Title: Organization and Reporting Entity
Accounting Policies: The accompanying schedule of expenditures of federal awards (Schedule) includes the federal award activity of the Companies under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Companies, it is not intended to and does not present the financial position, changes in fund balance, net position or cash flows of the Companies. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule, if any, represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.
De Minimis Rate Used: N
Rate Explanation: The Companies have elected not to use the 10 percent de minimus indirect cost rate allowed under the Uniform Guidance
Brazos Higher Education Authority, Inc. (BHEA), Brazos Student Finance Corporation (BSFC), Federated Student Finance Corporation (FSFC), and Brazos Education Loan Authority (BELA), (collectively, the “Companies”) operate in the education loan industry. While the individual entities are independent of one another, they are controlled by common officers and certain common directors with the ability to influence the business performed by each entity.
The Companies provide funds for the origination, acquisition and servicing of guaranteed student loans which are insured by the U.S. Department of Education (DOE) and guaranteed by various national guarantors under the Federal Family Education Loans Program (Lenders) as provided for in the Higher Education Act of 1965, as amended. To maintain such insurance and guarantee of student loans, the Companies must individually comply with the servicing, collecting, accounting, and reporting requirements of the Federal Family Education Loans Program (Lenders).
Title: Federal Financial Assistance
Accounting Policies: The accompanying schedule of expenditures of federal awards (Schedule) includes the federal award activity of the Companies under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Companies, it is not intended to and does not present the financial position, changes in fund balance, net position or cash flows of the Companies. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule, if any, represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.
De Minimis Rate Used: N
Rate Explanation: The Companies have elected not to use the 10 percent de minimus indirect cost rate allowed under the Uniform Guidance
The Companies receive interest subsidies on behalf of eligible students during qualified periods and special allowance on eligible qualifying loans disbursed before April 1, 2006. The Special Allowance Payment formula, or SAP rate, is determined by the DOE, based upon an average of all of the applicable floating rates (91-day Treasury bill, commercial paper, and LIBOR) in a calendar quarter, plus a spread between 1.74% and 3.50%, depending on the underlying loan status and origination date. These rates are then applied to the quarterly average daily balance for loans eligible to receive SAP.
For loans first disbursed prior to April 1, 2006, the Companies earn interest at the higher of the borrower’s rate or the SAP rate. If the SAP rate exceeds the borrower’s rate, the DOE makes a payment directly to the Companies. For loans first disbursed after April 1, 2006, the Companies earn interest at the SAP rate. If the SAP rate is less than the borrower’s rate, the Companies “rebate” the difference between the borrower’s rate and the lower SAP rate to the DOE. If the SAP rate is greater than the borrower’s rate, the DOE makes SAP payments to the Companies for the difference between the two rates.
Title: Student Loan Notes Servicing
Accounting Policies: The accompanying schedule of expenditures of federal awards (Schedule) includes the federal award activity of the Companies under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Companies, it is not intended to and does not present the financial position, changes in fund balance, net position or cash flows of the Companies. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule, if any, represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.
De Minimis Rate Used: N
Rate Explanation: The Companies have elected not to use the 10 percent de minimus indirect cost rate allowed under the Uniform Guidance
Brazos Higher Education Service Corporation, Inc. (BHESC) provides the Companies with the necessary student loan servicing to maintain compliance with the requirements of the Federal Family Education Loans Program (Lenders) by holding subservicing agreements for loan servicing duties with various student loan servicing agencies. BHESC holds subservicing agreements for Federal Family Education Loans Program (Lenders) loan servicing duties with Navient Solutions, LLC (formerly known as Sallie Mae Servicing Corporation), Nelnet Diversified Solutions LLC, and American Education Services (Pennsylvania Higher Education Assistance Agency). Under the terms of these subservicing agreements, the sub servicer shall reimburse the Companies for any loss of principal and interest resulting from deficiencies in the loan servicing performed by the subservicer.
Title: Accrued Federal Interest and Subsidies Receivable
Accounting Policies: The accompanying schedule of expenditures of federal awards (Schedule) includes the federal award activity of the Companies under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Companies, it is not intended to and does not present the financial position, changes in fund balance, net position or cash flows of the Companies. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule, if any, represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.
De Minimis Rate Used: N
Rate Explanation: The Companies have elected not to use the 10 percent de minimus indirect cost rate allowed under the Uniform Guidance
The following represents the accrued federal interest and subsidies receivable for the year ended June 30, 2023:
Title: Outstanding Student Loan Balances
Accounting Policies: The accompanying schedule of expenditures of federal awards (Schedule) includes the federal award activity of the Companies under programs of the federal government for the year ended June 30, 2023. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Companies, it is not intended to and does not present the financial position, changes in fund balance, net position or cash flows of the Companies. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule, if any, represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years.
De Minimis Rate Used: N
Rate Explanation: The Companies have elected not to use the 10 percent de minimus indirect cost rate allowed under the Uniform Guidance
The federal loan program listed subsequently is administered directly by the Companies, and balances and transactions relating to this program are included in the Companies’ basic financial statements.
Loans outstanding at the beginning of the year, loans made during the year, if any, interest subsidies and special allowance subsidies (payments) are included in the federal expenditures presented in the
Schedule. The balance of loans outstanding at June 30, 2023, consists of: