FY 2015                                58
                                                                                  Annual Performance Report
                                                                             Performance Results by Strategic Goal

Strategic Goal D: Ensure program integrity and safeguard taxpayers’
                  interests.

Performance Metric D.1: Improper Payment Rate


                             FY 2011             FY 2012       FY 2013      FY 2014          FY 2015
 Fiscal Year
                              Actual             Actual        Actual       Actual      Target         Actual
                                                Pell Grant    Pell Grant
                                                 2.49%         2.26%

                        Performance metric      Direct Loan   Direct Loan
 Performance           established in FY 2012
                                                                             1.54%       1.65%         1.44%
                                                   0.58%         1.03%

                                                  FFEL          FFEL
                                                  1.93%        <0.005%
                          Prior-year data          Met         Not met      Not met              Met
 Performance Result        not available


Target Context:
FSA develops and reports annually in the AFR improper payment estimates for programs
determined to be susceptible to significant improper payments. In FY 2015, FSA identified the Pell
Grant and Direct Loan programs as risk-susceptible. The FY 2015 target was set using the FY 2014
actuals for these two programs, with a confidence interval of plus or minus 1 percent to allow for
minor fluctuations in responses. Prior to FY 2015, the FFEL program had also been identified as
risk-susceptible. However, the improper payment rate calculation reported for FFEL for FY 2013 and
FY 2014 was less than 0.005 percent and OMB approved in FY 2015 a change in designation to low
risk. As a result, FFEL is not included in the blended improper payment rate or target for FY 2015.

For FY 2012 and FY 2013, the Improper Payment Rate metric was calculated separately for each
risk-susceptible program. Starting with the FY 2014 metric, FSA began reporting a single ‘blended’
rate that divides aggregated estimated improper payments for all programs identified as risk-
susceptible for that year by aggregated estimated program outlays. This new, more comprehensive
measure has enabled FSA to view its progress in a more holistic manner.

Analysis of Progress:
FSA met its target with a result of 1.44 percent. As noted below, the underlying improper payment
estimates were calculated using an alternative methodology and the decline in the FY2015 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 and Direct Loan programs please
see the Other Information section of the Department’s AFR.

Data Quality and Limitations:
The OMB-approved FY 2015 improper payment estimation methodology is an alternative, as
opposed to statistical methodology. Accordingly, these estimates may lack the precision of other
estimates developed using random, statistical methodologies. The alternative methodology is based
on an analysis of data obtained from program reviews conducted at schools identified through a risk-
based (i.e., non-random) selection process.


                               Federal Student Aid Annual Report FY 2015                                  59
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                                                                             Performance Results by Strategic Goal

Performance Metric D.2: Percentage of contract dollars competed by FSA


                         FY 2011         FY 2012        FY 2013    FY 2014               FY 2015
 Fiscal Year
                          Actual         Actual          Actual    Actual          Target          Actual

 Performance           Performance metric established in FY 2014    88.7%       87.7%–89.7%        90.3%

                                                                     Met                    Met
 Performance Result           Prior-year data not available



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 exceeded this metric with a final score of 90.3 percent.

FSA has consistently improved the percent of contract dollars competed in each fiscal year and
continues to develop and maintain the highest quality standards among enterprise contractors.

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”.




                                           FSA Fact
The Financial Awareness Counseling Tool (FACT) is available to assist student borrowers in
managing their student loan debt. This interactive tool, launched by FSA provides students
with tutorials that cover topics ranging from managing a budget to avoiding default. To get
more information about FACT, go to StudentLoans.gov.

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                                                                                           Performance Results by Strategic Goal


Performance Metric D.3: Collection Rate 10


                                     FY 2011               FY 2012        FY 2013       FY 2014             FY 2015
 Fiscal Year
                                      Actual                Actual         Actual        Actual       Target         Actual

                              Performance metric
 Performance                 established in FY 2012
                                                             $31.90        $41.57        $35.90       $36.56         $51.58



                                  Prior-year data             Met            Met        Not met                Met
 Performance Result                not available



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 to gauge the efficiency of its back-end
systems and processes.

Analysis of Progress:
FSA met its target with a result of $51.58.

Collection costs were significantly lower than anticipated due to stronger cost management of the
Private Collection Agency contracts. Stricter documentation criteria was a primary factor in driving
down costs despite lower than forecasted collections.

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 Activity-Based
Costing process.

The cost data are derived from FSA’s Activity-Based Costing model (Default Collections and Loan
Servicing) and Private Collection Agency spending. A program from the general ledger captured the
amount of collections and repayment.




10
  Collection Rate for the purpose of this metric is defined as the amount of dollars collected from borrowers in the fiscal
year per dollar spent to collect

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                                                                              Performance Results by Strategic Goal

Strategic Goal E: Strengthen FSA’s performance culture and become one of
                  the best places to work in the federal government.

Performance Metric E.1: Employee Engagement Index


                          FY 2011        FY 2012         FY 2013     FY 2014              FY 2015
 Fiscal Year
                           Actual         Actual          Actual     Actual         Target          Actual

 Performance             Performance metric established in FY 2014    67.7%      66.7%–68.7%        67.9%

                                                                       Met                   Met
 Performance Result             Prior-year data not available



Target Context:
Beginning in FY 2014, FSA has measured its progress on Strategic Goal E via the Employee
Engagement Index, based on a subset of questions from the government-wide FEVS. The
Employee Engagement Index is a government-wide standard subset of questions 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 met its target with a result of 67.9 percent.

With an FY 2015 result of 67.9 percent, FSA met its target range of 66.7–68.7 percent and exceeded
its prior-year result of 67.7 percent. This is a testament to FSA’s strong focus on improving the
employee experience in FY 2015 through recognizing the achievement of employees and creating an
environment in which personal growth is encouraged. Among the highlights of the FY 2015 FEVS
survey, 90 percent of FSA employees believe that the work they do is important, more than
86 percent positively rate the quality of work of their work unit, and more than 80 percent like the kind
of work that they do. FSA experienced year-over-year gains in nearly half of the FEVS survey
questions, including improvements in the percentage of employees who believe that FSA is
successful at accomplishing its mission, the percentage of employees who believe that they are given
a real opportunity to improve their skills at FSA, and the percentage of employees who believe that
their supervisors support employee development. More information about the FEVS and the
questions included on the survey can be located Fedview.opm.gov.


Data Quality and Limitations:
The Employee Engagement Index is calculated as the average of positive response percentages to
a predetermined set of questions in the annual FEVS: 3, 4, 6, 11, 12, 47, 48, 49, 51, 52, 53, 54, 56,
60, and 61. These questions can be found on the FY 2015 FEVS located at Fedview.opm.gov.




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                                                            FY 2015 Accomplishments of Federal Student Aid



FY 2015 Accomplishments of Federal Student Aid

During FY 2015, FSA realized additional accomplishments that were not measured
specifically by the performance metrics implemented to measure performance against FSA’s
Strategic Plan. Although not measured by FSA performance metrics, these additional
accomplishments were the result of initiatives FSA undertook to support the implementation
of this Strategic Plan or legislative changes. This section describes its additional
accomplishments.

FSA realized the following additional accomplishments in support of Strategic Goal
A: Provide superior service and information to students and borrowers.

•   FSA promoted the FAFSA Completion Initiative, under which states may, at the
    discretion of the Department, disclose FAFSA filing status information to a school
    district, secondary school, or other entity as designated by the Secretary, allowing
    guidance and college access professionals to individually target students to encourage
    FAFSA completion.

•   FSA continued to enhance its critically-acclaimed outreach initiatives, including an
    integrated repayment campaign to provide borrowers information about their repayment
    options, and new content and features on StudentAid.gov.

•   FSA refined and expanded the scale and effectiveness of its email marketing campaigns
    to raise awareness of repayment options, particularly income-driven repayment (IDR)
    plans, including through a partnership with the White House Social and Behavioral
    Sciences Team.

FSA realized the following additional accomplishments in support of Strategic Goal
B: Work to ensure that all participants in the system of funding postsecondary education
serve the interest of students, from policy to delivery.

•   FSA improved its compliance and oversight activities in critical areas, expanding the
    team responsible for ensuring compliance with the Jeanne Clery Disclosure of Campus
    Security Policy and Campus Crime Statistics Act (Clery Act), which governs campus
    security and crime reporting.

•   FSA began implementation of the systems required to enforce Gainful Employment
    regulations, which help protect students from becoming burdened by student loan debt
    that they cannot repay and ensure that postsecondary education remains a driver for
    long-term success.

•   FSA strengthened oversight by developing a multi-regional review team tasked with
    monitoring large and publicly-traded school groups.




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                                                               FY 2015 Accomplishments of Federal Student Aid

FSA realized the following additional accomplishments in support of Strategic Goal
C: Develop efficient processes and effective capabilities that are among the best in the
public and private sectors.

•   FSA improved its analytical and modeling capabilities to ensure proper portfolio
    management and risk mitigation, and streamlined staff through the creation of an
    Enterprise Data Office tasked with managing and developing data requests.

•   FSA developed the technical foundation for the Enterprise Data Warehouse, which
    includes student aid lifecycle data, loan servicing history, and tools for business
    intelligence for reporting and analysis.

•   FSA expanded the FSA Data Center and developed ‘dashboards’ to compile and share
    data among stakeholders and improve transparency.

•   FSA realized approximately $141.3 million in cost savings and avoidances over a five-
    year period with the Title IV Financial Aid Origination and Disbursement contract. This
    value reflects reductions when compared solely with historical costs. It does not include
    the additional and significant cost avoidances, which may be due to increased
    operational volumes or risk mitigation.

FSA realized the following additional accomplishments in support of Strategic Goal
D: Ensure program integrity and safeguard taxpayers’ interests.

•   FSA strengthened cyber security through various initiatives, including the initiation of a
    security review of guaranty agencies and the successful completion of a government-
    wide Cybersecurity Sprint. Efforts to improve the security of FSA’s systems have been,
    and will continue to be, a significant focus for the organization in order to protect PII and
    ensure the integrity of customer data.

•   FSA developed and implemented a new, more secure FSA ID to replace the old FSA
    Personal Identification Number for customers. This significantly strengthened the
    security of FSA’s external authentication processes.

FSA realized the following additional accomplishments in support of Strategic Goal E:
Develop FSA’s performance culture and become one of the best places to work in the
federal government.

•   Redesigned and administered the training needs analysis process to ascertain
    organizational functional skills training and developmental needs. The Functional Skills
    Training Needs Analysis was conducted from January to August 2015. Various data
    collection methods were used throughout the process.

•   FSA continued improvements to the Summer Pathways Intern Program. FSA had 10
    Pathways interns in FY 2015 and was able to retain 100 percent into the current fiscal
    year through extension or conversion to full time employees. Also, feedback scores for
    satisfaction and experience were 100 percent across the board.




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•   FSA conducted Management Seminar Training from April through June 2015 in
    Washington, D.C., and in FSA’s regional offices from June and July 2015. All attendees
    provided analysis and feedback based on organizational results, using group
    interactions and facilitated discussions. The seminar’s format employed inquiry based
    learning methods, with some FSA related scenario based situations.




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                                                                    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 the 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 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 usually provides these recommendations by direct contact with
colleagues in various offices within the Department, including the Office of Postsecondary
Education and the Office of the Under Secretary, at both the senior policy level and at a staff
level. While a portion of this policy advising is accomplished on an ongoing, informal basis,
during the past year, FSA provided specific recommendations to policy officials on the
following issues: simplification of the financial aid application (FAFSA) process, including
implementing the statutorily permitted use of so-called “prior-prior” year income; developing
the expansion of the Experimental Sites Initiative to address 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 and implementing
policies to address the expiration of the Federal Perkins Loan Program; and various budget
and legislative initiatives. In addition, FSA’s staff also contributed to the Department’s other
rulemaking processes, including rulemaking on cash management, borrower defenses, and
Campus-Crime reporting.




                                            FSA Fact
FSA, worked closely with the Department to implement the changes made to the Clery Act by the
Violence Against Women Reauthorization Act of 2013. The Department published a final rule that
included additional requirements to ensure that institutions provide the most complete
information possible to their students, better inform and protect victims, and clarify the process
for collecting crime statistics, among other changes. That act and the new rule strengthen the
Clery Act to improve security and to address more effectively, and ultimately reduce, sexual
violence on college campuses.

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                                                                                  Annual Bonus Awards



Annual Bonus Awards

FY 2015 performance ratings and related awards for FSA senior managers and Senior
Executive Service staff were not finalized at the time this report was prepared.

At the end of FY 2015, there were 44 FSA senior managers. There were also nine Senior
Executive Service members. Nine of the 44 senior managers and 3 of the 9 Senior Executive
Service staff served on the FSA Operating Committee and reported directly to the COO. The
remaining 35 senior managers and 6 Senior Executive Service staff served in a variety of senior
positions and capacities within FSA.

For FY 2014, the composition of ratings for the 36 senior managers who did not serve on the
Operating Committee last year were as follows: 14 achieved a performance rating of
Exceptional Results, 12 achieved a performance rating of High Results and 8 achieved a
performance rating of Results Achieved, and 2 were not eligible for a rating.

Award amounts for those senior managers achieving an Exceptional Results rating ranged from
a low of $6,479 to a high of $20,400 with a median award of $7,830. Award amounts for those
achieving a High Results rating ranged from a low of $4,312 to a high of $15,908 with a median
award of $4,867.

There were also FY 2014 ratings and awards for seven senior manager members of the
Operating Committee. The composition of those rated includes: four achieved a performance
rating of Exceptional Results; two achieved a performance rating of High Results, one achieved
a performance rating of Results Achieved. Three of the 10 Senior Executive Service members
are on the 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 Operating Committee were as follows: two achieved a performance rating of Exceptional,
three achieved a performance rating of High Results, and two achieved a performance rating of
Results Achieved.

Award amounts for the Operating Committee ranged from approximately $14,608 to
$75,000, 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.html




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                                                               Report of the Federal Student Aid Ombudsman



Report of the Federal Student Aid Ombudsman

The FSA Ombudsman entered its 16th year of service to federal student aid recipients in
FY 2015. Established by the 1998 amendments to the HEA, the Ombudsman began
operations on September 30, 1999.

Consistent with its statutory mission, the Ombudsman Group uses informal dispute resolution
processes to address complaints about the Title IV financial aid programs. The Ombudsman
employs a collaborative approach in working with institutions of higher education, lenders,
guaranty agencies, loan servicers, and other participants in the student aid programs.
Ombudsman Group staff conduct fact-finding, review student loan data and records, and
facilitate contacts between borrowers and their loan servicers to promote mutually agreeable
resolution of issues.

Information about customer inquiries is compiled into the Ombudsman Case Tracking System.
The data are analyzed, and the findings are included in internal and external reports for FSA
and the industry in general, to identify systemic issues affecting Title IV programs.
Implementation of systemic solutions can at times prevent problems, an approach preferable
to resolving individual complaints as received.

Since 1999, the Ombudsman has received 366,882 customer contacts, including 34,008 in
FY 2015. In most of its years of operation the Ombudsman Group has received a greater
number of customer contacts than in the previous year, attributable, in part, to growing
awareness of the Ombudsman and the increase in the number of individuals receiving federal
student aid. Contacts received in FY 2015 were lower than the peak of FY 2014 but
consistent with recent levels.

                                  Total Volume of Contacts
     FY            New Customer Contacts           Percentage Change from Previous Fiscal Year
    2012                  34,909                                    +6.0%
    2013                  33,916                                     -2.8%
    2014                  38,665                                   +14.0%
    2015                  34,008                                    -12.0%

The Ombudsman Group classifies customer contacts as one of two types: General
Assistance (GenAssist) cases, which typically are resolved almost immediately through the
provision of information or referral to the appropriate entity within the student loan community;
and Research cases, which present a more complex problem requiring the engagement of
multiple parties and a series of contacts, are assigned to a research specialist to address, and
may take several months to close. Historically, Research cases have represented an
increasing percentage of total contacts to the Ombudsman, but, as the following table
demonstrates, this trend reversed in FY 2013 and continues.




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                                     Research Contacts Received
                                                                                  Research Cases as
                                        Percentage Change in Research
          FY       Research Cases                                                 Percentage of Total
                                        Cases from Previous Fiscal Year
                                                                                  Customer Contacts
      2012               11,570                      + 41.0%                            33.1%
      2013                9,414                      -18.6%                             27.8%
      2014                7,819                      -16.9%                             20.2%
      2015                6,046                      -22.7%                             17.8%

  Several initiatives undertaken by the Ombudsman, FSA business units, and student loan
  servicers contributed to the reduction in the number of Research cases. The mission of the
  FSA Ombudsman is to serve as a forum of last resort, to assist borrowers who have been
  unable to resolve their problem with their loan holder. Borrowers contacting the Ombudsman
  who have not exhausted the problem resolution options available through their loan holder are
  referred to the loan holder and counseled to re-contact the Ombudsman if those efforts are
  unsuccessful.

  Borrower Issues
  The Ombudsman Group uses issue categories and issue sub-categories to classify the nature
  of the question, issue, or observation brought to it by customers. The following table shows
  the total volume of customer contacts by each of the 16 major issues categories along with a
  brief description of the category.

                            FY 2015 Customer Contacts by Original Issue
                                                                                     FY 2015 Volume
     Issue Category
                                               Description                                      General
         Name                                                                    Research
                                                                                               Assistance
Account Balance              Questions/disagreement about the balance being        1,504          3,863
                             collected, balance dispute, school refund,
                             disbursement
Bankruptcy                   Bankruptcy related issues from a bankruptcy             48             85
                             court filing
Closed School                Issues related to a postsecondary school's              86            549
                             closure
Collection Practices         Actions taken by collectors deemed excessive,           81            431
                             abusive, unreasonable, or illegal by borrower
Consolidation                Question/complaint about terms and processes           459           1,480
                             for consolidating FFEL, Federal Direct Loan,
                             Federal Perkins, or HEAL Loans
Credit Reporting             A report detailing all outstanding consumer-           363           1,380
                             related debt, including bad student loan debt
Default                      Assertion that the default status is wrong, or is      550           2,309
                             asking for options for default removal
Deferment/Forbearance        Deferment, Deferment Rejected, Forbearance,            155           1,258
                             Forbearance Granted
FSA Assistance               General Information Request, Pell Grant, Not a         180           5,645
                             Loan Question, Other, Other Aid Issue
Loan                         Loan Cancellation, Disability Discharge,               959           3,128
Cancellation/Discharge       Discharge—Death, Discharge Denied, Loan
                             Discharge, False Certification, ID Theft

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                                                                                   FY 2015 Volume
     Issue Category
                                             Description                                      General
         Name                                                                  Research
                                                                                             Assistance
NSLDS                      NSLDS is incorrect                                     100            183
Repayment                  Customer wants to establish, revise, or comment        744           2,780
Plans/Amounts              on available repayment plans/amounts
Service Quality            Complaints about loan servicing, service quality,      371           2,051
                           due diligence, quality of education
Student Eligibility        Borrower cannot receive Title IV funds because         120           1,366
                           of regulatory or school imposed
                           policy/procedures
Tax Refund/(Federal)       Borrower wants to avoid tax or other Federal           164            808
Offset                     offset
Wage Garnishment           Borrower objects to administrative wage                156            646
                           garnishment, wants to avoid it, reduce amount,
                           or complain about how the agency implements it.
Issue Not Yet Classified                                                           6               0


   Case Volume – Research

   As noted above, Research contacts—those requiring more intensive effort to resolve—are a
   subset of the total volume received. In keeping with its role as a neutral, the Ombudsman
   Group typically declines to characterize every contact it receives as a “complaint.” However, it
   is fair to say that Research contacts most often result from a customer’s dissatisfaction with
   previous efforts to resolve an issue. As such, this section presents more information about
   the cause and types of issues identified as Research contacts.

   In FY 2015, the top five issues for Research cases were consistent with prior years with the
   exception that Consolidation returned to the top five supplanting Credit Reporting. In
   FY 2015, the top five issues for Research cases were:

   Account Balance: Customer requests for assistance concern disagreement over account
   balances, interest accrual, or how payments are applied. The root causes of these contacts
   are nearly as varied as the individuals contacting the Ombudsman Group. Ombudsman
   Group customers can often find themselves in a difficult position after their account balance
   has grown over time because of capitalized interest and, possibly, late fees and collection
   costs due to loan default. The Ombudsman Group takes the time to review all payment
   history documentation provided by the loan servicer and the customer to validate whether an
   outstanding balance has been calculated correctly, from loan disbursement to the current
   date.




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Loan Cancellation Discharge: Customers assert their loans should be cancelled or
discharged because of existing conditions or services performed.

Historically, discharge for TPD has been the primary cause of contacts to the Ombudsman
Group. However, changes to statute and regulations coupled with significant improvements in
servicing have resulted in a noticeable reduction in TPD cases. Growth in the number of
customer cases for Loan Cancellation/Discharge were driven by increases in issues related to
closed schools and customers seeking discharge of their loans because the quality of the
education received was deemed inferior. In the latter case, the quality of education received
in not a basis for loan discharge under current statute and regulations.

Repayment Plans/Amounts: Customer requests for assistance concern the desire to
establish, revise, or complain about their repayment plans. This category has been in the top
five in the entire history of the Ombudsman Group. The array of repayment plan options has
expanded significantly in recent years, in some ways taxing customer and servicer abilities to
comprehend the perceived advantages and benefits of each. The 10-year standard
repayment plan may no longer be the optimal plan for many borrowers as they enter
repayment. Helping individual borrowers select the best alternative to the ten-year plan
involves not only advising them on how to submit the appropriate application and documents,
but also helping them determine whether the plan is best for them in the short or long term.

Default: Customers assert the default status of their loans is wrong, or customers are asking
for options for removing the defaulted status of their loans. Most customers in this category
have had some interaction with the entity performing collection activities on the debt, but have
not been satisfied with the outcome of those interactions, or are seeking an alternative to the
options offered.

The role of the Ombudsman Group is frequently one of facilitating the customer’s interaction
with the loan holder or collection agency. Depending on the customer’s circumstances, the
resolution may be assisting the customer with entering a mutually agreeable repayment plan
for the purpose of loan rehabilitation.

Consolidation: After an absence of several years, Consolidation returned as a top five
Research issue in FY 2015. Customers contact the Ombudsman seeking information about
options for consolidation of their student loans or to seek assistance when they believe there
are errors in their consolidation loan. The increase in consolidation cases is driven by the
emergence of third-party firms that contact student loan borrowers with promises of debt relief.
The firms typically charge an upfront fee and a monthly charge to consolidate the borrower’s
loans and enroll them in a loan forgiveness program, services available at no charge from
loan servicers. The number of customer contacts relating to third-party firms promising debt
relief to borrowers increased by over 300 percent between FY 2014 and FY 2015.

Analysis of Outcomes
Case closing categories and sub-categories in Ombudsman Case Tracking System allow the
logging of the outcomes for customers who contact the Ombudsman Group for assistance.
We believe improved analysis of these data will contribute to a better understanding of the
nature of the issues customers present, point out areas where service quality can be
improved, and identify possible systemic issues that lead to customer complaints.

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Resolutions of the problems customers present are rarely binary—the customer receives or
does not receive the outcome sought. Customers sometimes seek outcomes which statute
and regulation do not authorize—e.g., discharge of a loan because of economic hardship—or
for which they are not eligible due to their circumstances. Customers are often unaware of the
option or options that provide the best way to manage their student loan debt, and the best
service that can be provided by the Ombudsman is to create awareness of those actions.

The Ombudsman Group identified five broad categories that capture the range of customer
outcomes:

•   Action: Ombudsman activity results in a change to the customer’s account, e.g., a
    change in loan status, payments reapplied, loan balance adjusted, loan
    cancellation/discharge granted, income-driven repayment granted, etc.

•   Confirmation: No change occurred on the customer’s account and research confirms the
    current status, e.g., loan balance verified, interest rate found to be accurate, the desired
    benefit was properly denied, etc. In these situations, the Ombudsman staff will provide
    guidance for the borrower on the available options for managing their student loans and
    refer them to the proper entity for initiating the optimal option.

•   Information: The customer was provided with information or guidance on the available
    options for managing their student loan account and empowered to take the next steps,
    e.g., loan servicer identified, Public Service Loan Forgiveness or Income Based
    Repayment (IBR) explained, contact information provided, etc.

•   Referral: Customer is provided guidance on available options and referred to appropriate
    party for resolution, e.g., loan servicer, guaranty agency, or other FSA office.

•   Other: Customer has to submit information or contact us again in order for further
    Ombudsman research to continue.

Outcomes Comparison of Research and General Assistance Cases
Outcomes vary significantly between Research and GenAssist cases. The former are
assigned to a specialist for research and are more likely to result in an outcome of Action or
Confirmation. Because the Ombudsman is the resource of last resort, customers who have
not exhausted all of the available options to resolve their issue with their loan servicer are
referred to an escalated issues team at the servicer to attempt resolution. If those efforts still
do not result in resolution, the customer is advised to contact the Ombudsman again.
Consequently, the most common outcome for GenAssist cases is referral.

             Outcomes Comparison of Research and General Assistance Cases
                                                                                           Total
Case Type        Action      Confirmation     Information     Referral       Other
                                                                                           Cases
Research         27.3%          35.2%            19.5%         10.2%          7.7%          5,997
General
                  0.5%           0.8%            5.1%          80.9%         12.7%         27,503
Assistance




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Outcomes for Research Cases Closed in FY 2015 by Original Issue Category
Since Research contacts are more complex and time consuming, there are many different
paths to resolving the customer’s issue. In FY 2015, for about 35.2 percent of Research
contacts, confirmation was the result. Although the resolution may not be what the customer
ultimately wanted, as an independent, neutral, third party, the Ombudsman has provided the
customer with an unbiased review of the matter, and informed the customer of their specific
options unique to their situation.

                FY 2015 Research Case Outcome Category by Issue Category

      Research –                                                                         Total
                          Action    Confirmation   Information   Referral    Other
Original Issue Category                                                                 Closed

Account Balance            19.3%       54.6%          10.1%        7.7%       8.2%      100.0%
Bankruptcy                 20.5%       53.8%          10.3%        7.7%       7.7%      100.0%
Closed School              12.2%       52.2%          16.7%       15.6%       3.3%      100.0%
Collection Practices       17.1%       23.2%          28.0%       17.1%      14.6%      100.0%
Consolidation              51.2%       29.8%          10.5%        3.9%       4.6%      100.0%
Credit Reporting           18.7%       37.4%          29.5%        7.6%       6.8%      100.0%
Default                    27.3%       27.7%          29.4%        8.8%       6.7%      100.0%
Deferment/Forbearance      36.7%       26.1%          17.0%       12.8%       7.4%      100.0%
FSA Assistance             22.0%        9.1%          17.7%       26.8%      24.4%      100.0%
Loan
Cancellation/Discharge     26.4%       31.9%          26.6%        9.6%       5.6%      100.0%
NSLDS                      68.3%        5.9%           6.9%        8.9%       9.9%      100.0%
Repayment
Plans/Amounts              29.2%       26.4%          26.3%       11.5%       6.7%      100.0%
Service Quality            21.7%       39.3%          12.0%       17.3%       9.7%      100.0%
Student Eligibility        24.1%       16.1%          14.3%       33.9%      11.6%      100.0%
Tax Refund/Offset          31.8%       22.5%          31.2%        4.6%       9.8%      100.0%
Wage Garnishment           40.4%       24.6%          21.6%        8.2%       5.3%      100.0%

As the above table demonstrates, outcomes vary depending on the nature of the customer’s
issue. Account balance is the most frequent category of Research contact and could involve
a customer who disputes the validity of their entire debt, or believes that their balance should
be lower than the amount they are being asked to repay. Account balance also includes
those customers who request a reapplication of payments or believe the interest is calculated
or capitalized incorrectly. For every one customer whose account balance is adjusted
favorably after intercession by the Ombudsman Group, e.g., payments are applied correctly,
account balance corrected, payment refunded, etc., there are two customers where we
confirm their status, e.g., verify the outstanding balance as correct, that payments were
applied correctly, that the interest is established in law and cannot be changed, etc.

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Customer contacts about Repayment Plans/Amounts are another frequent Research issue.
For 29.2 percent of these contacts, an action, e.g., IBR approved, reversal of a TEACH Grant
conversion, IBR adjusted, etc., occurs after our research. For 26.4 percent of Repayment
Plans/Amounts contacts, the Ombudsman provides a confirmation reflective of statutory and
regulatory requirements, e.g., not eligible for a new repayment option, TEACH Grant
conversion to a loan correct, IBR not adjusted, etc. For 26.3 percent, the Ombudsman
provides critical information, e.g., IBR explained, repayment options explained, educate the
customer on consolidation loans, etc.

For customers whose student loans are in default, 29.4 percent of the time the Ombudsman
provides information, explaining the steps that can be taken to remove the loans from default
status. For another 27.3 percent some action is taken, e.g., the default is reversed or the
customer establishes a rehabilitation plan or consolidates to eliminate the default. For
27.7 percent the Ombudsman confirms the validity of the default and explains that the current
outstanding balance includes capitalized interest, collection costs, and fees.

Loan consolidation resurfaced as a top five issue for Research cases in FY 2015. For more
than half of these customers, the Ombudsman Group was able to facilitate an action to assist,
e.g., missing loans were added to the consolidation, a new consolidation loan was approved,
or the customer was able to reverse a consolidation loan. For 29.8 percent of customers, a
confirmation occurred—reversal or modification of the consolidation loan was denied or the
balance on the loan was confirmed as accurate.

The Ombudsman Group conducted some preliminary analyses comparing case outcome data
with the type of loan servicer. Initial findings based on initial issue category did not reveal
differences between types of loan servicers that rose to the level of statistical significance or
the sample size was too small to provide meaningful results. The Ombudsman Group will
continue to refine these analyses to see if they produce any useful insights about servicer
performance.

Other FY 2015 Highlights

Customer Satisfaction Survey
In FY 2015, the Ombudsman Group inaugurated a new customer satisfaction survey with the
goal of gathering better data with which to inform improvements in customer service. On a
weekly basis, the contractor sends a survey by email to all customers whose cases were
closed during the previous time period. Participation in the survey is voluntary, and
respondents are ensured confidentiality, so that they can provide candid feedback without fear
of consequences. Responses to a standardized questionnaire are converted to a score on a
0 to 100 scale, and reported using the metrics of the ACSI.

The overall ACSI score for the Ombudsman Group for FY 2015 is 41. While not as high as
desired, analysis of the numbers reveals unusual aspects that may reflect the nature of the
Ombudsman’s work. Large data sets, when graphically displayed, typically present in the
classic Bell Curve—lowest on the scale at the respective tails and highest in the middle. The
Ombudsman Group’s ACSI scores present as an inverted Bell Curve—highest at the tails and
lowest in the middle. It is believed that the Ombudsman’s inability to provide customers with
outcomes that are outside of law and regulation contribute to the ACSI scores they assign to
the Ombudsman Group’s work. Customers generally contact the Ombudsman because of a

                                Federal Student Aid Annual Report FY 2015                             74
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                                                             Report of the Federal Student Aid Ombudsman

perceived problem with their student loan account and often have a desired outcome in mind.
If there has been a problem in the administration of the customer’s account, the Ombudsman
can assist in having corrections made. If, however, the customer’s account has been
administered in a manner consistent with applicable procedures, the Ombudsman cannot
provide an outcome that is inconsistent with current statutory and regulatory requirements.
The data suggest that customers may, in effect, be rating the Ombudsman based not on the
quality of the service provided but on the outcome of their case.

The ACSI score for survey respondents with a research request is 45 and 39 for general
assistance in FY 2015. It is not surprising that research ACSI scores are higher than for
general assistance as the Ombudsman staff work with the research customer more
extensively and have frequent interaction, as their issues are more complex. With general
assistance customers, most are referred to the appropriate external entity, as Ombudsman
Group does not perform loan-servicing actions such as processing deferments, forbearances,
repayment plans, granting student loan discharges, etc. Some survey respondents provide
scores for the Ombudsman Group based on the customer service of the external, non-
Ombudsman entity. Many general assistance survey respondents reported that they did not
receive a response from the Ombudsman Group regarding their issues, and then in turn,
provide very low scores for all survey questions. This may be caused by Ombudsman Group
email replies that the customer does not receive because their computers inadvertently treat
the customer specific replies as junk email/spam. The Ombudsman Group is in the process of
proactively informing customers of this issue by changing website language and pop-ups and
initiating telephonic follow-up.

As noted above, the Ombudsman is the service of last resort. If the customer has not
exhausted all of the opportunities for resolution with their current loan holder, the Ombudsman
treats their situation as a GenAssist case and refers the customer to an escalated level of
assistance at the current loan holder. Analysis of the data shows that 73.2 percent of the
customers who gave the Ombudsman an ACSI score of zero had GenAssist cases. When the
scores of zero are removed from the total, the Ombudsman Group receives an average ACSI
score of 63.

Nonetheless, the Ombudsman Group is unsatisfied with its current ACSI scores and is
committed to improving them. Due to the newness of the survey, there is a limited amount of
data to review for trends. We continue to dissect and review the survey data with the goal of
identifying improvements to processes that could enhance customer satisfaction. Changes
were made to the process for referring customers to their loan holder. The Ombudsman
Group communicates the customers’ issues and information directly to an escalated issues
team at the loan holder, and contacts the customer again to inform them of the steps taken
and to advise them to contact the Ombudsman again if unable to resolve the matter with the
loan holder.

 “I love great customer service. I wish there          “It is a relief to know that our fine public
 were more people who knew how to handle               employees in fact care and do what is
 discouraged customers who feel like there             in their power to assist.”
 is no hope…keep up the good work.”


 “Thank you for your courteous help! I felt                      “You folks rock…Thx”
 ‘listened to’.”

                               Federal Student Aid Annual Report FY 2015                              75
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                                                                 Report of the Federal Student Aid Ombudsman

Consumer Financial Protection Bureau
In FY 2015, the Ombudsman continued its collaboration with the Consumer Financial
Protection Bureau (CFPB) Private Student Loan Ombudsman. The FSA Ombudsman’s
statutory authority limits its jurisdiction to the federal student loan program, so a major part of
this collaboration is a mutual referral process that ensures that borrowers with private loan
issues receive assistance from the CFPB. Borrowers who contact the Ombudsman Group
with private student loan problems are provided with contact information and referred to
CFPB. Conversely, borrowers with federal student loans who contact CFPB are referred to
the FSA Ombudsman. In FY 2015, 1,700 of our new customers reported they were referred
by CFPB. During FY 2015, the Ombudsman Group referred 994 customers to CFPB.

As in prior years, CFPB Private Student Loan Ombudsman staff participated in the annual
Student Loan Ombudsman Caucus Meeting to share information and engage in discussion
with colleagues throughout the student loan community.

Student Loan Borrower Interest Groups Roundtable
Beginning in FY 2013, the Ombudsman Group initiated a program of outreach to
organizations that have an interest in issues relating to student loans. Through periodic
conference calls, the Ombudsman provides a forum for these organizations to share concerns
regarding the servicing of federal student loans and to engage in dialogue with Ombudsman
Group staff and representatives of other business units within FSA. The goal is to enhance
communication with the advocacy groups and allow discussion of observed servicing issues
and changes in servicing operations. The Ombudsman Group facilitates this discussion and
expands FSA’s ability to anticipate the customer experience and communicate with
stakeholders.

The Ombudsman Group held three of these calls in FY 2015. Participants included legal aid
societies, consumer protection groups, and organizations focused on the operational impacts
of federal student loan policy. Many of the participants work with individual borrowers and
often refer those individuals to the Ombudsman Group. The topics of conversation this year
included the updates on FSA’s Spring 2015 Repayment campaign, the wind-down of ED-
Aspire as a federal direct loan servicer, new Frequently Asked Questions for Consumer
Advocates, collaborative ombudsman efforts with the CFPB, and the development of FSA’s
Enterprise Data Warehouse and Enterprise Complaint System. These conversations are a
part of several activities aimed at continuously improving customer service for borrowers of
federal student loans.

New Contract, New Data System
FY 2015 was a year of significant change for the Ombudsman Group. The contract to provide
call intake and casework support to the FSA Ombudsman was re-competed, and for the first
time since operations began in 1999, there is a new vendor providing support services.
During transition, the Ombudsman Group staff was actively engaged in planning, development
and delivery of training, and integrating the new contractor into the workflow.

Additionally, the Ombudsman Group transitioned to a new software system for recording and
tracking cases. The goal of the change was to enhance efficiency of operations and the ability
to extract and analyze data to both improve customer service and better identify systemic
problems. Development and training concluded in late summer and the system went live at
the end of July.


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                                              Financial Section




   Section 1. 0

Financial Section




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                                            Financial Section




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Federal Student Aid Annual Report FY 2015              78
                                                                                       Financial Section
                                                                 Message From the Chief Financial Officer


 3
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 are driven to achieve this mission while
  protecting taxpayers’ interests and minimizing costs.

  In fiscal year (FY) 2015, FSA spent $1.4 billion to deliver
  $128.7 billion of federal aid to nearly 11.9 million postsecondary
  students and their families as well as to oversee a loan portfolio of
  42 million borrowers with $1.2 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            John W. Hurt, III
  Department of Education (the Department) and FSA, we met the             Chief Financial Officer
  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.

  The $1.4 billion administrative budget is managed largely through FSA’s investment
  management process. FSA uses this process to manage all major aspects (i.e., scope,
  schedule, and cost) of the investments in order to deliver our promised performance levels.
  This past year, we successfully re-competed the Title IV origination and disbursement contract,
  re-competed the National Student Loan Database system contract, implemented the Enterprise
  Data Warehouse, and implemented a new Person Authentication Service. As an example, one
  of the successful outcomes of the re-competition of the Title IV origination and disbursement
  contract was the $141.3 million savings in anticipated operations costs over the first five years
  of the contract. To achieve this success, program staff thoroughly documented requirements,
  allowing acquisition staff to negotiate among competing vendors from a position of strength.
  While we continue to make improvements to our investment management process, it has been
  effective in ensuring that we consistently achieve significant benefits, even under the
  challenging timeframes often imposed upon us.

  As part of the internal control framework, FSA documented and tested 1,292 business process
  and entity-level controls and 1,584 Information Technology (IT) system internal controls across
  36 business processes (and sub-processes) and 18 integrated IT systems, respectively. In
  2015, we assessed that 96 percent of the controls tested are designed and operating
  effectively. The other 4 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

                                Federal Student Aid Annual Report FY 2015                             79
                                                                                   Financial Section
                                                             Message From the Chief Financial Officer

underlying internal control framework 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 be working with a group of professionals throughout the Department who so
enthusiastically meet our financial management challenges and achieve such distinguished
results.

Sincerely,



John W. Hurt, III
Chief Financial Officer
November 13, 2015




                             Federal Student Aid Annual Report FY 2015                            80
                                                                                                                     Financial Section
                                                                                                          Consolidated Balance Sheet


Financial Statements


                                        United States Department of Education
                                                      Federal Student Aid
                                                  Consolidated Balance Sheet
                                               As of September 30, 2015 and 2014
                                                        (Dollars in Millions)


                                                                                    Fiscal Year              Fiscal Year
                                                                                       2015                     2014
         Assets:
          Intragovernmental:
               Fund Balance with Treasury (Note 3)                              $            67,985   $              61,506
           Total Intragovernmental                                                           67,985                  61,506
           Cash and Other Monetary Assets (Note 5)                                            1,561                   1,471
           Accounts Receivable, Net (Note 4)                                                     65                     105
           Credit Program Receivables, Net (Note 6)                                       1,016,425                 922,418
           Property and Equipment, Net (Note 7)                                                  16                       7
           Other Assets (Note 8)                                                                  6                      13
         Total Assets (Note 2)                                                  $         1,086,058   $             985,520

         Liabilities:
          Intragovernmental:
               Accounts Payable (Note 9)                                        $                 1   $                    1
               Debt (Note 10)                                                             1,050,344                 965,362
               Guaranty Agency Funds Due to Treasury (Note 5)                                 1,561                   1,471
               Other Intragovernmental Liabilities (Note 11)                                  8,684                   6,382
           Total Intragovernmental                                                        1,060,590                 973,216

           Accounts Payable (Note 9)                                                          3,552                   3,848
           Accrued Grant Liability (Note 12)                                                  1,571                   1,719
           Other Liabilities (Note 11)                                                           37                      67
         Total Liabilities (Note 11)                                            $         1,065,750   $             978,850

           Commitments and Contingencies (Note 19)

         Net Position:
           Unexpended Appropriations (Note 13)                                  $            28,325 $                 30,485
           Cumulative Results of Operations (Note 13)                                        (8,017)                 (23,815)

         Total Net Position (Note 13)                                           $            20,308   $               6,670
         Total Liabilities and Net Position                                     $         1,086,058   $             985,520
                                                                                                  0                        0

  The accompanying notes are an integral part of these statements.




                                        Federal Student Aid Annual Report FY 2015                                               81
                                                                                                 Financial Section
                                                                                 Consolidated Statement of Net Cost




                              United States Department of Education
                                           Federal Student Aid
                                   Consolidated Statement of Net Cost
                            For the Years Ended September 30, 2015 and 2014
                                               (Dollars in Millions)


                                                                       Fiscal Year             Fiscal Year
                                                                          2015                    2014
Program Costs:
    Increase College Access, Quality, and Completion
  # Gross Costs                                               $                 59,500 $                 65,470
  # Earned Revenue                                                             (31,547)                 (28,979)
         Net Program Costs                                                      27,953                   36,491

  Total Program Costs                                         $                 27,953 $                 36,491



Net Cost of Operations (Notes 14 + 17)                        $                 27,953 $                 36,491




The accompanying notes are an integral part of these statements.




                              Federal Student Aid Annual Report FY 2015                                       82
                                                                                                                                              Financial Section
                                                                                                               Consolidated Statement of Net Position

                                                        United States Department of Education
                                                                 Federal Student Aid
                                                      Consolidated Statement of Changes in Net Position
                                                      For the Years Ended September 30, 2015 and 2014
                                                                       (Dollars in Millions)


                                                                                               Fiscal Year                                       Fiscal Year
                                                                                                  2015                                              2014


                                                                          Cumulative Results              Unexpended              Cumulative Results        Unexpended
                                                                            of Operations                Appropriations             of Operations          Appropriations


Beginning Balances:
 1.Beginning Balances                                                 $               (23,815) $                  30,485      $              (3,601) $              33,595
 Beginning Balances, as adjusted                                      $               (23,815) $                  30,485      $              (3,601) $              33,595

Budgetary Financing Sources:
 4.Appropriations Received                                            $                     - $                   55,792      $                  - $                49,876
 5.Appropriations Transferred - In/Out                                                      -                        (13)                        -                      74
 6.Other Adjustments (Rescissions, etc.)                                                    -                        (47)                        -                    (125)
 7.Appropriations Used                                                                 57,892                    (57,892)                   52,935                 (52,935)
 8.Nonexchange Revenue                                                                      8                          -                        12                       -
Other Financing Sources:
14. Imputed Financing from Costs Absorbed by Others                   $                        10 $                       -   $                 12 $                        -
15. Negative Subsidy Transfers, Downward Subsidy
15. Re-estimates, and Other                                                           (14,159)                            -                 (36,682)                        -
Total Financing Sources                                               $                43,751 $                   (2,160)     $             16,277 $                  (3,110)

Net Cost of Operations:                                               $               (27,953) $                          -   $             (36,491) $                      -

Net Change:                                                           $                15,798 $                   (2,160)     $             (20,214) $                (3,110)

1919. Ending Balances (Note 13)                                       $                (8,017) $                  28,325      $             (23,815) $              30,485



The accompanying notes are an integral part of these statements.




                                                         Federal Student Aid Annual Report FY 2015                                                               83
                                                                                                                              Financial Section
                                                                                               Combined Statement of Budgetary Resources




                                          United States Department of Education
                                                     Federal Student Aid
                                        Combined Statement of Budgetary Resources
                                      For the Years Ended September 30, 2015 and 2014
                                                                   (Dollars in Millions)

                                                                               Fiscal Year                                   Fiscal Year
                                                                                  2015                                          2014
                                                                                           Non-Budgetary                                  Non-Budgetary
                                                                                           Credit Reform                                   Credit Reform
                                                                                             Financing                                       Financing
                                                                       Budgetary             Accounts                 Budgetary              Accounts
Budgetary Resources:
Unobligated Balance, Brought Forward, October 1                    $        12,642         $          9,857       $       13,950 $                11,072
Recoveries of Prior Year Unpaid Obligations                                    921                   20,727                  464                  97,274
Other Changes in Unobligated Balance (+ or -)                                (196)                 (24,520)                 (148)               (99,806)
Unobligated Balance from Prior Year Budget Authority, Net          $        13,367         $          6,064       $       14,266 $                 8,540
Appropriations (Discretionary and Mandatory)                                55,798                      904               49,854                     581
Borrowing Authority (Discretionary and Mandatory) (Note 16)                      -                 171,624                     -                182,749
Spending Authority from Offsetting Collections
(Discretionary and Mandatory)                                                  504                  53,365                   411                  51,281
Total Budgetary Resources (Note 16)                                $        69,669         $       231,957        $       64,531          $      243,151
Status of Budgetary Resources:
Obligations Incurred (Note 16)                                     $        56,950         $       217,721        $       51,889          $      233,294
Unobligated Balance, End of Year:
 Apportioned                                                                10,473                     550                10,617                      69
 Unapportion                                                                 2,246                  13,686                 2,025                   9,788
Total Unobligated Balance, End of Year                             $        12,719         $        14,236        $       12,642          $        9,857
Total Status of Budgetary Resources (Note 16)                      $        69,669         $       231,957        $       64,531          $      243,151
Change in Obligated Balance:
 Unpaid Obligations:
  Unpaid Obligations, Brought Forward, October 1                   $         21,466 $                80,104       $        23,380 $              161,488
  Obligations Incurred                                                       56,950                 217,721                51,889                233,294
  Outlays (Gross) (-)                                                       (58,209)               (199,218)              (53,339)              (217,404)
  Recoveries of Prior Year Unpaid Obligations (-)                              (921)                (20,727)                  (464)              (97,274)
  Unpaid Obligations, End of Year                                  $         19,286 $                77,880       $        21,466 $                80,104
 Uncollected Payments:
  Uncollected Payments, Federal Sources, Brought Forward,
  October 1 (-)                                                    $               -       $             (4)      $               -       $          (3)
  Change in Uncollected Payments, Federal Sources (+ or -)                         -                       -                      -                  (1)
  Uncollected Payments, Federal Sources, End of Year (-)           $               -       $             (4)      $               -       $          (4)
 Memorandum (non-add) Entries:
  Obligated Balance, Start of Year (+ or -)                        $        21,466         $        80,100        $       23,380          $      161,485
  Obligated Balance, End of Year (+ or -)                          $        19,286         $        77,876        $       21,466          $       80,100
Budget Authority and Outlays, Net:
 Budget Authority, Gross (Discretionary and Mandatory)             $        56,302 $                225,893       $       50,265 $               234,611
 Actual Offsetting Collections (Discretionary and Mandatory) (-)              (647)                (122,283)                (542)                (97,375)
 Change in Uncollected Customer Payments from Federal
 Sources (Discretionary and Mandatory) (+ or -)                                        -                      -                       -               (1)
Budget Authority, Net (Discretionary and Mandatory)                $        55,655         $       103,610        $       49,723          $      137,235
Outlays, Gross (Discretionary and Mandatory)                       $         58,209 $               119,218       $        53,339 $              217,404
Actual Offsetting Collections (Discretionary and Mandatory) (-)                (647)               (122,283)                 (542)               (97,375)
Outlays, Net (Discretionary and Mandatory)                                   57,562                  76,935                 52,797               120,029
Distributed Offsetting Receipts (-) (Note 16)                               (12,957)                      -               (39,559)                     -
Agency Outlays, net (discretionary and mandatory)
(Note 16)                                                          $        44,605         $        76,935        $        13,238 $              120,029


The accompanying notes are an integral part of these statements.




                                          Federal Student Aid Annual Report FY 2015                                                                  84
                                                                                        Financial Section
                                                                         Notes to the Financial Statements



Notes to the Financial Statements for the Periods Ended
September 30, 2015 and 2014
  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) under 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 SAFRA Act, 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.
  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
  need-based grants to low-income undergraduate and certain post baccalaureate students that
  promotes access to postsecondary education. Other grant programs include Federal
  Supplemental Educational Opportunity Grants (FSEOG), Teacher Education Assistance for
  College and Higher Education (TEACH) Grants, and Iraq and Afghanistan Service Grants.
     Basis of Accounting and Presentation
  These financial statements have been prepared to report the financial position, net cost of
  operations, changes in net position, and budgetary resources of the FSA reporting group, 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.




                                 Federal Student Aid Annual Report FY 2015                              85
                                                                                       Financial Section
                                                                        Notes to the Financial Statements

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.
The Department and FSA’s financial activities are interlinked and dependent upon the financial
activities of the centralized management functions of the federal government. Due to financial
regulation and management control by OMB and the U.S. Department of Treasury (Treasury),
operations may not be conducted and financial positions may not be reported as they would if
FSA were a separate, unrelated entity.
   Accounting for Federal Credit Programs
The purpose of the Federal Credit Reform Act of 1990 (FCRA) is to record the lifetime subsidy
cost of direct loans and loan guarantees at the time the loan is disbursed. Components of
subsidy costs for loans and guarantees include defaults (net of recoveries); contractual
payments to third-party private loan collectors who receive a set percentage of amounts
collected; and, as an offset, origination and other fees collected. For direct loans, the difference
between interest rates incurred by the Department on its borrowings from Treasury and interest
rates charged to particular borrowers is also subsidized (or may provide an offset to subsidy if
the Department’s rate is less).
Under the FCRA, subsidy cost is estimated using the net present value of future cash flows to
and from the Department. In accordance with the FCRA, credit programs either estimate a
subsidy cost to the government (a “positive” subsidy), breakeven (zero subsidy cost), or
estimate a negative subsidy cost. Negative subsidy occurs when the estimated cost of
providing loans to borrowers from Treasury borrowing, collection costs and loan forgiveness is
less than the value of collections from borrowers for interest and fees, in present value terms.
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.
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 of subsidy is interest expense on debt with
Treasury minus interest income from borrowers and interest on uninvested fund balance with
Treasury. It is calculated as the difference between interest revenue and interest expense.
Amortized amounts are recognized as an increase or decrease in interest income. Amortization
accounts for the differences in interest rates, accruals, and cash flows over the life of a cohort,
insuring that cost is reflected in subsidy estimates and re-estimates. 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.




                               Federal Student Aid Annual Report FY 2015                               86
                                                                                     Financial Section
                                                                      Notes to the Financial Statements

The FCRA establishes the use of financing, program, and 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’s general fund receipt account.
       Financing accounts are presented separately in the combined statement 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.
   •   General fund receipt accounts receive amounts paid from financing accounts when
       there are negative subsidies for new loan disbursements or downward re-estimates of
       existing loans.
   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;
recoveries of prior-year obligations; 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, TEACH,
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 the
general fund receipt account. 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 calculates a different interest rate to be used for
each loan cohort. FSA may carry forward borrowing authority to future fiscal years provided
that cohorts are disbursing loans. All borrowings from Treasury are effective on October 1 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, TEACH, 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 canceled and may not be
used. Resources that have not expired at year-end are available for new obligations, as well as
upward adjustments of prior-year obligations. Funds are appropriated on an annual, multi-year,
or no-year basis. Appropriated funds shall 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.
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                                                                                      Financial Section
                                                                       Notes to the Financial Statements

Permanent Indefinite Budget Authority. The Direct Loan, FFEL, TEACH, 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 16)
   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 Department administrative overhead costs; allowance for subsidy for
direct, defaulted guaranteed and acquired loans; the liability for loan guarantees; the amount
payable or receivable from annual credit program re-estimates and modifications of subsidy
cost (general program administration cost); and grant liability and advance accruals. (See
Notes 6, 12, and 14)
   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)
   Fund Balance with Treasury
The Fund Balance with Treasury includes four types of funds in the FSA and the Department’s
accounts with Treasury available to pay current liabilities and finance authorized purchases, as
well as funds restricted until future appropriations are received: (1) general funds which consist
of expenditure accounts used to record financial transactions funded by congressional
appropriations (which include amounts appropriated to fund subsidy and administrative costs of
loan programs), as well as receipt accounts; (2) revolving funds which manage the activity of
self-funding programs whether through fees, sales or other income (which include financing
accounts for loan programs); (3) special funds which collect funds from sources that are
authorized by law for a specific purpose—these receipts are available for expenditure for
special programs; and (4) other funds include deposit funds, receipt funds, and clearing
accounts. Treasury processes cash receipts and cash disbursements for the Department and
FSA. The Department’s and FSA’s records are reconciled with Treasury’s. (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
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                                                                                        Financial Section
                                                                         Notes to the Financial Statements

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 the Department and FSA’s
experience in the collection of receivables and an analysis of the outstanding balances.
Accounts receivable are established as claims to cash or other assets against other entities. At
FSA, accounts receivable originate through legal provisions or program requirements to return
funds due to noncompliant program administration, regulatory requirements, or individual
service obligations. Further, FSA utilizes the opportunity to reduce the accounts receivable
balances through the Treasury Offset Program.
The Department and FSA calculate the allowance for loss from uncollectable accounts
receivable by applying a collection rate based on historical trends against gross accounts
receivable. The collection rate is determined based on a rolling average of actual collection
rates for the prior seven fiscal years. (See Note 4)
   Cash and Other Monetary Assets
Cash and Monetary Assets is 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.
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 credited
to the Department’s Fund Balance with Treasury account. (See Note 5)
   Credit Program Receivables, Net and Liabilities for Loan Guarantees
The financial statements reflect the Department and 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. FSA also values all pre-1992 loans, loan guarantees, and
direct loans at their net present values. If the liability for loan guarantees is positive, the amount
is reported as a component of credit program receivables, net.
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, and recoveries from assigned loans. Guaranteed loans that default are initially
turned over to guaranty agencies for collection. Defaulted FFEL loans are accounted for and
reported in the financial statements under credit reform rules, similar to direct loans, although
they are legally not direct student loans. Negative balances are reported as a component of
credit program receivables, net. Credit program receivables, net includes defaulted FFEL loans

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                                                                                                Financial Section
                                                                                  Notes to the Financial Statements

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 to FSA for collection.
Credit program receivables for activities under the temporary loan purchase authority include
the present value of future cash flows related to purchased loans. Subsidy was transferred,
which may have been prior to loan purchase, and is recognized as subsidy expense on the
balance sheet and statement of net cost. 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. (See Note 6)
   Property and Equipment, Net and Leases
In accordance with the Department’s policy, FSA capitalizes single items of property and
equipment with a cost of $50,000 or more that have an estimated useful life of two years or
more. Additionally, FSA capitalizes bulk purchases of property and equipment with an
aggregate cost of $500,000 or more. A bulk purchase is defined as the purchase of like items
related to a specific project, or the purchase of like items occurring within the same fiscal year
that have an estimated useful life of at least two years. Property and equipment are
depreciated over their estimated useful lives using the straight-line method of depreciation.
Internal Use Software meeting the above cost and useful life criteria is also capitalized. Internal
Use Software is either purchased off the shelf, internally developed, or contractor developed
solely to meet the agency’s needs.
The Department adopted the following useful lives for its major classes of depreciable property
and equipment:
                         Depreciable Property and Equipment
                                                     (In Years)

                                       Major Class                                           Useful Life
    Information Technology, Internal Use Software, and Telecommunications Equipment              3
    Furniture and Fixtures                                                                       5

The Department and FSA lease buildings, along with information technology and
telecommunications equipment, as part of a contractor-owned, contractor-operated services
contract. Lease payments associated with the 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 7)
   Liabilities
Liabilities represent actual and estimated amounts to be paid as a result of transactions or
events that have already occurred. However, no liabilities can be paid by FSA or the
Department without budget authority. Liabilities for which an appropriation has not been
enacted are classified as liabilities not covered by budgetary resources, and there is no
certainty that an appropriation will be enacted. The government, acting in its sovereign
capacity, can abrogate liabilities that arise from activities other than contracts. FFEL program
and Direct Loan program liabilities are entitlements covered by permanent indefinite budget
authority. (See Note 11)
   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. (See Note 9)



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                                                                                    Financial Section
                                                                      Notes to the Financial Statements

   Debt
FSA borrows from Treasury to provide funding for the Direct Loan, FFEL, TEACH, and other
loan programs. The liability to Treasury from borrowings represents unpaid principal at year-
end. FSA repays the principal based on available fund balances. Interest on the debt is
calculated at fiscal year-end using rates set by Treasury. These are rates generally fixed based
on the rate for 10-year Treasury securities. (See Note 10)
   Accrued Grant Liability
Some grant recipients incur allowable expenditures as of the end of an accounting period but
have not yet been reimbursed by the agency. The Department and FSA will accrue a liability
for these allowable expenditures incurred that have not yet been reimbursed. The amount is
estimated using statistical sampling of unliquidated balances. (See Note 12)
   Other Liabilities
Other Liabilities includes liabilities in miscellaneous receipt accounts and capital transfers.
Liabilities in miscellaneous receipt accounts are recorded for downward subsidy re-estimates
that are accrued at year end and for amounts of future capital transfers from Liquidating
Accounts. Miscellaneous receipt accounts are a mechanism used by Treasury to facilitate the
elimination of receivables and payables within the government, and the Department and FSA
follow the guidance for using miscellaneous receipt accounts in recording specific events. Upon
execution of a downward re-estimate or an actual capital transfer, the liabilities in the
miscellaneous receipt accounts are satisfied and removed from the general ledger. Liabilities in
miscellaneous receipt accounts are unfunded liabilities. (See Note 11)
   Net Cost
Net cost consists of gross costs and earned revenue. Gross costs and earned revenue are
classified as intragovernmental (exchange transactions between FSA and other entities within
the federal government) or with the public (exchange transactions between FSA and
nonfederal entities).
Net program costs are gross costs less any revenue earned from activities. FSA determines
gross cost and earned revenue by tracing amounts back to the specific program office.
Administrative overhead costs of funds unassigned are allocated based on full-time employee
equivalents of each program. (See Note 14)
   Interest Expense and Interest Revenue
FSA accrues interest receivable and records interest revenue on performing Direct Loans and
FFEL loans purchased by FSA. FSA recognizes interest income when interest is accrued on
loans to the public for the Direct Loan, FFEL, and TEACH Programs. Interest accrual under
the FFEL Financing and Liquidating Accounts is recognized in allowance for subsidy. Interest
receivables are established upon accrual and satisfied upon the collection or capitalization of
interest. Interest accruals are calculated by the loan servicers and the debt collection
management system at least monthly.
Interest expense and interest revenue are equal for all credit programs due to subsidy
amortization. If interest revenue is greater than expense or interest expense is greater than
revenue, the difference is recorded to revenue with the offset to allowance for subsidy.
Subsidy amortization is required by the FCRA and accounts for the difference between interest
accruals and interest cash flows. (See Note 15)




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                                                                                     Financial Section
                                                                       Notes to the Financial Statements

   Net Position
Net position consists of unexpended appropriations and cumulative results of operations.
Unexpended appropriations include undelivered orders and unobligated balances, except for
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. (See Note 13)
   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)
provides income and medical cost protection to covered federal civilian employees injured on
the job, employees who have incurred work-related occupational diseases, and beneficiaries of
employees whose deaths are attributable to job-related injuries or occupational diseases. The
FECA Program is administered by the U.S. Department of Labor (DOL), which pays valid
claims and subsequently seeks reimbursement from the Department for these paid claims.
The FECA liability consists of two components. The first component is based on actual claims
paid and recognized by the Department as a liability. Generally, the Department reimburses
DOL within two to three years once funds are appropriated. The second component is the
estimated liability for future benefit payments based on unforeseen events, such as death,
disability, medical, and miscellaneous costs as determined by DOL annually. (See Note 11)




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                                                                                                                                    Financial Section
                                                                                                        Notes to the Financial Statements

Note 2. Non-Entity Assets
As of September 30, 2015 and 2014, non-entity assets consisted of the following:
                                                       Non-Entity Assets
                                                              (Dollars in Millions)

                                                                                                    2015                             2014
         Non-Entity Assets
           With the Public:
              Cash and Other Monetary Assets                                              $             1,561               $            1,471
              Credit Program Receivables, Net                                                             410                              387
              Accounts Receivable, Net                                                                     31                               33
                 Total With the Public                                                                  2,002                            1,891
         Total Non-Entity Assets                                                                        2,002                            1,891
         Entity Assets                                                                              1,084,056                          983,629
         Total Assets                                                                     $         1,086,058               $          985,520


FSA’s FY 2015 assets are predominantly entity assets (99.8 percent), leaving the small portion
of assets remaining as non-entity assets. Non-entity assets with the public primarily consist of
guaranty agency reserves (78.0 percent), reported as Cash and Other Monetary Assets, and
related Federal Perkins Loan Program loan receivables (20.5 percent), reported as credit
program receivables, net. The corresponding liabilities for these non-entity assets are reflected
in various accounts, including intragovernmental accounts payable, guaranty agency federal
fund due to Treasury, and other liabilities. (See Notes 5, 9, and 11)
Note 3. Fund Balance with Treasury
Fund Balance with Treasury by status of funds and fund type, as of September 30, 2015 and
2014, consisted of the following:
                                             Fund Balance with Treasury
                                                         (Dollars in Millions)

                                                                                      2015
                                                   General          Revolving          Special                      Other
                                                                                                                                            Total
                                                   Funds             Funds              Funds                       Funds
  Status of Funds
  Unobligated Balance:
             Available                         $      10,473         $        550             $         -       $               -      $      11,023
             Unavailable                                 671               13,686                      14                       -             14,371
  Obligated Balance, Not Yet Disbursed                19,283               23,307                       1                       -             42,591
  Fund Balance with Treasury                   $      30,427         $     37,543             $        15       $               -      $      67,985
    *Other primarily consists of non-entity deposit and receipt funds and clearing accounts.


                                                                                          2014
                                                    General             Revolving                 Special            Other
                                                                                                                                            Total
                                                    Funds                Funds                    Funds              Funds
  Status of Funds
  Unobligated Balance:
             Available                         $      10,617        $          69     $                 -       $               -      $      10,686
             Unavailable                                 543                9,788                      11                       -             10,342
  Obligated Balance, Not Yet Disbursed                21,462               19,012                       4                       -             40,478
  Fund Balance with Treasury                   $      32,622          $    28,869     $                15       $               -       $     61,506



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                                                                                                 Financial Section
                                                                                   Notes to the Financial Statements

   Composition of Funds
A portion of the general funds is provided in advance by multiyear appropriations for obligations
anticipated during the current and future fiscal years. Revolving funds are derived from
borrowings, as well as collections from the public and other federal agencies. Special funds
include fees collected on delinquent or defaulted Perkins loans that have reverted to FSA and
the Department from the initial lenders.
   Status of Funds
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 ($14,371 million)
differs from unapportioned amounts on the SBR ($15,932 million) due to the Cash and Other
Monetary Assets ($1,561 million). Obligated balances not yet disbursed include undelivered
orders and unpaid expended authority. (See Note 5)
Note 4. Accounts Receivable
Accounts receivable, as of September 30, 2015 and 2014, consisted of the following:
                                          Accounts Receivable
                                              (Dollars in Millions)

                                                                           2015
                                            Gross
                                          Receivables                     Allowance           Net Receivables

       Intragovernmental              $                  -            $               -      $             -
       With the Public                                85                           (20)                   65

       Total                          $               85              $            (20)      $            65



                                                                            2014
                                            Gross
                                          Receivables                     Allowance           Net Receivables

       Intragovernmental              $                  -            $               -      $             -
       With the Public                               115                           (10)                  105

       Total                          $              115              $            (10)      $           105


Accounts receivable consist of institutional debt resulting from external audit or program
review; program scholarship grant repayments; employee debt; and intragovernmental debts
due from other federal agencies through interagency agreements.




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                                                                                                Financial Section
                                                                               Notes to the Financial Statements

Note 5. Cash and Other Monetary Assets
Cash and Other Monetary Assets consist of reserves held in the FFEL guaranty agencies’
Federal Fund. The net change in the valuation of the Federal Fund on FSA’s Balance Sheet
increases or decreases FSA’s Cash and Other Monetary Assets with a corresponding change
in Guaranty Agency Funds Due to Treasury. The table below presents Cash and Other
Monetary Assets for the years ended September 30, 2015 and 2014.


                                     Cash and Other Monetary Assets
                                                   (Dollars in Millions)

                                                                               2015               2014
       Beginning Balance, Cash and Other Monetary Assets                   $     1,471      $        1,482
         Valuation Increase in Guaranty Agency Federal Funds                          92              (11)
         Less: Collections from Guaranty Agency Federal Funds
              Excess Collections                                                       2                 -
              Collections Remitted to Treasury                                         2                 -

       Ending Balance, Cash and Other Monetary Assets                      $     1,561      $        1,471


The balance in the Federal Fund represents consolidated reserve balances of the 29 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 based on form of organization. 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.
The $92 million valuation increase in the Federal Fund in FY 2015 represents the change in the
estimated value of net assets held in the FFEL guaranty agency Federal Fund consolidated for
disclosure. The activity on which the balance reflected on the Balance Sheet is adjusted
reflects the net activity of guaranty agencies’ operations as adjusted based on the FSA’s
procedures. During FY 2015, $2 million was remitted to the Department by a guaranty agency,
and these remitted funds were returned to Treasury.
Note 6. Credit Programs for Higher Education: Credit Program
Receivables, Net and Liabilities for Loan Guarantees
FSA and the Department currently operate two major student loan programs: Direct Loan and
FFEL. 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.
FSA holds $1,016.4 billion in outstanding credit program net receivables. This outstanding
balance is comprised primarily of Direct Loans, FFEL, and loans purchased using authority
provided in the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA), but there
are several other loan programs that the Department and FSA administer – including the
Federal Perkins Loan Program, the TEACH Grant Program, and the HEAL Program.




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                                                                                                     Financial Section
                                                                                       Notes to the Financial Statements

Credit Program Receivables, as of September 30, 2015 and 2014, consisted of the following:

                                 Credit Program Loan Receivables, Net
                                                (Dollars in Millions)


                                                                                 2015                2014
    Direct Loan Program Loan Receivables, Net                               $    880,557         $    778,516
    FFEL Program Loan Receivables:
     FFEL Guaranteed Loan Program, Net (Pre-1992)                                  2,365                1,904
     FFEL Program (Post-1991):
      FFEL Guaranteed Loan Program, Net                                           38,180               37,969
      Temporary Loan Purchase Authority:
        Loan Purchase Commitment, Net                                             32,865               36,556
        Loan Participation Purchase, Net                                          59,516               64,513
        ABCP Conduit, Net                                                          1,778                1,922
    Federal Perkins and Other Loan Program Loan Receivables, Net                       410                  387
    TEACH Program Loan Receivables, Net                                                631                  536
    HEAL Program Loan Receivables, Net                                                 123                  115

    Total                                                                   $   1,016,425        $    922,418


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 a comprehensive description of the
student loan programs at the Department, including summary financial data and subsidy rates.
William D. Ford Federal 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. As of September 30, 2015 and 2014, total principal balances outstanding of Direct
Loans were approximately $800.8 billion and $694.0 billion, respectively.
The Department records an estimated obligation each year for direct loan awards to be made
in a fiscal year based on estimates of schools’ receipt of aid applications. Half of all loan
awards are issued in the fourth quarter of the fiscal year. Loans awarded are typically
disbursed in multiple installments over an academic period. As a result, loans may be
disbursed over multiple fiscal years. Loan awards may not be fully disbursed due to students
leaving or transferring to other schools. The Department’s estimate may also not reflect the
actual amount of awards made. Based on historical averages, the Department expects
approximately 8.1% of the amount obligated for new loan awards will not be disbursed.
The following schedule summarizes the principal and related interest receivables, net of the
allowance for subsidy:
                            Direct Loan Program Loan Receivables, Net
                                                (Dollars in Millions)

                                                                                2015                 2014
    Principal Receivable                                                $       800,811          $    694,006
    Interest Receivable                                                          44,250                37,152
      Total                                                                     845,061               731,158
    Allowance for Subsidy                                                        35,496                47,358
    Direct Loan Program Loan Receivables, Net                           $       880,557          $    778,516


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                                                                                                  Financial Section
                                                                                   Notes to the Financial Statements

Direct Loan program loan receivables are defaulted and nondefaulted loans owned and held by
the Department. Of the $845.1 billion in gross receivables, as of September 30, 2015,
$44.1 billion (5.2 percent) in loan principal was in default and had been transferred to the
Department’s defaulted loan servicer, compared to $33.9 billion (4.6 percent) as of September
30, 2014. As of September 30, 2015 and 2014, an additional $1.2 billion and $0.5 billion,
respectively, in defaulted loans held by servicers had not yet been transferred to the
Department’s defaulted loan servicer; this amount includes defaulted Direct Loans and
defaulted loans from other loan programs. Allowance for subsidy is subject to interest rates,
default rates, fees, and other costs. A positive allowance for subsidy is substantially a factor of
projected borrower interest exceeding the cost of Treasury borrowings and loan forgiveness.
Negative subsidy is an estimate of future cash inflows exceeding future cash outflows. Subsidy,
either positive or negative, provides resources for FSA to carry on its loan origination and loan
servicing activities under the Direct Loan Program.
The following schedule provides a reconciliation between the beginning and ending balances of
the allowance for subsidy for the Direct Loan program:

                 Direct Loan Program Reconciliation of Allowance for Subsidy
                                               (Dollars in Millions)
                                                                           2015                  2014
    Beginning Balance, Allowance for Subsidy                           $      47,358        $       65,247
    Activity
    Fee Collections                                                          (1,618)               (1,623)
    Loan Cancellations                                                         4,777                 2,068
    Subsidy Allowance Amortization                                          (16,373)              (11,319)
    Other                                                                        460                 1,111
    Total Activity                                                          (12,754)               (9,763)
    Components of Subsidy Transfers
    Interest Rate Differential                                                 8,993                33,161
    Defaults, Net of Recoveries                                                (253)               (1,409)
    Fees                                                                         641                 1,756
    Other                                                                    (3,195)              (11,418)
    Current Year Subsidy Transfers                                             6,186                22,090

    Loan Modification                                                        (9,936)                     -

    Components of Subsidy Re-estimates
    Interest Rate Re-estimates                                               (1,506)               (8,344)
    Technical and Default Re-estimates                                         6,148              (21,872)
    (Upward)/Downward Subsidy Re-estimates                                     4,642              (30,216)

    Ending Balance, Allowance for Subsidy                              $      35,496         $      47,358


Loan cancellations include write-offs of loans because the borrower died, became disabled, or
declared bankruptcy. Subsidy transfers reflect the subsidy cost for loans disbursed during the
current fiscal year. The other components of current year negative subsidy transfers consist of
contract collection costs, program review collections, fees, and other accruals. 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, and any related negative
subsidy.




                                 Federal Student Aid Annual Report FY 2015                                       97
                                                                                                       Financial Section
                                                                                       Notes to the Financial Statements

The following schedule summarizes the Direct Loan interest expense and interest revenue for
the years ended September 30, 2015 and 2014:

                        Direct Loan Program Interest Expense and Revenue
                                               (Dollars in Millions)

                                                                           2015                       2014
    Interest Expense on Treasury Borrowing                             $       27,593         $           25,152
    Total Interest Expense                                             $        27,593        $           25,152


    Interest Revenue from the Public                                   $         39,760       $           32,801
    Amortization of Subsidy                                                    (16,373)                 (11,319)
    Interest Revenue on Uninvested Funds                                          4,206                    3,670
    Total Interest Revenue                                             $        27,593        $           25,152


The following schedule summarizes the Direct Loan subsidy expense for the years ended
September 30, 2015 and 2014:

                               Direct Loan Program Subsidy Expense
                                               (Dollars in Millions)

                                                                               2015                   2014
    Components of Negative Subsidy Transfers
    Interest Rate Differential                                             $       8,993          $      33,161
    Defaults, Net of Recoveries                                                    (253)                (1,409)
    Fees                                                                             641                  1,756
    Other                                                                        (3,195)               (11,418)
    Negative Subsidy Transfers                                                     6,186                 22,090

    Loan Modification                                                            (9,936)                       -
    (Upward)/Downward Subsidy Re-estimates                                        4,642                (30,216)

    Direct Loan Subsidy Expense                                            $          892         $      (8,126)


Direct Loan program re-estimated subsidy cost was adjusted downward by $4.6 billion in
FY 2015. Updated discount rates for the 2014 and 2013 cohorts decreased cost by
$6.2 billion. Higher participation in income dependent repayment plans increased cost by
$15 billion. A new model was developed that much more accurately reflects debts and
incomes of recent income dependent repayment borrowers. While both debts and incomes
increased in the new model, for consolidated borrowers the increase in income compared to
debt resulted in debts becoming more affordable resulting in a $5.8 billion decrease in
costs. Costs increased $1.8 billion due to increases in default rates. Changes in prepayment
rates reflect larger than expected prepayment activity, leading to decreased interest earnings
resulting in $3.5 billion in upward subsidy cost. Costs decreased $5.7 billion due to higher
forbearance rates. Interest accrues during forbearance and that interest is eventually paid to
the Department. Other assumption updates produced offsetting costs, with the remainder
attributable to interest on the re-estimate.
Subsidy rates are sensitive to interest rate fluctuations; for example, a 1 percent increase in
projected borrower interest rates would reduce projected Direct Loan subsidy cost by
$4.3 billion. Re-estimated costs only include cohorts that are 90 percent disbursed; cohort
years 1994–2014.


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                                                                                          Financial Section
                                                                            Notes to the Financial Statements

Direct Loan re-estimated subsidy cost was adjusted upward by $30.2 billion in FY 2014.
Updated discount rates for the 2013 and 2012 cohorts decreased subsidy cost by $4.4 billion.
Changes in the availability of repayment plans increased subsidy cost by $18.6 billion. Subsidy
costs increased $2.9 billion due to increases in default rates. Changes in prepayment rates
reflect slower than expected prepayment activity, leading to increased interest earnings
resulting in $3.2 billion in downward subsidy cost. Other assumption updates produced
offsetting costs, with the remainder attributable to interest on the re-estimate. In June 2014,
President Obama announced a new initiative to expand the Pay As You Earn (PAYE)
repayment plan. The modified cost for subsidy of this plan for cohort years 1994-2013 is
$8.3 billion.
The subsidy rate is sensitive to interest rate fluctuations; for example, a 1 percent increase in
projected borrower base rates would reduce projected Direct Loan subsidy cost by $3.5 billion.
Re-estimated subsidy costs only include those cohorts that are 90 percent disbursed; cohort
years 1994–2013.
FY 2015 Modification. Recorded subsidy cost of a loan is based on a set of assumed future
cash flows. Government actions that change these assumed future cash flows change subsidy
cost and are recorded as loan modifications. Loan modifications are recognized under the
same accounting principle as subsidy re-estimates. Modification adjustment transfers are
required to adjust for the difference between the discount rate used to calculate the cost of the
modification and the interest rate at which the cohort pays or earns interest.
The Department modified Direct Loans in FY 2015. The PAYE loan repayment option available
to eligible borrowers caps monthly payments for many recent graduates at an amount that is
affordable based on their income. PAYE, first announced in October 2011, caps payments for
Federal Direct Student Loans at 10 percent of discretionary income for eligible borrowers.
Borrowers formerly ineligible for the more generous PAYE repayment plan are now eligible for
a modified version of PAYE leading to increased costs resulting in a $9.3 billion upward
modification of subsidy cost and a $629 million net upward modification adjustment transfer. .
In FY 2015, the Department forgave $2.1 billion in interest for borrowers participating in the
PAYE/income-based repayment (IBR) plans, which provide that, if the borrower’s monthly
payment amount is not sufficient to pay the accrued interest on the borrower’s direct subsidized
loan or the subsidized portion of a direct consolidation loan, the Secretary does not charge the
borrower the remaining accrued interest for a period not to exceed three consecutive years
from the established repayment period start date on that loan under the PAYE/IBR plan.
The subsidy rates applicable to the 2015 loan cohort year follow:
                           Direct Loan Subsidy Rates—Cohort 2015
                                         Interest
                                        Differential   Defaults   Fees         Other        Total

   Stafford                              3.97%         0.12%      (1.07)%       5.73%      8.75%
   Unsubsidized Stafford                (14.83)%       0.15%      (1.07)%       6.83%      (8.92)%
   PLUS                                 (22.67)%       0.25%      (4.29)%       5.84%     (20.87)%
   Consolidation                         (1.50)%       (0.14)%    0.00%        10.68%      9.04%
   Total                                 (8.45)%       0.07%      (1.16)%       7.69%      (1.87)%


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
expense for new direct loans reported in the current year relates to disbursements of loans
from both current and prior years’ cohorts. Subsidy expense is recognized when the
Department disburses direct loans. The subsidy expense reported in the current year may
                              Federal Student Aid Annual Report FY 2015                                   99
                                                                                              Financial Section
                                                                                Notes to the Financial Statements

include re-estimates. The subsidy rates shown above, which reflect aggregate negative
subsidy in the FY 2015 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 2017 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.

The following schedule summarizes the Direct Loan program loan disbursements by loan type
for the years ended September 30, 2015 and 2014:
                   Direct Loan Program Loan Disbursements by Loan Type
                                           (Dollars in Millions)

                                                                       2015                  2014
    Stafford                                                       $      (23,953)     $        (25,877)
    Unsubsidized Stafford                                                 (52,698)              (54,740)
    PLUS                                                                  (19,163)              (18,910)
    Consolidation                                                         (46,434)              (34,525)
    Total Expenditures                                             $     (142,248)     $       (134,052)

The allocation of disbursements for the first three loan types is estimated based on historical
trend information.
Student and parent borrowers may prepay existing loans without penalty through a new
consolidation loan. Under the FCRA and requirements provided by OMB regulations, the
retirement of Direct Loans being consolidated is considered a collection of principal and
interest. This receipt is offset by the disbursement related to the newly created consolidation
loan. Underlying direct or guaranteed loans, performing or nonperforming, are paid off in their
original cohort; new consolidation loans are originated in the cohort in which the new
consolidation loan was obligated. Consolidation activity is taken into consideration in
establishing subsidy rates for defaults and other cash flows. The cost of new consolidations is
included in subsidy expense for the current-year cohort; the effect of prepayments on existing
loans could contribute to re-estimates of prior cohort subsidy costs. The net receivables include
estimates of future prepayments of existing loans through consolidations; they do not reflect
subsidy costs associated with anticipated future consolidation loans.
Direct Loan consolidations increased from $35 billion during FY 2014 to $46 billion during
FY 2015. 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 program, consolidated into a direct loan, or otherwise
satisfied, discharged, or cancelled. As of September 30, 2015 and 2014, total principal
balances outstanding of guaranteed loans held by lenders were approximately $220 billion and
$242 billion, respectively. As of September 30, 2015 and 2014, the estimated maximum
                               Federal Student Aid Annual Report FY 2015                                    100
                                                                                              Financial Section
                                                                                Notes to the Financial Statements

government exposure on outstanding guaranteed loans held by lenders was approximately
$215 billion and $236 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.

                               FFEL Program Loan Receivables, Net
                                             (Dollars in Millions)
                                                                         2015                 2014

    FFEL Program (Pre-1992)
      Principal Receivable                                           $      4,388         $       4,707
      Interest Receivable                                                   6,149                 5,810
        Total                                                             10,537                10,517
      Allowance for Subsidy                                               (8,162)               (8,586)
      Liabilities for Loan Guarantees                                         (10)                  (27)
    FFEL Guaranteed Loan Program, Net (Pre-1992)                            2,365                 1,904

    FFEL Program (Post-1991)
    FFEL Guaranteed Loan Program:
    Principal Receivable                                                  33,415                34,251
    Interest Receivable                                                     5,756                 5,273
      Total                                                               39,171                39,524
       Allowance for Subsidy                                              (4,389)               (5,773)
       Liabilities for Loan Guarantees                                      3,398                 4,218
    FFEL Guaranteed Loan Program, Net (Post-1991)                         38,180                37,969

    Temporary Loan Purchase Authority:
    Loan Purchase Commitment:
    Principal Receivable                                                  26,474                29,401
    Interest Receivable                                                    1,981                 1,927
      Total                                                               28,455                31,328
         Allowance for Subsidy                                             4,410                 5,228
    Loan Purchase Commitment, Net                                         32,865                36,556
    Loan Participation Purchase:
    Principal Receivable                                                  48,540                52,782
    Interest Receivable                                                    3,403                 3,358
      Total                                                               51,943                56,140
         Allowance for Subsidy                                             7,573                 8,373
    Loan Participation Purchase, Net                                      59,516                64,513
    ABCP Conduit:
    Principal Receivable                                                   1,887                 2,036
    Interest Receivable                                                      240                   218
      Total                                                                2,127                 2,254
         Allowance for Subsidy                                             (349)                 (332)
    ABCP Conduit, Net                                                      1,778                 1,922

    FFEL Program Loan Receivables, Net                               $   134,704          $    142,864


ECASLA gave the Department temporary authority to purchase FFEL loans and participation
interests in those loans. The Department implemented three activities under this authority: loan
purchase commitments; purchases of loan participation interests; and a put, or forward
purchase commitment, with an Asset-Backed Commercial Paper (ABCP) Conduit. This
authority expired after September 30, 2010; as a result, loan purchase commitments and


                                  Federal Student Aid Annual Report FY 2015                                 101
                                                                                                 Financial Section
                                                                                   Notes to the Financial Statements

purchases of loan participation interests concluded. However, under the terms of the Put
Agreement with the conduit, ABCP Conduit activity ceased operations in January 2014.
The asset-backed commercial paper vehicle, the Conduit, closed in early FY 2014, resulting in
a $71 billion recovery of prior year obligations and the cancellation of unused borrowing
authority.
The FFEL guaranteed student loan financing account has a negative estimated liability for loan
guarantees of $3.4 billion and $4.2 billion as of September 30, 2015 and 2014, respectively.
This indicates that expected collections on anticipated future defaulted loans will be in excess
of default disbursements, calculated on a net present value basis. Under GAAP, the negative
estimated liability has been classified as a component of credit program receivables on the
consolidated balance sheet. The following schedule provides a reconciliation between the
beginning and ending balances of the liability for loan guarantees for the insurance portion of
the FFEL program:
                FFEL Program Reconciliation of Liabilities for Loan Guarantees
                                               (Dollars in Millions)

                                                                           2015                 2014
    Beginning Balance, FFEL Financing Account Liability for
    Loan Guarantees                                                    $      4,218         $       4,260
    Activity
    Interest Supplement Payments                                                  896               1,094
    Claim Payments                                                            6,917                 8,914
    Fee Collections                                                          (1,926)               (2,156)
    Interest on Liability Balance                                             1,826                 1,843
    Other                                                                   (12,797)              (13,785)
    Total Activity                                                           (5,084)               (4,090)
    Components of Loan Modifications
    Loan Modification Costs                                                         -               4,020
    Modification Adjustment Transfers                                               -                (581)
    Loan Modifications                                                              -               3,439


    (Upward)/Downward Subsidy Re-estimates                                    4,264                    609

    Ending Balance, FFEL Financing Account Liability for Loan
    Guarantees                                                                3,398                 4,218
    FFEL Liquidating Account Liability for Loan Guarantees                      (10)                  (27)
    Liabilities for Loan Guarantees                                    $      3,388         $       4,191


Other activity includes negative special allowance collections, collections on defaulted FFEL
loans, expenditures, and loan cancellations due to death, disability, or bankruptcy.




                                    Federal Student Aid Annual Report FY 2015                                  102
                                                                                                               Financial Section
                                                                                           Notes to the Financial Statements

The following schedules provide reconciliations between the beginning and ending balances of
the allowance for subsidy for the loan purchase commitment component and the loan
participation purchase component of the FFEL program. Loans in these programs are loans
acquired by the Department. Acquired loans are reported at their net present value of future
cash flows.
           Loan Purchase Commitment Reconciliation of Allowance for Subsidy
                                                (Dollars in Millions)

                                                                                2015                       2014
    Beginning Balance, Allowance for Subsidy                                $         5,228            $         5,188
    Activity
    Subsidy Allowance Amortization                                                     (724)                      (749)
    Loan Cancellations                                                                  274                        116
    Contract Collection Cost and Other                                                   40                         72
    Total Activity                                                                     (410)                      (561)


    (Upward)/Downward Subsidy Re-estimates                                             (408)                       601

    Ending Balance, Allowance for Subsidy                                   $         4,410            $         5,228



           Loan Participation Purchase Reconciliation of Allowance for Subsidy
                                                (Dollars in Millions)

                                                                                2015                       2014
    Beginning Balance, Allowance for Subsidy                                $         8,373            $         8,208
    Activity
    Subsidy Allowance Amortization                                                   (1,362)                    (1,304)
    Loan Cancellations                                                                  518                        224
    Contract Collection Cost and Other                                                   44                         93
    Total Activity                                                                     (800)                      (987)


    (Upward)/Downward Subsidy Re-estimates                                                 -                     1,152

    Ending Balance, Allowance for Subsidy                                   $         7,573            $         8,373


The following schedule provides FFEL program subsidy expense for the years ended
September 30, 2015 and 2014, respectively:
                                         FFEL Program Subsidy Expense
                                                    (Dollars in Millions)

                                                                                         2015                     2014
       FFEL Guaranteed Loan Program Subsidy Re-estimates                         $             4,264       $           609
       Loan Purchase Commitment Subsidy Re-estimates                                           (408)                   601
       Loan Participation Purchase Subsidy Re-estimates                                            -                 1,152
       ABCP Conduit Subsidy Re-estimates                                                           -                   203
       FFEL Program (Upward)/Downward Subsidy Re-estimates                                     3,856                 2,565

       FFEL Guaranteed Loan Program Modification Costs                                             -                 4,020

       FFEL Program Subsidy Expense                                              $             3,856       $         6,585




                                     Federal Student Aid Annual Report FY 2015                                               103
                                                                                      Financial Section
                                                                       Notes to the Financial Statements

FFEL guaranteed re-estimated subsidy cost was adjusted downward by $3.9 billion in FY 2015.
Subsidy costs decreased $2.1 billion due to updated economic assumptions, including
probabilistic deterministic rates, which reflected historically low commercial paper rates,
resulting in substantially higher negative special allowance payments. Subsidy costs decreased
$706 million due to lower deferment rates on consolidated loans that have subsidized
components of outstanding debt. The Department pays interest benefits when loans are in
deferment, so lower deferment rates mean less interest benefits when loans are in deferment,
so lower deferment rates mean less interest benefit payments to lenders. Other assumption
updates produced offsetting subsidy costs, with the remainder attributable to interest on the re-
estimate.
Subsidy rates are sensitive to interest rate fluctuations; for example, a 1 percent increase in
borrower interest rates and the guaranteed yield for lenders would increase projected FFEL
subsidy costs by $17.5 billion.
FFEL guaranteed re-estimated subsidy cost was adjusted downward by $0.6 billion in FY 2014.
Subsidy costs decreased $411 million due to updated economic assumptions, including
probabilistic deterministic rates, which reflected historically low commercial paper rates,
resulting in substantially higher negative special allowance payments than were previously
projected. Subsidy costs decreased $111 million due to maturity and debt distribution
assumption updates. Other assumption updates produced offsetting subsidy costs, with the
remainder attributable to interest on the re-estimate. The subsidy rate is sensitive to interest
rate fluctuations; for example, a 1 percent increase in borrower interest rates and the
guaranteed yield for lenders would increase projected FFEL subsidy costs by $18 billion.
FY 2014 Modification. The Department modified FFEL loans in FY 2014, but not in FY 2015.
The Bipartisan Budget Act of 2013 eliminated guaranty agencies’ retention share of original
defaulted student loan amounts, and reduced the cap on the amount of collection costs they
can charge a borrower. The act required these agencies to send rehabilitated loans to the
Department if they cannot find a private lender buyer. These technical changes resulted in a
$4 billion downward subsidy cost modification and a $581 million modification adjustment
transfer loss for the FFEL financing account.
Other Credit Programs for Higher Education
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.
As of September 30, 2015 and 2014, loan and interest receivables, net of allowance for losses,
were $410 million and $387 million, respectively. These receivables are valued at net realizable
value with estimated allowance for losses of $168 million and $161 million as of
September 30, 2015 and 2014, respectively.
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. Since grants can be converted to direct loans, for budget and accounting purposes, the
program is operated as a loan program under the FCRA.


                               Federal Student Aid Annual Report FY 2015                            104
                                                                                                      Financial Section
                                                                                   Notes to the Financial Statements

As of September 30, 2015 and 2014, loan receivables were $631 million and $536 million,
respectively. The receivable balance is net of allowance for subsidy of $108 million and
$120 million as of September 30, 2015 and 2014, respectively.
The subsidy rates applicable to the 2015 loan cohort year follow:
                            TEACH Subsidy Rates—Cohort 2015
                                         Interest
                                        Differential            Defaults    Fees       Other           Total
   Subsidy Rates                         12.39%                   0.23%     0.00%         3.95%       16.57%


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.
Credit program receivables, net of allowance for subsidy and liabilities for loan guarantees, as
of September 30, 2015 and 2014 were $123 million and $115 million, respectively. All loan
activity for 1992 and beyond is recorded in corresponding financing accounts.

Administrative Expenses
Administrative expenses, for the years ended September 30, 2015 and 2014, consisted of the
following:
                                    Administrative Expenses
                                              (Dollars in Millions)

                                               2015                                       2014
                                Direct Loan                  FFEL           Direct Loan             FFEL
                                 Program                   Program           Program              Program
     Operating Expense          $      653                $           422   $       604           $      390
     Other Expense                      28                             18            22                   14

     Total                      $      681                $           440   $       626           $      404




                              Federal Student Aid Annual Report FY 2015                                            105
                                                                                                         Financial Section
                                                                                        Notes to the Financial Statements


Note 7. Property and Equipment, Net and Leases
Property and equipment, as of September 30, 2015 and 2014, consisted of the following:
                                         Property and Equipment, Net
                                                        (Dollars in Millions)

                                                                                       2015
                                                                  Asset             Accumulated          Net Asset
                                                                  Cost              Depreciation          Value

       Information Technology, Internal Use Software,
       and Telecommunications Equipment                    $             140        $      (124)     $          16
       Furniture and Fixtures                                                   2            (2)                     -

       Property and Equipment, Net                         $             142        $      (126)     $          16



                                                                                       2014
                                                                  Asset             Accumulated          Net Asset
                                                                  Cost              Depreciation          Value

       Information Technology, Internal Use Software,
       and Telecommunications Equipment                    $              130       $      (123)     $           7
       Furniture and Fixtures                                                   2            (2)                     -

       Property and Equipment, Net                         $              132       $      (125)         $           7


The depreciation expense was $1 million for the years ending September 30, 2015 and 2014.
The major drivers of fixed assets at FSA are improvements to information technology, including
financial management and program management systems. Specifically, recent enhancements
have been made to FSA’s automated grant management capability. FSA acquires more robust
information technology to augment its significant capabilities to manage student loan and grant
operations.
   Leases
FSA staff and contractors are housed in leased buildings. FSA does not own real property.
The leased contracts with GSA are operating leases and are expensed as incurred.
Note 8. Other Assets
Other assets with the public consist of payments made to grant recipients in advance of their
expenditures and in-process invoices for interest benefits and special allowances for the FFEL
program. Other assets with the public were $6 million and $13 million as of
September 30, 2015 and 2014, respectively.




                                   Federal Student Aid Annual Report FY 2015                                             106
                                                                                                     Financial Section
                                                                                      Notes to the Financial Statements


Note 9. Accounts Payable
Accounts payable, as of September 30, 2015 and 2014, consisted of the following:
                                                Accounts Payable
                                                   (Dollars in Millions)

                                                                               2015                   2014
       Direct Loan Booking Accrual                                         $          2,938      $           3,027
       In Process Disbursements:
          Direct Loans                                                                 298                     312
          Grants                                                                       164                     161
          FFEL Claim Payments                                                          118                     311
       Contractual Services                                                              98                    163
       Other                                                                           (64)                  (126)
       Accounts Payable to the public                                                 3,552                  3,848

       Intragovernmental Accounts Payable                                                 1                     1

       Total Accounts Payable                                              $          3,553      $           3,849



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.
The Department pays vendor invoices according to the Prompt Payment Act rules that are built
into the financial system as a control mechanism, generally within 30 days of receipt of goods
and proper invoicing. The Department also monitors and leverages vendor discount
opportunities by processing payments to coincide with discount terms when possible.
The FY 2015 accounts payable other abnormal balance of $(64) million is primarily due to
FFEL Guaranteed Loan program collections of fees, principal, and interest on defaulted loans.




                                     Federal Student Aid Annual Report FY 2015                                       107
                                                                                                            Financial Section
                                                                                          Notes to the Financial Statements

Note 10. Debt
Debt, as of September 30, 2015 and 2014, consisted of the following:

                                                   Debt
                                             (Dollars in Millions)

                                                                         2015
                                 Beginning                                                     Ending
                                  Balance           Borrowing            Repayments            Balance
 Treasury Debt
 Direct Loan Program             $ 819,007           $ 159,667           $   (68,747)          $ 909,927
 FFEL Program
   Guaranteed Loan Program          43,254                           -                -           43,254
   Loan Purchase Commitment         36,271                     732              (3,295)           33,708
   Loan Participation Purchase      64,302                  1,825               (5,145)           60,982
   ABCP Conduit                      1,973                           -           (146)             1,827
 TEACH Program                        555                      108                 (17)              646
 Total                           $ 965,362           $ 162,332           $   (77,350)          $1,050,344


                                                                         2014
                                 Beginning                                                     Ending
                                  Balance           Borrowing            Repayments            Balance
 Treasury Debt
 Direct Loan Program             $ 698,361          $ 171,227            $   (50,581)         $ 819,007
 FFEL Program
   Guaranteed Loan Program          43,254                       -                    -           43,254
   Loan Purchase Commitment         38,598                     976              (3,303)           36,271
   Loan Participation Purchase      68,017                     790              (4,505)           64,302
   ABCP Conduit                      2,543                     203               (773)             1,973
 TEACH Program                         485                      99                (29)               555
 Total                           $ 851,258           $ 173,295           $   (59,191)         $ 965,362



FSA borrows from Treasury to fund the disbursement of new loans and the payment of credit
program outlays and related costs. During FY 2015, debt increased 9 percent from $965 billion
in the prior year to $1,050 billion. The Department 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.
Over 86 percent of FSA’s debt, as of September 30, 2015, 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. Net borrowing in the Direct Loan
program for FY 2015 totaled $160 billion. The new financing was used to disburse new loans
and make negative subsidy transfers. FSA also borrowed funding to execute the downward
subsidy re-estimate on the entire portfolio and to pay its interest to Treasury at year-end.
Principal payments were made during the year. The FFEL program is no longer offering new
financing to public borrowers or entering into guaranty agreements with lending authorities.
FSA also borrows from Treasury for activity in the TEACH program. During FY 2015, TEACH
net borrowing of $91 million was used for the advance of new grants and repayments of
principal made to Treasury.


                                  Federal Student Aid Annual Report FY 2015                                              108
                                                                                                            Financial Section
                                                                                            Notes to the Financial Statements

Note 11. Other Liabilities
Other liabilities, as of September 30, 2015 and 2014, consisted of the following:
                                                 Other Liabilities
                                                       (Dollars in Millions)

                                                                      2015                               2014
                                                            Intragovern-   With the           Intragovern-    With the
                                                               mental       Public               mental       Public
   Liabilities Covered by Budgetary Resources
     Current
       Employer Contributions and Payroll Taxes               $                1   $    -      $        1      $         -
       Liability for Deposit Funds and Clearing
         Accounts                                                         -             -               -             -
       Accrued Payroll and Benefits                                       -             5               -             5
       Deferred Revenue                                                   -            18               -            50
       Liabilities in Miscellaneous Receipt Accounts                  5,497             -           3,762             -
   Total Other Liabilities Covered by
   Budgetary Resources                                                5,498            23           3,763            55


   Liabilities Not Covered by Budgetary Resources
     Current
       Accrued Unfunded Annual Leave                                           -       12               -            12
     Noncurrent
       Accrued Unfunded FECA Liability                                    1             -               1                -
       Liabilities in Miscellaneous Receipt Accounts                    395             -             376                -
       Capital Transfers                                              2,790             -           2,242                -
       Accrued FECA Actuarial Liability                                   -             2               -                -
   Total Other Liabilities Not Covered by
   Budgetary Resources                                                3,186            14           2,619            12

   Other Liabilities                                          $       8,684        $   37      $    6,382      $     67


Other liabilities include current and noncurrent liabilities. The current liabilities covered by
budgetary resources primarily consist of downward subsidy re-estimates ($5.5 billion), which
when executed will be paid to the General Fund of the Treasury.
The noncurrent liabilities not covered by budgetary resources primarily relate to capital
transfers ($2.8 billion) and the student loan receivables of the Federal Perkins Loan program
($395 million).
 Liabilities Not Covered by Budgetary Resources
Liabilities not covered by budgetary resources include liabilities for which congressional action
is needed before budgetary resources can be provided. Although future appropriations to fund
these liabilities are likely, it is not certain that appropriations will be enacted to fund these
liabilities. Liabilities not covered by budgetary resources totaled $3.2 billion and $2.7 billion as
of September 30, 2015 and 2014, respectively.
As of September 30, 2015 and 2014, liabilities totaled $1,065.8 billion and $978.9 billion,
respectively. Of this amount, liabilities covered by budgetary resources totaled $1,062.6 billion
and $976.2 billion as of September 30, 2015 and 2014, respectively.




                                     Federal Student Aid Annual Report FY 2015                                               109
                                                                                              Financial Section
                                                                            Notes to the Financial Statements

Note 12. Accrued Grant Liability
FSA’s accrued grant liability was $1,571 million and $1,719 million as of September 30, 2015
and 2014, respectively. The majority is comprised of Pell Grants. The remaining accrued grant
liability also includes discretionary, formula, and campus-based grants.

Note 13. Net Position
Unexpended appropriations, as of September 30, 2015 and 2014, consisted of the following:
                                     Unexpended Appropriations
                                              (Dollars in Millions)

                                                                          2015                  2014
       Unobligated Balances:
         Available                                                    $          10,436   $         10,571
         Not Available                                                             489                 482
       Undelivered Orders                                                        17,400             19,432

       Unexpended Appropriations                                      $          28,325   $         30,485


   Cumulative Results of Operations:
The cumulative results of operations of $(8,017) million and $(23,815) million as of
September 30, 2015 and 2014, respectively, consists mostly of unfunded upward subsidy re-
estimates for Direct Loan and FFEL Loan programs, other unfunded expenses, and net
investments of capitalized assets.
   Other Financing Resources:
Negative subsidy transfers, downward subsidy re-estimates, and other in the other financing
sources section of the statement of changes in net position was $(14,159) million and
$(36,682) million as of September 30, 2015 and 2014, respectively. The amount was primarily
comprised of Direct Loan and FFEL program activity.
   Appropriations Received:
Appropriations received were $55,792 million and $49,876 million as of September 30, 2015
and 2014, respectively, and comprised primarily of Pell Grant and Direct Loan programs.




                               Federal Student Aid Annual Report FY 2015                                     110
                                                                                                Financial Section
                                                                               Notes to the Financial Statements


Note 14. Intragovernmental Cost and Exchange Revenue by
Program

As required by the GPRA Modernization Act of 2010, FSA’s reporting groups and major
program offices have been aligned with the goals presented in the Department’s Strategic Plan
2014–2018. Strategic Goal 1, increase college access, affordability, quality, and completion by
improving higher education and lifelong learning opportunities for youth and adults, is a sharply
defined directive that guides divisions to carry out the vision and programmatic mission of FSA.
Gross costs and earned revenue are classified as intragovernmental (exchange transactions
between FSA and other entities within the federal government) or with the public (exchange
transactions between FSA and non-federal entities). \The following table presents FSA's gross
cost and exchange revenue by program for FY 2015 and FY 2014.

                            Gross Cost and Exchange Revenue by Program
                                                 (Dollars in Millions)

                                                                             2015                 2014

       Increase College Access, Quality, and Completion
       Intragovernmental Gross Cost                                      $     33,873       $        31,267
       Public Gross Cost                                                       25,627                34,203
         Total Gross Program Costs                                             59,500                65,470
       Intragovernmental Earned Revenue                                        (5,134)               (4,293)
       Public Earned Revenue                                                  (26,413)              (24,686)
        Total Program Earned Revenue                                          (31,547)              (28,979)
       Total Program Cost                                                      27,953                36,491


       Net Cost of Operations                                            $      27,953      $        36,491




                                  Federal Student Aid Annual Report FY 2015                                    111
                                                                                                           Financial Section
                                                                                            Notes to the Financial Statements

Note 15. Interest Expense and Interest Revenue
For FY 2015 and FY 2014, interest expense and interest revenue by program consisted of the
following:
                                   Interest Expense and Interest Revenue
                                                   (Dollars in Millions)
                                                                                   2015
                                                  Expenses                                          Revenue
                                       Federal    Nonfederal           Total              Federal   Nonfederal    Total


      Direct Loan Program              $ 27,593       $        -       $27,593            $ 4,206     $ 23,387    $27,593
      FFEL Program :
         Guaranteed Loan Program         2,083        (1,826)                257              257            -        257
         Loan Purchase Commitment        1,091              -              1,091               63        1,028      1,091
         Loan Participation Purchase     2,018              -              2,018              130        1,888      2,018
         ABCP Conduit                       60              -                 60                4           56         60
      TEACH Program                         20              -                 20                2           18         20
      Other Programs                         -              -                  -                2            -          2

      Total                            $ 32,865      $(1,826)          $31,039            $ 4,664     $ 26,377    $31,041


                                                                                   2014
                                                  Expenses                                          Revenue
                                       Federal     Nonfederal           Total             Federal   Nonfederal    Total


      Direct Loan Program              $ 25,152       $            -   $25,152            $ 3,670     $ 21,482   $25,152
      FFEL Program:
         Guaranteed Loan Program          2,083           (1,843)            240              240            -       240
         Loan Purchase Commitment         1,163                 -          1,163               64        1,099     1,163
         Loan Participation Purchase      2,102                 -          2,102              119        1,983     2,102
         ABCP Conduit                        75                 -             75               14           61        75
      TEACH Program                          18                 -             18                2           16        18
      Other Programs                          -                 -              -                -           13        13

      Total                             $30,593      $ (1,843)         $28,750            $ 4,109     $ 24,654   $28,763


Federal interest expense is recognized on FSA’s outstanding borrowing from Treasury (debt).
The Direct Loan and FFEL programs have $910 billion and $140 billion in debt, respectively, as
of September 30, 2015. Federal interest revenue is earned on Fund Balance with Treasury for
the Direct Loan and FFEL programs. The interest rate set by OMB is the same for interest
expense and interest revenue.
Nonfederal interest expense results from the amortization of loan subsidy. Nonfederal interest
revenue is interest earned from the public on credit program receivables held by FSA. The
credit program receivable net balances for the Direct Loan and FFEL programs are
$880.6 billion and $134.7 billion, respectively, as of September 30, 2015. FSA holds
$1,016.4 billion in outstanding credit program net receivables.




                                  Federal Student Aid Annual Report FY 2015                                                 112
                                                                                                      Financial Section
                                                                                       Notes to the Financial Statements

Note 16. Statement of Budgetary Resources
The SBR compares budgetary resources with the status of those resources. As of September
30, 2015, budgetary resources were $302 billion and net agency outlays were $122 billion. As
of September 30, 2014, budgetary resources were $308 billion and net agency outlays were
$133 billion.
Obligations Incurred by Apportionment Type and Category
Obligations incurred by apportionment type and category, as of September 30, 2015 and 2014,
consisted of the following:
                    Obligations Incurred by Apportionment Type and Category
                                                (Dollars in Millions)

                                                                                2015                    2014
       Direct:
          Category A                                                    $            1,467       $          1,175
          Category B                                                               273,102                283,814
          Exempt from Apportionment                                                    102                    194

       Obligations Incurred                                             $          274,671       $        285,183


The apportionment categories are determined in accordance with the guidance provided in
OMB regulations. Category A apportionments are those resources that can be obligated
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
Unused borrowing authority and related changes in available borrowing authority, as of
September 30, 2015 and 2014, consisted of the following:
                                      Unused Borrowing Authority
                                                (Dollars in Millions)
                                                                                2015                   2014
       Beginning Balance, Unused Borrowing Authority                    $            61,089      $         138,411
       Current Year Borrowing Authority                                            171,624                 182,749
       Funds Drawn From Treasury                                                  (162,332)              (173,295)
       Borrowing Authority Withdrawn                                               (15,814)               (86,776)

       Ending Balance, Unused Borrowing Authority                           $          54,567     $           61,089


FSA is given authority to draw funds from Treasury to finance the Direct Loan, FFEL, TEACH,
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 and may cancel unused amounts.




                                 Federal Student Aid Annual Report FY 2015                                             113
                                                                                                       Financial Section
                                                                                         Notes to the Financial Statements

Undelivered Orders at the End of the Period
Undelivered orders, as of September 30, 2015 and 2014, consisted of the following:
                                              Undelivered Orders
                                                  (Dollars in Millions)

                                                                                  2015                   2014
       Budgetary                                                          $              17,443    $            19,506
       Nonbudgetary                                                                      74,828                 76,676

       Undelivered Orders (Unpaid)                                            $          92,271    $            96,182


Undelivered orders at the end of the period, as presented above, will differ from the
undelivered orders included in unexpended appropriations. Undelivered orders represent the
amount of goods and/or services ordered which have not been actually or constructively
received. This amount includes any orders which may have been prepaid or advanced but for
which delivery or performance has not yet occurred. Undelivered orders for trust funds,
reimbursable agreements, and federal credit financing and liquidating funds are not funded
through appropriations and are not included in unexpended appropriations. (See Note 13)
Distributed Offsetting Receipts
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 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. Distributed offsetting receipts, for the years ended
September 30, 2015 and 2014, consisted of the following:
                                         Distributed Offsetting Receipts
                                                  (Dollars in Millions)
                                                                                  2015                   2014
       Negative Subsidies and Downward Re-estimates:
         FFEL Program                                                     $               4,658    $             7,945
         Direct Loan Program                                                              8,211                 31,551
         TEACH Program                                                                       31                     13
         HEAL Program                                                                        19                      -
         Total Negative Subsidies and Downward Re-estimates                              12,919                 39,509
       Other                                                                                 38                     50
       Distributed Offsetting Receipts                                    $              12,957    $            39,559




                                  Federal Student Aid Annual Report FY 2015                                              114
                                                                                       Financial Section
                                                                        Notes to the Financial Statements

Explanation of Differences Between the Statement 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 FY 2014 SBR for the Federal Fund are
compiled through combining all guaranty agencies’ annual reports to determine a net valuation
amount for the Federal Fund.

Note 17. Reconciliation of Net Cost of Operations to Budget
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.




