What Is a Master Promissory Note? You’ll Need One for a Student Loan

Borrowing for college requires a one-time agreement to lending terms

Closeup of Man in Plaid Shirt Signing Papers at a Desk

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After you’ve been accepted to college, the journey to financing your continued education begins. If you’ve decided to take out a student loan, there are a few parts of the process that can be hard to understand the first time around. 

One important element of taking out a student loan is signing a Master Promissory Note (MPN). You’ll only need to sign it once, but understanding the purpose and function of an MPN can make the overall student loan process a little more smooth. 

As the name suggests, a promissory note is a promise to repay your student loans and adhere to the terms and conditions of the contract. Here’s what you should know before signing an MPN.

What Is a Master Promissory Note? 

A federal student loan, or any loan for that matter, is a legally binding agreement between the borrower and the lender. Make sure you understand what you’re signing before locking yourself into the agreement.

A Master Promissory Note (MPN) outlines the details of the loan. When you sign one, you agree with the lender to the terms and conditions of the loan itself, and the way it will be repaid. 

An MPN usually includes:

  • Amount of the loan
  • Specifics of the interest rate and fees, including how it’s calculated
  • Terms of repayment 
  • Options for repayment, including federal repayment plans
  • Conditions of the loan 
  • Borrower’s full name and contact information 
  • Grace period option, if any
  • References verifying the borrower’s address and location, in case mail is deemed undeliverable

Do I Need to Sign a New Master Promissory Note Annually?  

You only need to sign an MPN once at most schools. An MPN is applicable to federal student loans for up to 10 years if a student is enrolled continuously. However, endorsers need to be renewed annually, as their purpose is to be a contact if the borrower can’t be reached or stops making payments. If you have taken out a federal PLUS loan, like a Parent PLUS loan, you might need your parents to sign their own promissory note. 

Types of Master Promissory Notes

Depending on the type of loan you take out, there are two kinds of MPNs you might need to sign. 

1. Federal Direct Loan MPN 

This type of Master Promissory Note applies to both subsidized and unsubsidized Federal Direct Loans. The federal government has a read-only preview of what this type of MPN looks like that you can review to prepare. If you have any questions once you read through it, bring these up with your loan servicer before you sign.

2. Federal PLUS Loan MPN

If you’re either a parent or student who has taken out a Federal PLUS loan, you will need to sign this type of MPN. You can preview a read-only version of the MPN and highlight any questions you have so that you can get clarity on the whole process before signing.

If you take out two different loans, you might need to sign an MPN for each one. 

Master Promissory Note vs. Promissory Note

You might see both the term Master Promissory Note and the term Promissory Note when borrowing money. These two terms are not necessarily interchangeable. 

Both types of promissory notes are legally binding agreements between the lender and the borrower of a loan. An MPN is a binding agreement that you have with the U.S. Department of Education when you borrow federal loans. A Promissory Note, on the other hand, is the legal document you sign agreeing to repay your mortgage. It can also refer to a type of debt that companies use to raise money often with a high rate of return and a low level of risk 

Why Are Master Promissory Notes Important? 

Federal loans are more regulated than some other types of loans, which can require a little bit of extra paperwork to make them legitimate. An MPN puts all of the pertinent information into one place, which allows both the borrower and the lender access to reference the specifics of the loan with ease. 

When you sign the note, you’re agreeing to repay the loan despite any unexpected circumstances.

Note: After signing an MPN, you must adhere to the terms and conditions of repayment, even if you don’t finish school or are unsatisfied with your educational experience. 

If you’ve decided to take out private student loans to finance your education, you will more than likely still need to sign a promissory note. Unlike federal student loans, if you take out a private loan you probably won’t be signing a Master Promissory Note. But the promissory note you do sign will likely contain a lot of the same information that a federal MPN would, specifying the terms and conditions of the private loan. 

The MPN exists both on paper and online. Completion of an MPN usually takes around 30 minutes and must be done in one sitting. When applying for federal student aid, you must complete the FAFSA, or Free Application for Federal Student Aid, on the Federal Student Aid (FSA) website to begin the process. 

From there, you’ll take a few steps before getting your MPN: 

  1. Create an account on the FSA website.
  2. Locate your FSA ID, which will function as an electronic signature on your MPN. 
  3. Determine two references who will be willing and able to verify your personal information. They will need to have known you for at least three years. 
  4. Fill out the Master Promissory Note that is right for you.

Make sure you read through the entire MPN before submitting it. If you don’t understand the terms and conditions, reach out to your school’s financial aid office for guidance. 

Article Sources

  1. Federal Student Aid. "Master Promissory Note," Accessed Oct. 15, 2019.

  2. Federal Student Aid. "Glossary - M," Accessed Oct. 15, 2019.

  3. Federal Student Aid. "Subsidized/Unsubsidized Master Promissory Note (MPN)," Download PDF of form. Accessed Oct. 22, 2019.

  4. Federal Student Aid. "Master Promissory Note (MPN)," Accessed Oct. 22, 2019.

  5. U.S. Securities and Exchange Commission. "Promissory Notes," Accessed Nov. 13, 2019.