Master Promissory Note

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What is a Master Promissory Note?

A master promissory note (MPN) is a legal document that defines the details of a student loan and how a borrower will repay the money to the US Department of Education. An MPN also gives college students valuable information about the terms of the loan, including any interest on payments and other terms and conditions.

How Master Promissory Notes Work

Master promissory notes (MPN) are legal documents that outline the terms and conditions of student loans. They are required for federal student loans and are good for up to ten years in some cases. College students or their parents can take out student loans under an MPN.

There are many facets to a master promissory note, and understanding each part of a MPN is essential to making a sound financial decision when it comes to student loans.

Here is an overview of what you can expect to find in your master promissory note:

Repayment Guidelines

When a borrower signs a master promissory note for a student loan, they agree to repay the loan indefinitely. This means that the money borrowed must be paid regardless of whether a college student finishes school and applies even if their education was not satisfactory. MPNs must be repaid even in the event of filing for bankruptcy.

Master promissory notes also contain information about future repayment options, such as:

  • Cost of payments
  • Frequency of payments
  • When payments should begin

Eligible Expenses

Master promissory notes include information about what expenses student loans can be used on. These usually include:

  • Tuition
  • Room and board
  • Transportation costs
  • Books and supplies
  • Meals

Interest Rates

Every MPN includes details about federal student loan interest rates. This section of the document is important because the higher the interest rate, the higher the total cost of the loan. When signing a master promissory note, it is essential to take into account the interest rate on the loan when determining how equitable it is.

Annual Borrowing Limits

Since a master promissory note is good for up to ten years, multiple loans can be taken out under the same original agreement. However, the federal government limits how much can be borrowed over the course of a year. The MPN sets out the annual borrowing limit for a college student upfront.

Charges and Fees

Additional fees and charges beyond interest rates are detailed in a master promissory note. Some examples include:

  • Late fees
  • Collection charges


Each master promissory note must include two personal references who are close to the borrower and have been for at least three years. This information is required in the application in case a borrower defaults, or stops making payments, on a loan. These references will be used to try to contact the borrower, or in some cases, to locate them through a process called skip-tracing.

Check out this article to learn more how master promissory notes work.

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What Happens After I Sign a Master Promissory Note?

When master promissory note is signed and approved, the federal government sends your loan details to the financial aid department at your school. Once that department receives it, you will be required to complete entrance counseling before your funds can be disbursed.

Entrance Counseling

Entrance counseling is required of all college students borrowing their first student loans and is designed to answer any questions about the student loan process. Since the loan is not finalized until the funds are disbursed, this also allows students a chance to back out of the loan before becoming financially responsible for it.

Disbursement of Funds

After entrance counseling is completed, your funds will be disbursed to you. Most colleges opt to disburse funds in a single payment, but that is not always the case. Be sure to check with your financial aid department directly to confirm how payments will be made.

Once funds are disbursed, the terms of the master promissory note go into effect immediately. If you have a change in address, phone number, stop going to school less than half the time, or decide to switch colleges, you must notify your financial aid office.

To find out more about what happens after you sign your promissory note, check out this article .

Master Promissory Notes and Student Loans

Master promissory notes dispense all of the vital information about student loan terms and conditions to borrowers. These legal documents were designed to include all the needed information about loans, loan limits, interest rates, repayment options, and much more.

There are two main types of student loans that require master promissory notes: federal direct Stafford loans and federal PLUS loans.

Federal Direct Stafford Loans

Federal direct Stafford loans are student loans that are known for their low interest rates. These loans also come with insurance that guarantees loan cancellation in the event that the borrower becomes disabled or dies.

Stafford loans are granted to students who fill out the FAFSA form and almost all students who apply qualify for the loan. Students qualify as long as they meet these requirements:

  • Attending college full-time
  • Have U.S. citizenship
  • Have never defaulted on other student loans

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Federal PLUS Loans

Federal PLUS loans can be taken out by college students or their parents to pay for their college education. Federal PLUS loans are characterized by the following:

  • Fixed interest rates
  • Interest accrues while student is in school

Within federal direct PLUS loans, there are two categories: Grad PLUS loans and Parent PLUS loans. Grad PLUS loans are taken out by the college student and Parent PLUS loans are taken out by the parent(s) of the student. Grad PLUS loans have a borrowing limit, while Parent PLUS loans do not.

To qualify for a Grad PLUS loan, a student must:

  • Be enrolled in college at least half-time
  • Qualify per a credit check
  • Meet all requirements for federal student aid

To qualify for a Parent PLUS loan, a parent must:

  • Be the biological or adoptive parent of a student attending school at least half-time
  • Qualify per a credit check

The student who parents apply on behalf of must:

  • Meet all requirements for federal student aid

To find out more about master promissory notes and student loans, check out this webpage .

Do I Need to Sign a Master Promissory Note Every Year?

Master promissory notes are generally good for up to ten years, which means that you can take out as many loans (up to your borrowing limit) each year as you would like without having to sign a new promissory note . However, some colleges do have exceptions to this rule, so you should always check with your school’s financial aid office to be sure.

Check out this webpage for more information about master promissory notes.

Get Help with a Master Promissory Note

Do you need money for college but you’re unsure of where to start? Getting help with your master promissory note is a great first step to scoring the funding you need to get you through college. Post a project on ContractsCounsel today to connect with financial lawyers who specialize in college debt and student loans.

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