                               Federal Student Aid Annual Report FY 2015                               115
                                                                                                      Financial Section
                                                                                        Notes to the Financial Statements

The reconciliation of net cost of operations to budget, as of September 30, 2015 and 2014, are
presented below:
                         Reconciliation of Net Cost of Operations to Budget
                                                  (Dollars in Millions)

                                                                                         2015               2014

Resources Used to Finance Activities:
  Obligations Incurred                                                              $      274,671     $      285,183
  Spending Authority from Offsetting Collections and Recoveries                          (144,579)          (195,653)
  Offsetting Receipts                                                                     (12,957)           (39,559)
    Net Budgetary Resources Obligated                                                     117,135             49,971
  Imputed Financing from Costs Absorbed by Others                                               10                 12
  Other Financing Sources                                                                 (14,159)           (36,682)
    Net Other Resources                                                                   (14,149)           (36,670)

Net Resources Used to Finance Activities                                                  102,986             13,301


Resources Used or Generated for Items Not Part of the Net Cost of Operations:
  (Increase)/Decrease in Budgetary Resources Obligated but Not Yet Provided                  3,998            83,563
  Resources that Fund Subsidy Re-estimates Accrued in Prior Period                        (20,131)             2,383
  Credit Program Collections                                                              102,102             80,293
  Acquisition of Fixed Assets                                                                  (10)               (3)
  Acquisition of Net Credit Program Assets or Liquidation of Liabilities for Loan
  Guarantees                                                                             (165,607)          (186,818)
  Resources from Non-Entity Activity                                                        14,788             36,682
    Net Resources That Do Not Finance the Net Cost of Operations                          (64,860)            16,100


Net Resources Used to Finance the Net Cost of Operations                                   38,126             29,401


Components of the Net Cost of Operations That Will Not Require or Generate Resources in the Current Period:
  Change in Depreciation                                                                 1                (2)
  Subsidy Amortization and Interest on the Liability for Loan Guarantees          16,709              11,609
  Other                                                                                (1)               581
    Total Components Not Requiring or Generating Resources                        16,709              12,188
  Increase/(Decrease) in Annual Leave Liability                                                  -                   2
  Accrued Re-estimates of Credit Subsidy Expense                                             2,598             20,130
  Increase in Exchange Revenue Receivable from the Public                                 (29,484)           (25,227)
  Other                                                                                          4                 (3)
     Total Components Requiring or Generating Resources in Future
     Periods                                                                              (26,882)            (5,098)

Total Components That Will Not Require or Generate Resources in the
Current Period                                                                            (10,173)             7,090


Net Cost of Operations                                                              $      27,953       $     36,491




                                    Federal Student Aid Annual Report FY 2015                                            116
                                                                                      Financial Section
                                                                       Notes to the Financial Statements


Note 18. 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.
   Guaranty Agencies
FSA may assist guaranty agencies experiencing financial difficulties. No provision has been
made in the financial statements for potential liabilities. FSA has not done so in fiscal years
2015 or 2014 and does not expect to in future years.
   Federal Perkins Loan Program
The Federal Perkins Loan program provides financial assistance to eligible postsecondary
school students. In FY 2015, the Department provided funding of 83.0 percent of the capital
used to make loans to eligible students through participating schools at 5 percent interest. The
schools provided the remaining 17.0 percent of program funding. For the latest academic year
that ended June 30, 2015, approximately 527 thousand loans were made totaling $1.2 billion at
1,474 institutions, making an average of $2,197 per loan. The Department’s equity interest was
approximately $6.7 billion as of June 30, 2015.
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 officially ended on September 30, 2015. However, if
schools made the first disbursement of a Federal Perkins Loan to a student for the 2015–2016
award year prior to October 1, 2015, the school may make any remaining disbursements of
that 2015–2016 loan after September 30, 2015. In addition, there is a narrow “grandfathering”
provision that allows schools to make Federal Perkins Loans to certain students for up to five
additional years (through September 30, 2020) to enable students who received loans for
award years that end prior to October 1, 2015 to continue or complete courses of study.
   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.
   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.




                               Federal Student Aid Annual Report FY 2015                           117
                                                                                                         Financial Section
                                                                        Required Supplementary Stewardship Information



Required Supplementary Stewardship Information
  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, 2015 and the preceding four fiscal year ends:

                                  Summary of Human Capital Expenses
                                                (Dollars in Millions)

                                               2015               2014           2013        2012         2011
   Federal Student Aid Expense
    Direct Loan Subsidy                          $(892)             $8,126      ($39,557)   ($10,720)    ($28,630)
    FFEL Program Subsidy                         (3,856)            (6,585)       (8,753)    (14,381)     (16,126)
    Perkins Loans, Pell and Other Grant          31,400             33,098        33,542      34,310       39,008
    Recovery Act                                        0                  0            0           23           18
    Salaries and Administrative                       242                206         222         192          193
   Total                                        $26,894           $34,845       ($14,546)     $9,424      ($5,537)


  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.
  The President’s Budget proposes to overhaul the TEACH Grant program, and replacing it with
  a new, targeted teacher recruitment and retention program called the Presidential Teaching
  Fellows. This new program would provide grants to states that meet certain conditions to


                                     Federal Student Aid Annual Report FY 2015                                        118
                                                                                      Financial Section
                                                        Required Supplementary Stewardship Information

supply scholarships of up to $10,000 to talented individuals attending the most effective
programs in the state. These individuals would commit to teaching for at least three years in a
high need school and subject. To be eligible for funds, states would measure the
effectiveness of their teacher preparation programs based on the student achievement data of
their graduates among other measures; hold teacher preparation programs accountable for
results; and upgrade licensure and certification standards.

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
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 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.




                              Federal Student Aid Annual Report FY 2015                              119
                                                                                                                                  Financial Section
                                                                                                         Required Supplementary Information



       Required Supplementary Information

                                          United States Department of Education
                                                     Federal Student Aid
                                         Combining Statement of Budgetary Resources
                                           For the Year Ended September 30, 2015
                                                                   (Dollars in Millions)

                                                                                                         Health Education Assistance
                                                                                Combined                           Loans
                                                                                       Non-Budgetary                         Non-Budgetary
                                                                                       Credit Reform                          Credit Reform
                                                                                         Financing                              Financing
                                                                       Budgetary         Accounts            Budgetary          Accounts
Budgetary Resources:
Unobligated Balance, Brought Forward, October 1                    $        12,642     $        9,857    $            9 $                68
Recoveries of Prior Year Unpaid Obligations                                    921             20,727                 -                   -
Other Changes in Unobligated Balance (+ or -)                                (196)           (24,520)                (8)                  -
Unobligated Balance from Prior Year Budget Authority, Net          $        13,367     $        6,064    $            1 $                68
Appropriations (Discretionary and Mandatory)                                55,798                904                 -                   -
Borrowing Authority (Discretionary and Mandatory) (Note 16)                      -           171,624                  -                   -
Spending Authority from Offsetting Collections
(Discretionary and Mandatory)                                                  504            53,365                  9                  10
Total Budgetary Resources (Note 16)                                $        69,669     $     231,957     $           10      $           78
Status of Budgetary Resources:
Obligations Incurred (Note 16)                                     $        56,950     $     217,721     $               2   $           25
Unobligated Balance, End of Year:
 Apportioned                                                                10,473               550                  1                   -
 Unapportion                                                                 2,246            13,686                  7                  53
Total Unobligated Balance, End of Year                             $        12,719     $      14,236     $            8      $           53
Total Status of Budgetary Resources (Note 16)                      $        69,669     $     231,957     $           10      $           78
Change in Obligated Balance:
 Unpaid Obligations:
  Unpaid Obligations, Brought Forward, October 1                   $         21,466 $          80,104    $            - $                 -
  Obligations Incurred                                                       56,950           217,721                 2                  25
  Outlays (Gross) (-)                                                       (58,209)         (199,218)               (2)                (25)
  Recoveries of Prior Year Unpaid Obligations (-)                              (921)          (20,727)                -                   -
  Unpaid Obligations, End of Year                                  $         19,286 $          77,880    $            - $                 -
 Uncollected Payments:
  Uncollected Payments, Federal Sources, Brought Forward,
  October 1 (-)                                                    $               -   $           (4)   $               -   $            -
  Uncollected Payments, Federal Sources, End of Year (-)           $               -   $           (4)   $               -   $            -
 Memorandum (non-add) Entries:
  Obligated Balance, Start of Year (+ or -)                        $        21,466     $      80,100     $               -   $            -
  Obligated Balance, End of Year (+ or -)                          $        19,286     $      77,876     $               -   $            -
Budget Authority and Outlays, Net:
 Budget Authority, Gross (Discretionary and Mandatory)             $        56,302 $          225,893    $            9 $                10
 Actual Offsetting Collections (Discretionary and Mandatory) (-)              (647)          (122,283)               (9)                (10)
Budget Authority, Net (Discretionary and Mandatory)                $        55,655 $          103,610    $            - $                 -
Outlays, Gross (Discretionary and Mandatory)                       $         58,209 $         119,218    $            2 $                25
Actual Offsetting Collections (Discretionary and Mandatory) (-)                (647)         (122,283)               (9)                (10)
Outlays, Net (Discretionary and Mandatory)                                   57,562            76,935                (7)                 15
Distributed Offsetting Receipts (-) (Note 16)                               (12,957)                -               (19)                  -
Agency Outlays, net (discretionary and mandatory)
(Note 16)                                                          $        44,605     $      76,935     $          (26) $               15




                                                             Federal Student Aid Annual Report FY 2015                                           120
                                                                                                                                  Financial Section
                                                                                                         Required Supplementary Information


                                          United States Department of Education
                                                     Federal Student Aid
                                         Combining Statement of Budgetary Resources
                                           For the Year Ended September 30, 2015
                                                                   (Dollars in Millions)

                                                                    Direct Student Loan Program                   Teach Program
                                                                                       Non-Budgetary                         Non-Budgetary
                                                                                       Credit Reform                          Credit Reform
                                                                                         Financing                              Financing
                                                                       Budgetary         Accounts            Budgetary          Accounts
Budgetary Resources:
Unobligated Balance, Brought Forward, October 1                    $             -     $       4,622     $            5      $           1
Recoveries of Prior Year Unpaid Obligations                                      -            20,079                  1                 10
Other Changes in Unobligated Balance (+ or -)                                    -           (23,704)                 -                (11)
Unobligated Balance from Prior Year Budget Authority, Net          $             -     $         997     $            6      $           -
Appropriations (Discretionary and Mandatory)                                23,661               904                 16                  -
Borrowing Authority (Discretionary and Mandatory) (Note 16)                      -           168,953                  -                115
Spending Authority from Offsetting Collections
(Discretionary and Mandatory)                                                    -            31,810                  -                 35
Total Budgetary Resources (Note 16)                                $        23,661     $     202,664     $           22      $         150
Status of Budgetary Resources:
Obligations Incurred (Note 16)                                     $        23,661     $     197,183     $           16      $         148
Unobligated Balance, End of Year:
 Apportioned                                                                     -                 -                  -                  -
 Unapportioned                                                                   -             5,481                  6                  2
Total Unobligated Balance, End of Year                             $             -     $       5,481     $            6      $           2
Total Status of Budgetary Resources (Note 16)                      $        23,661     $     202,664     $           22      $         150
Change in Obligated Balance:
 Unpaid Obligations:
  Unpaid Obligations, Brought Forward, October 1                   $              - $          77,328    $             5 $                64
  Obligations Incurred                                                       23,661           197,183                16                 148
  Outlays (Gross) (-)                                                       (23,661)         (178,804)              (14)               (142)
  Recoveries of Prior Year Unpaid Obligations (-)                                 -           (20,079)                (1)                (10)
  Unpaid Obligations, End of Year                                  $              - $          75,628    $             6 $                60
 Uncollected Payments:
  Uncollected Payments, Federal Sources, Brought Forward,
  October 1 (-)                                                    $               -   $            -    $               -   $           (4)
  Change in Uncollected Payments, Federal Sources (+ or -)                         -                -                    -                -
  Uncollected Payments, Federal Sources, End of Year (-)           $               -   $            -    $               -   $           (4)
 Memorandum (non-add) Entries:
  Obligated Balance, Start of Year (+ or -)                        $               -   $      77,328     $               5   $           60
  Obligated Balance, End of Year (+ or -)                          $               -   $      75,628     $               6   $           56
Budget Authority and Outlays, Net:
 Budget Authority, Gross (Discretionary and Mandatory)             $        23,661     $     201,667     $           16      $         150
 Actual Offsetting Collections (Discretionary and Mandatory) (-)                 -           (92,936)                 -                (47)
 Change in Uncollected Customer Payments from Federal
 Sources (Discretionary and Mandatory) (+ or -)                                    -                -                    -                 -
 Anticipated Offsetting Collections (Discretionary and
 Mandatory) (+ or -)                                                             -                 -                  -                  -
Budget Authority, Net (Discretionary and Mandatory)                $        23,661     $     108,731     $           16      $         103
Outlays, Gross (Discretionary and Mandatory)                       $        23,661 $         178,804     $           14 $              142
Actual Offsetting Collections (Discretionary and Mandatory) (-)                  -           (92,936)                 -                (47)
Outlays, Net (Discretionary and Mandatory)                                  23,661            85,868                 14                 95
Distributed Offsetting Receipts (-) (Note 16)                               (8,211)                -                (31)                 -
Agency Outlays, net (discretionary and mandatory)
(Note 16)                                                          $         15,450 $         85,868     $          (17) $               95




                                                             Federal Student Aid Annual Report FY 2015                                           121
                                                                                                                                   Financial Section
                                                                                                             Required Supplementary Information


                                              United States Department of Education
                                                     Federal Student Aid
                                         Combining Statement of Budgetary Resources
                                           For the Year Ended September 30, 2015
                                                                   (Dollars in Millions)

                                                                       Federal Family Education          Perkins Loans       Administrative
                                                                            Loan Program                  and Grants            Funds
                                                                                       Non-Budgetary
                                                                                       Credit Reform
                                                                                         Financing
                                                                       Budgetary         Accounts            Budgetary           Budgetary
Budgetary Resources:
Unobligated Balance, Brought Forward, October 1                    $         1,581 $           5,166     $        10,921     $           126
Recoveries of Prior Year Unpaid Obligations                                     28               638                 865                  27
Other Changes in Unobligated Balance (+ or -)                                 (138)             (805)                (42)                 (8)
Unobligated Balance from Prior Year Budget Authority, Net          $         1,471 $           4,999     $        11,744     $           145
Appropriations (Discretionary and Mandatory)                                 1,363                 -              29,361               1,397
Borrowing Authority (Discretionary and Mandatory) (Note 16)                      -             2,556                    -                   -
Spending Authority from Offsetting Collections
(Discretionary and Mandatory)                                                  507            21,510                  (9)                 (3)
Total Budgetary Resources (Note 16)                                $         3,341     $      29,065     $        41,096     $         1,539
Status of Budgetary Resources:
Obligations Incurred (Note 16)                                     $         1,555     $      20,365     $        30,249     $         1,467
Unobligated Balance, End of Year:
 Apportioned                                                                    37               550              10,432                   3
 Unapportioned                                                               1,749             8,150                 415                  69
Total Unobligated Balance, End of Year                             $         1,786     $       8,700     $        10,847     $            72
Total Status of Budgetary Resources (Note 16)                      $         3,341     $      29,065     $        41,096     $         1,539
Change in Obligated Balance:
 Unpaid Obligations:
  Unpaid Obligations, Brought Forward, October 1                   $             39 $           2,712    $         20,777    $            645
  Obligations Incurred                                                        1,555            20,365              30,249               1,467
  Outlays (Gross) (-)                                                        (1,553)         (20,247)            (31,592)             (1,387)
  Recoveries of Prior Year Unpaid Obligations (-)                               (28)            (638)               (865)                 (27)
  Unpaid Obligations, End of Year                                  $             13 $           2,192    $         18,569    $            698
 Uncollected Payments:
  Uncollected Payments, Federal Sources, Brought Forward,
  October 1 (-)                                                    $               -   $            -    $               -   $               -
  Uncollected Payments, Federal Sources, End of Year (-)           $               -   $            -    $               -   $               -
 Memorandum (non-add) Entries:
  Obligated Balance, Start of Year (+ or -)                        $            39     $       2,712     $        20,777     $           645
  Obligated Balance, End of Year (+ or -)                          $            13     $       2,192     $        18,569     $           698
Budget Authority and Outlays, Net:
 Budget Authority, Gross (Discretionary and Mandatory)             $         1,870 $           24,066    $        29,352     $         1,394
 Actual Offsetting Collections (Discretionary and Mandatory) (-)              (638)          (29,290)                  -                   -
Budget Authority, Net (Discretionary and Mandatory)                $         1,232 $          (5,224)    $        29,352     $         1,394
Outlays, Gross (Discretionary and Mandatory)                       $          1,553 $          20,247    $        31,592     $         1,387
Actual Offsetting Collections (Discretionary and Mandatory) (-)                (638)         (29,290)                   -                  -
Outlays, Net (Discretionary and Mandatory)                                      915            (9,043)            31,592               1,387
Distributed Offsetting Receipts (-) (Note 16)                                (4,658)                -                (38)                  -
Agency Outlays, net (discretionary and mandatory)
(Note 16)                                                          $         (3,743) $         (9,043)   $        31,554               1,387




                                                             Federal Student Aid Annual Report FY 2015                                            122
                                                                                                                                   Financial Section
                                                                                                          Required Supplementary Information


