App version: 0.1.0

What Is a Master Promissory Note in Student Loans?

What Is a Master Promissory Note in Student Loans?
Rebecca Safier
Rebecca SafierUpdated September 8, 2023
Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Before you can borrow federal student loans for college or graduate school, you’ll need to sign a Master Promissory Note (MPN). Your MPN is a legal contract between you and the Department of Education. It goes over the details of your loan, such as its interest rate, terms, and repayment options. By signing your MPN, you enter into a legally binding contract to pay back your student loans over time. Understanding how your Master Promissory Note works can help you avoid confusion and make the student loan borrowing process go smoothly. 

Understanding the Master Promissory Note (MPN)

The Master Promissory Note is a legal contract between federal student loan borrowers and the Department of Education. By signing it, you’re promising to pay back your loan and any associated interest and fees to the U.S. Department of Education. You don’t necessarily have to sign a new MPN every time you borrow a federal student loan. In fact, one MPN can cover multiple student loans over a period of up to 10 years, as long as your school is authorized to use an MPN in this way. There are two types of MPNs, one for Subsidized and Unsubsidized Direct Loans and the other for Direct PLUS Loans. Only graduate students or parents borrowing PLUS Loans will have to sign the MPN for Direct PLUS Loans. 

Contents of a Master Promissory Note

Your Master Promissory Note outlines the details of your loan, such as: 
  • How much you owe 
  • Your interest rate 
  • What you can use your student loan money on 
  • Late fees, collections charges, and other potential loan costs 
  • Repayment plans 
  • Deferment, forbearance, and cancellation options 
Since the MPN is a legally binding document, read it over carefully so you understand the agreement you’re entering into with the Education Department. 

When You Sign the MPN

Whether you’re an undergraduate student, graduate or professional student, or parent of a college student, you can sign your MPN on the Federal Student Aid website. You’ll log into your account with your FSA ID to read over the Master Promissory Note and sign your name. Federal Student Aid also offers a demo version so you can preview the MPN before starting the process. 

Promissory Notes vs Master Promissory Notes 

The Master Promissory Note specifically refers to the contract you sign to borrow federal student loans from the U.S. Department of Education. However, most loan types, such as private student loans and auto loans, require you to sign a promissory note before borrowing. Similar to the MPN, regular promissory notes outline the terms and conditions of your loan. Signing a promissory note means you’re agreeing to the terms and conditions offered by your lender. However, you’ll need to sign a new promissory note for each loan you borrow. With the Master Promissory Note, on the other hand, one MPN can cover all the federal student loans you borrow throughout your time in college over a period of up to 10 years. Unless your school has other rules in place, you won’t have to sign a new MPN every year you’re in school. 

What Happens After You Sign the Master Promissory Note?

Student loan borrowers sign the Master Promissory Note after submitting the FAFSA but before receiving their student loans. Besides signing the MPN, you may also need to complete student loan entrance counseling, which you can complete on the Federal Student Aid website.Once these steps are complete, the Department of Education will release your loan proceeds to your school. Your school’s financial aid office will apply the amount to tuition, fees, and any other required expenses. If there’s any money left over, it will be sent directly to you. You can use it toward education-related expenses, such as books, supplies, equipment, housing, and other living expenses. You can also choose to return unused student loan money if you borrowed too much.

What Happens If You Don't Repay Your Loan? 

If you don’t pay back your student loan, the consequences can be severe. Federal student loans go into default after 270 days. Once a student loan is in default, it may get sold to a collections agency. You could receive frequent calls for repayment and get charged hefty collections fees. Your credit score will also take a hit, making it difficult to obtain other forms of financing in the future. What’s more, the government has the power to garnish your wages, tax refunds, and even Social Security benefits to recoup repayment. There are avenues for getting out of default, such as student loan rehabilitation and consolidation. There are also a number of repayment options that can help you avoid defaulting in the first place, such as income-driven repayment and forbearance. If you’re in danger of missing payments, speak with your loan servicer about adjusting your payments (or pausing them temporarily) until you get back on your feet. Recommended: What Happens If You Don’t Pay Your Student Loans Back?

How to Complete a Master Promissory Note

To complete a Master Promissory Note, head to the Federal Student Aid website and select the MPN for the loan type you want to borrow. If you’re an undergraduate student, these are the steps you’ll need to take: 
  1. Provide your contact information. This includes your email address, phone number, driver’s license number, and permanent address. 
  2. Provide your school information. Your school will be notified once you’ve signed your MPN. 
  3. Provide two references. You’ll provide the contact information of two people who the Department of Education can reach out to if they’re unable to reach you. One of these references must be a parent or guardian. 
  4. Read over your MPN agreement. This section details your loan request, terms, conditions, and other important details about your loan. 
  5. Review your information. Check to make sure everything you entered is correct. You can edit your responses if you spot an error or typo. 
  6. Sign your Master Promissory Note. By signing your MPN electronically, you’re promising to pay back the full amount of your student loans, plus any interest or fees. 
While the process for graduate students and parents borrowing PLUS Loans will be slightly different (for instance, a parent or guardian reference won’t be required), it will be similar to the steps described above. The amount of time it takes for your loan to be disbursed can vary by school. If you’re a first-year undergraduate student, you might have to wait 30 days after enrolling before your school can disburse your loan money. 

The Takeaway

Signing your Master Promissory Note is an important part of the federal student loan borrowing process. You’re required to sign this contract before the Department of Education will disburse your loan funds to your school, which in turn will send any leftover funds to you. Make sure to read over the terms and conditions of your loan carefully before you sign the MPN. This document will go over your loan’s interest rate, repayment terms, and other important details. Note that you’re not required to pay back your student loan while you’re in school or for six months after you graduate. Once repayment starts, you may look for strategies to pay your loan back faster. One strategy worth exploring is refinancing student loans for better rates. By refinancing your student loan, you might be able to reduce your interest rate and choose repayment terms that work better for your budget. The downsides of refinancing a federal student loan, however, is that you lose access to federal benefits and protections. These include income-driven repayment plans, forbearance, deferment, and forgiveness programs, such as Public Service Loan Forgiveness. If you’re relying on any of these programs, it wouldn’t make sense to refinance a federal student loan. If you decide refinancing is the right move for you, though, Lantern by SoFi can help you refinance student loans by comparing offers from leading lenders.

Frequently Asked Questions

What happens if you don't fill out a master promissory note?
Who signs the master promissory note: student or parent?
Photo credit: iStock/Nattakorn Maneerat

About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
Share this article: