Master Promissory Notes (MPN) | What you need to know before you sign

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Master Promissory Notes (MPN)

Master Promissory Notes (MPN) are the documents that students must sign before they can take out a federal student loan.

Your MPN is legally binding and governs any loans you take out from the Department of Education.

It is incredibly important that you read and understand your MPN before applying for student loans. We’re going to break it down so you know what to expect before you read it for yourself.

What are master promissory note loans?

A Master Promissory Note (MPN) is a legally binding document that federal loan borrowers use to promise to repay their loans to the U.S. Department of Education. The MPN defines the terms and conditions for the loans.

Borrowers must sign an MPN before taking out federal student loans. However, they don’t have to sign a new MPN every time they receive a loan disbursement.

Borrowers can have the same MPN for up to 10 years. If an undergraduate borrower decides to take out graduate or trade school loans later, they will need to sign a new MPN.

What does the MPN contain?

Master promissory notes are detailed documents. Some of its most important parts are listed below.

  • Loan interest rate. The MPN contains your loan interest rate and how the interest on the loan is calculated. This is especially important for unsubsidized loans that accrue interest immediately.
  • Credit limits. When attending an expensive school, or attending a law or medical school, you may run into credit limits. Keep these limits in mind when planning how to pay for school.
  • Probationary reprieve, reprieve, and forbearance. The MPN explains the legally binding practices regarding grace, postponement and leniency options.
  • Repayment options. The MPN specifies exactly when to start paying back your loans, as well as the repayment options.

Special note about MPN refund options

One of the most important parts of Master Promissory Notes is the section that lists the redemption options. Today, student MPNs describe income-driven repayment (IDR) options (Parent PLUS loans do not have the same options).

Because the MPN is a legally binding document, borrowers have a fully certified guarantee that they will qualify for income-driven repayment (IDR) options for the life of the loan. This guarantee is extremely valuable as payments under IDR plans are usually manageable for all income levels.

Even if student loans change radically in the future, current borrowers will always have the option to join an income-driven repayment (IDR) plan. If you’re ever confused about your repayment options, a tool like LoanBuddy can help you find the right option.

How to complete a master promissory note

A master’s note must be completed and signed before taking out your first student loan. This only happens after you’ve been selected a college and approved for federal funding. Your school’s grant office will usually send you an email that says “Your help is approved”. Then, follow the directions on your school’s financial assistance website to complete the MPN.

StudentAid.gov advises that it takes approximately 30 minutes to fill out an MPN electronically. Filling out the MPN only takes a few minutes. Prospective borrowers will need their Federal Student Aid ID (FSA ID) to complete the MPN electronically. You provide 6 pieces of personal information like your social security number and your driver’s license number.

Then you need to provide contact information for two references. References are people you have known for at least three years and who live in the United States. These people will be contacted if you have defaulted on your loan and the Department of Education cannot find you. In most cases, the first reference should be a parent or legal guardian.

Once you have completed this information, you will have the opportunity to read the entire agreement. We recommend reading the full document before signing. The information is really valuable and it is advisable to read legal documents carefully before signing on the dotted line.

What happens after the MPN is signed?

Once you’ve signed your MPN, the Department of Education will notify your school. At this point, the school will conduct admission counseling for you. This is a meeting where a school grant officer explains what it means to borrow money for your education.

Please, please, please use this meeting to ask questions and learn more about student loans. Understanding student loan borrowing can help you make informed decisions about how much to borrow.

Final thoughts

Filling out the master’s note is an important step in student loan borrowing, but it doesn’t determine how much you will ultimately borrow. After signing your MPN, take steps to reduce the amount you need to borrow so you can finish school with a lower debt burden. For information on cost-cutting ideas, check out our Guide to Saving In College.

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