                                          United States Department of Education
                                                     Federal Student Aid
                                         Combining Statement of Budgetary Resources
                                           For the Year Ended September 30, 2014
                                                                   (Dollars in Millions)
                                                                                                          Health Education Assistance
                                                                                Combined                            Loans
                                                                                       Non-Budgetary                          Non-Budgetary
                                                                                       Credit Reform                           Credit Reform
                                                                                         Financing                               Financing
                                                                       Budgetary         Accounts             Budgetary          Accounts
Budgetary Resources:
Unobligated Balance, Brought Forward, October 1                    $        13,950 $           11,072     $               -   $            -
Recoveries of Prior Year Unpaid Obligations                                    464             97,274                     -                -
Other Changes in Unobligated Balance (+ or -)                                 (148)           (99,806)                    -               62
Unobligated Balance from Prior Year Budget Authority (Net)         $        14,266 $            8,540     $               -   $           62
Appropriations (Discretionary and Mandatory)                                49,854                581                     -                -
Borrowing Authority (Discretionary and Mandatory) (Note 16)                      -           182,749                      -                -
Spending Authority from Offsetting Collections
(Discretionary and Mandatory)                                                  411            51,281                      9                7
Total Budgetary Resources (Note 16)                                $        64,531     $     243,151      $               9   $           69
Status of Budgetary Resources:
Obligations Incurred (Note 16)                                     $        51,889     $     233,294      $               -   $            1
Unobligated Balance, End of Year:
 Apportioned                                                                10,617                69                      -                -
 Unapportioned                                                               2,025             9,788                      9               68
Total Unobligated Balance, End of Year                             $        12,642     $       9,857      $               9   $           68
Total Status of Budgetary Resources (Note 16)                      $        64,531     $     243,151      $               9   $           69
Change in Obligated Balance:
 Unpaid Obligations:
  Unpaid Obligations, Brought Forward, October 1                   $         23,380 $         161,488     $               -   $            -
  Obligations Incurred                                                       51,889           233,294                     -                1
  Outlays (Gross) (-)                                                       (53,339)         (217,404)                    -               (1)
  Recoveries of Prior Year Unpaid Obligations (-)                              (464)           (97,274)                   -                -
  Unpaid Obligations, End of Year                                  $         21,466 $           80,104    $               -   $            -
 Uncollected Payments:
  Uncollected Payments, Federal Sources, Brought Forward,
  October 1 (-)                                                    $               -   $            (3)   $               -   $            -
  Change in Uncollected Payments, Federal Sources (+ or -)                         -                (1)                   -                -
  Uncollected Payments, Federal Sources, End of Year (-)           $               -   $            (4)   $               -   $            -
 Memorandum (Non-add) Entries:
  Obligated Balance, Start of Year (+ or -)                        $        23,380     $     161,485      $               -   $            -
  Obligated Balance, End of Year (+ or -)                          $        21,466     $      80,100      $               -   $            -
Budget Authority and Outlays, Net:
 Budget Authority, Gross (Discretionary and Mandatory)             $        50,265 $         234,611      $            9 $                 7
 Actual Offsetting Collections (Discretionary and Mandatory) (-)              (542)          (97,375)                 (2)                 (3)
 Change in Uncollected Customer Payments from Federal
 Sources (Discretionary and Mandatory) (+ or -)                                  -                 (1)                    -                -
Budget Authority, Net (Discretionary and Mandatory)                $        49,723     $     137,235      $               7   $            4
Outlays, Gross (Discretionary and Mandatory)                       $         53,339 $        217,404      $             - $                1
Actual Offsetting Collections (Discretionary and Mandatory) (-)                (542)         (97,375)                 (2)                 (3)
Outlays, Net (Discretionary and Mandatory)                                   52,797          120,029                  (2)                 (2)
Distributed Offsetting Receipts (-) (Note 16)                               (39,559)                -                   -                    -
Agency Outlays, Net (Discretionary and Mandatory)
(Note 16)                                                          $        13,238     $     120,029      $           (2) $               (2)




                                                             Federal Student Aid Annual Report FY 2015                                            123
                                                                                                                                  Financial Section
                                                                                                         Required Supplementary Information




                                          United States Department of Education
                                                     Federal Student Aid
                                         Combining Statement of Budgetary Resources
                                           For the Year Ended September 30, 2014
                                                                   (Dollars in Millions)

                                                                    Direct Student Loan Program                   Teach Program
                                                                                       Non-Budgetary                         Non-Budgetary
                                                                                       Credit Reform                          Credit Reform
                                                                                         Financing                              Financing
                                                                       Budgetary         Accounts            Budgetary          Accounts
Budgetary Resources:
Unobligated Balance, Brought Forward, October 1                    $             -     $       3,351     $            4      $            1
Recoveries of Prior Year Unpaid Obligations                                      -            25,397                  1                  20
Other Changes in Unobligated Balance (+ or -)                                    -           (28,047)                 -                (22)
Unobligated Balance from Prior Year Budget Authority (Net)         $             -     $         701     $            5      $          (1)
Appropriations (Discretionary and Mandatory)                                16,254                 -                 18                   -
Borrowing Authority (Discretionary and Mandatory) (Note 16)                      -           180,673                  -                108
Spending Authority from Offsetting Collections
(Discretionary and Mandatory)                                                    -            30,029                  -                 31
Total Budgetary Resources (Note 16)                                $        16,254     $     211,403     $           23      $         138
Status of Budgetary Resources:
Obligations Incurred (Note 16)                                     $        16,254     $     206,781     $           18      $         137
Unobligated Balance, End of Year:
Apportioned                                                                      -                 -                  -                  -
Unapportioned                                                                    -             4,622                  5                  1
Total Unobligated Balance, End of Year                             $             -     $       4,622     $            5      $           1
Total Status of Budgetary Resources (Note 16)                      $        16,254     $     211,403     $           23      $         138
Change in Obligated Balance:
 Unpaid Obligations:
  Unpaid Obligations, Brought Forward, October 1                   $              - $          87,616    $             4 $               75
  Obligations Incurred                                                       16,254           206,781                18                 137
  Outlays (Gross) (-)                                                       (16,254)         (191,672)              (16)               (128)
  Recoveries of Prior Year Unpaid Obligations (-)                                 -           (25,397)                (1)               (20)
  Unpaid Obligations, End of Year                                  $              - $          77,328    $             5 $               64
 Uncollected Payments:
  Uncollected Payments, Federal Sources, Brought Forward,
  October 1 (-)                                                    $               -   $            -    $               -   $           (3)
  Change in Uncollected Payments, Federal Sources (+ or -)                         -                -                    -               (1)
  Uncollected Payments, Federal Sources, End of Year (-)           $               -   $            -    $               -   $           (4)
 Memorandum (Non-add) Entries:
  Obligated Balance, Start of Year (+ or -)                        $               -   $      87,616     $               4   $           72
  Obligated Balance, End of Year (+ or -)                          $               -   $      77,328     $               5   $           60
Budget Authority and Outlays, Net:
 Budget Authority, Gross (Discretionary and Mandatory)             $        16,254     $     210,702     $           18      $         139
 Actual Offsetting Collections (Discretionary and Mandatory) (-)                 -           (68,701)                 -                (46)
 Change in Uncollected Customer Payments from Federal
 Sources (Discretionary and Mandatory) (+ or -)                                    -                -                    -               (1)
 Anticipated Offsetting Collections (Discretionary and
 Mandatory) (+ or -)                                                             -                 -                  -                       -
Budget Authority, Net (Discretionary and Mandatory)                $        16,254     $     142,001     $           18      $           92
Outlays, Gross (Discretionary and Mandatory)                       $         16,254 $        191,672     $           16 $              128
Actual Offsetting Collections (Discretionary and Mandatory) (-)                   -          (68,701)                 -                (46)
Outlays, Net (Discretionary and Mandatory)                                   16,254          122,971                 16                 82
Distributed Offsetting Receipts (-) (Note 16)                               (31,551)               -                (13)                 -
Agency Outlays, net (discretionary and mandatory)
(Note 16)                                                          $        (15,297) $       122,971     $               3   $           82




                                                             Federal Student Aid Annual Report FY 2015                                            124
                                                                                                                                   Financial Section
                                                                                                             Required Supplementary Information


                                              United States Department of Education
                                                     Federal Student Aid
                                         Combining Statement of Budgetary Resources
                                           For the Year Ended September 30, 2014
                                                                   (Dollars in Millions)

                                                                       Federal Family Education          Perkins Loans       Administrative
                                                                            Loan Program                  and Grants            Funds
                                                                                       Non-Budgetary
                                                                                       Credit Reform
                                                                                         Financing
                                                                       Budgetary         Accounts            Budgetary           Budgetary
Budgetary Resources:
Unobligated Balance, Brought Forward, October 1                    $         1,596 $            7,720    $        12,255     $            95
Recoveries of Prior Year Unpaid Obligations                                      6             71,857                418                  39
Other Changes in Unobligated Balance (+ or -)                                 (120)          (71,799)                (28)                  -
Unobligated Balance from Prior Year Budget Authority (Net)         $         1,482 $            7,778    $        12,645     $           134
Appropriations (Discretionary and Mandatory)                                 2,269                581             29,920               1,393
Borrowing Authority (Discretionary and Mandatory) (Note 16)                      -              1,968                   -                  -
Spending Authority from Offsetting Collections
                                                                               402            21,214                  (1)                    1
(Discretionary and Mandatory)
Total Budgetary Resources (Note 16)                                $         4,153     $      31,541     $        42,564     $         1,528

Status of Budgetary Resources:
Obligations Incurred (Note 16)                                     $         2,572     $      26,375     $        31,643     $         1,402
Unobligated Balance, End of Year:
 Apportioned                                                                    45                69              10,514                  58
 Unapportioned                                                               1,536             5,097                 407                  68
Total Unobligated Balance, End of Year                             $         1,581     $       5,166     $        10,921     $           126
Total Status of Budgetary Resources (Note 16)                      $         4,153     $      31,541     $        42,564     $         1,528

Change in Obligated Balance:
 Unpaid Obligations:
  Unpaid Obligations, Brought Forward, October 1                   $             35 $          73,797    $        22,731     $            610
  Obligations Incurred                                                        2,572            26,375             31,643                1,402
  Outlays (Gross) (-)                                                        (2,562)          (25,603)           (33,179)              (1,328)
  Recoveries of Prior Year Unpaid Obligations (-)                                (6)          (71,857)              (418)                 (39)
  Unpaid Obligations, End of Year                                  $             39 $           2,712    $        20,777     $            645
 Uncollected Payments:
  Uncollected Payments, Federal Sources, Brought Forward,
  October 1 (-)                                                    $               -   $            -    $               -   $               -
  Change in Uncollected Payments, Federal Sources (+ or -)                         -                -                    -                   -
  Uncollected Payments, Federal Sources, End of Year (-)           $               -   $            -    $               -   $               -
 Memorandum (Non-add) Entries:
  Obligated Balance, Start of Year (+ or -)                        $            35     $      73,797     $        22,731     $           610
  Obligated Balance, End of Year (+ or -)                          $            39     $       2,712     $        20,777     $           645
Budget Authority and Outlays, Net:
 Budget Authority, Gross (Discretionary and Mandatory)             $         2,671 $           23,763    $        29,919     $         1,394
 Actual Offsetting Collections (Discretionary and Mandatory) (-)              (540)           (28,625)                 -                   -
 Change in Uncollected Customer Payments from Federal
 Sources (Discretionary and Mandatory) (+ or -)                                    -                -                    -                   -
 Anticipated Offsetting Collections (Discretionary and
 Mandatory) (+ or -)                                                             -                  -                  -                   -
Budget Authority, Net (Discretionary and Mandatory)                $         2,131     $       (4,862)   $        29,919     $         1,394
Outlays, Gross (Discretionary and Mandatory)                       $          2,562 $          25,603    $        33,179     $         1,328
Actual Offsetting Collections (Discretionary and Mandatory) (-)                (540)          (28,625)                 -                   -
Outlays, Net (Discretionary and Mandatory)                                    2,022            (3,022)            33,179               1,328
Distributed Offsetting Receipts (-) (Note 16)                                (7,945)                -                (50)                  -
Agency Outlays, net (discretionary and mandatory)
(Note 16)                                                          $         (5,923) $         (3,022)   $        33,129     $         1,328




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Other Information
                                                             Department of Education
                                                                Federal Student Aid
                                                          Combined Schedule of Spending
                                                 For the Years Ended September 30, 2015 and 2014
                                                                      (Dollars in Millions)



                                                                                                  FY 2015                         FY 2014
                                                                                                             Non-
                                                                                                          Budgetary                 Non-Budgetary
                                                                                                        Credit Reform               Credit Reform
                                                                                                          Financing                   Financing
                                                                                    Budgetary             Accounts        Budgetary   Accounts


 Section I: What Money is Available to Spend?
       Total Resources                                                          $          69,669             231,957 $       64,531        243,151
       Amount Available but Not Agreed to be Spent                                        (10,473)               (550)       (10,617)           (69)
       Amount Not Available to be Spent                                                    (2,246)            (13,686)        (2,025)        (9,788)
 Total Amounts Agreed to be Spent                                              $          56,950             217,721 $       51,889         233,294

 Section II: How was the Money Spent?

 Increase College Access, Quality, and Completion
    Credit Programs                                                             $          25,210             198,154 $       18,801         216,297
    Grants                                                                                 31,588                   -         33,174             -
    Personnel Compensation and Benefits                                                       193                   -            187             -
    Contractual Services                                                                    1,196               1,064          1,155           1,107
    Other 1/                                                                                   22                   -             22             -
    Total Program Spending                                                     $          58,209             199,218 $       53,339         217,404

 Total Spending                                                                $          58,209             199,218 $       53,339         217,404

       Amounts Remaining to be Spent   2/                                                     (1,259)          18,503         (1,450)          15,890
 Total Amounts Agreed to be Spent                                              $          56,950             217,721 $       51,889         233,294


 Section III: Who did the money go to?
    Non-Federal Obligations                                                    $           56,850             217,721 $       51,802         233,294
    Federal Obligations                                                                       100                 -               87             -
 Total Amounts Agreed to be Spent - Section III                                $          56,950             217,721 $       51,889         233,294


 1/
      Other primarily consists of payments for rent, utilities, communication, equipment, travel, and transportation.
 2/
   The “Amounts Remaining to be Spent” line is the difference between Total Spending and Amounts Total Amounts Agreed to be Spent. Actual
 spending in the current FY may include spending associated with amounts agreed to be spent during previous FY, which may result in negative
 amounts shown for the “Amounts Remaining to be Spent” line.




                                            Federal Student Aid Annual Report FY 2015                                                                   147
                                                                                  Other Information



Improper Payment Information Act Reporting Details

For improper payments information, FSA’s activities are part of an overall Departmental
integrated reporting effort. 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 2016 Executive
Summary found in the Other Information section located within the Department’s AFR.




                        Federal Student Aid Annual Report FY 2015                              148
                                            Appendices




 Appendices




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Federal Student Aid Annual Report FY 2015          150
                                                                                         Appendices
                                                            Appendix A: Glossary of Acronyms and Terms




Appendix A: Glossary of Acronyms and Terms


Acronym          Description
A
ABCP Conduit     Asset-Backed Commercial Paper Conduit
ACSI             American Customer Satisfaction Index
AFR              U.S. Department of Education FY 2015 Agency Financial Report

Annual Report    Federal Student Aid Annual Report FY 2015

C
CFPB             Consumer Financial Protection Bureau
Clery Act        Jeanne Clery Disclosure of Campus Security Policy and Campus Crime
                 Statistics Act
Conduit          Asset-Backed Commercial Paper Conduit
COO              Chief Operating Officer
CSRS             Civil Service Retirement System
D
the Department   U.S. Department of Education
Direct Loan      William D. Ford Federal Direct Loan
DOL              U.S. Department of Labor
DRT              Data Retrieval Tool
E
ECASLA           Ensuring Continued Access to Student Loans Act of 2008
ED               U.S. Department of Education
F
FACT             Financial Awareness Counseling Tool
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 Student Aid Annual Report FY 2015                                    151
                                                                                              Appendices
                                                                 Appendix A: Glossary of Acronyms and Terms


Acronym               Description
Federal Fund          Federal Student Loan Reserve Fund
FERS                  Federal Employees Retirement System
FEVS                  Federal Employee Viewpoint Survey
FFEL                  Federal Family Education Loan
FFELP                 Federal Family Education Loan Program
FISCAM                Federal Information Systems Control Audit Manual
FOTW                  FAFSA on the Web
FSA                   Federal Student Aid
FSA Strategic Plan,   Federal Student Aid: Strategic Plan, FY 2012–16
FY 2012–16
FSEOG                 Federal Supplemental Educational Opportunity Grant
FWS                   Federal Work-Study
FY                    Fiscal Year
G
GAAP                  Generally Accepted Accounting Principles
GAO                   U.S. Government Accountability Office
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
I
IBR                   Income Based Repayment
IDR                   Income Driven Repayment
IRS                   Internal Revenue Service
IT                    Information Technology
M
Met                   Performance result met or exceeded target




                          Federal Student Aid Annual Report FY 2015                                    152
                                                                                            Appendices
                                                               Appendix A: 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.
NFP                  Not-For-Profit
Not met              Performance result did not meet target
NSLDS                National Student Loan Data System
O
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 Internal Control
OPM                  U.S. Office of Personnel Management
OPR                  Organizational Performance Review
P
PAYE                 Pay As You Earn
PBO                  Performance-Based Organization
Pell Grant           Federal Pell Grant Program
Pub.L                Public Law
S
SBR                  Statement of Budgetary Resources
Secretary            Secretary of Education
SSAE                 Statement on Standards for Attestation Engagements
SOC1                 Service Organization Control 1
T
TEACH                Teacher Education Assistance for College and Higher Education Grant
Title IV             Title IV of the Higher Education Act of 1965, as amended
TIVAS                Title IV Additional Servicers
TPD                  Total and Permanent Disability
Treasury             U. S. Department of the Treasury




                          Federal Student Aid Annual Report FY 2015                                  153
                                                                                Appendices
                                                   Appendix A: Glossary of Acronyms and Terms


Acronym   Description
U
U.S.      United States




              Federal Student Aid Annual Report FY 2015                                  154
                                                                                                     Appendices
                                                  Appendix B: Availability of the Federal Student Aid Annual Report



Appendix B: Availability of the Federal Student Aid
            Annual Report
 FSA’s publicly available Annual Report FY 2015 and previous years’ Annual Reports are
 accessible on FSA’s and the Department’s websites at:


                       StudentAid.gov/strategic-planning-reporting

                   http://www.ed.gov/about/reports/annual/index.html



 The Federal Student Aid: Strategic Plan, Fiscal Years 2012–16 and previous years’
 Strategic Plans are also available at StudentAid.gov/strategic-planning-reporting

 To become connected to Federal Student Aid through social media, visit the Federal
 Student Aid website at StudentAid.gov.




 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, Annual Report FY 2015, Washington,
 D.C., 2015.

                           Federal Student Aid Annual Report FY 2015                                          155