What Is a Master Promissory Note?

Definition & Examples of a Master Promissory Note

Young woman reviewing student loan document with a professional

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A Master Promissory Note (MPN) is a document in which you promise to repay your federal student loans to the U.S. government and adhere to the terms and conditions of repayment. You typically need to complete and sign one in order to accept a loan in your financial aid offer.

Understand what a Master Promissory Note signifies and how it factors into the federal student loan application process.

What Is a Master Promissory Note?

A Master Promissory Note is a legally binding contract between you and the U.S. Department of Education that formally establishes your intent to repay a federal student loan. Undergraduate, graduate, and professional students, as well as parents of dependent students, are typically required to complete and sign an MPN when taking out any given federal student loan for the first time.

When you sign one, you agree not only to pay back the loan principal, interest, and any fees and charges incurred, but also to adhere to the terms and conditions of the loan, including when and how it will be repaid.

  • Acronym: MPN

How a Master Promissory Note Works

Federal student loans are strictly regulated and require special paperwork to make legitimate. An MPN puts all of the pertinent information in one place, allowing both the borrower and the lender to understand their rights and responsibilities concerning the loan and reference the specifics of the loan later on with ease. Borrowers complete the MPN as part of a loan application process that unfolds as follows:

  1. The borrower submits a Free Application for Federal Student Aid (FAFSA) form to apply for a federal student loan as a student or a parent of a dependent student.
  2. The financial aid office at a school indicated in the form reviews the application, and if the borrower is eligible, determines the loan amount and terms and packages the loan.
  3. The school originates the loan.
  4. The borrower completes and signs the MPN to communicate their loan acceptance to the school.
  5. The borrower is given a disclosure about how the loan will be disbursed, and may have to take loan entrance counseling.
  6. The school disburses the proceeds of the loan to the student.

Below are examples of the types of information you'll find in the MPN, although the specific information in the document will depend on the type of loan you take out:

  • Borrower’s full name and contact information
  • Loan amount
  • Interest rate, including how it’s calculated
  • Fees and other charges
  • Grace period
  • Terms of repayment 
  • Options for repayment, including income-based repayment plans
  • Other conditions of the loan (for example, how a default will be handled)
  • References who are familiar with the borrower

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.

Types of Master Promissory Notes

Depending on the type of loan you take out, you might need to sign one of two kinds of MPNs:

  • MPN for Subsidized/Unsubsidized Loans: You'll need to sign this type of MPN if you're taking out a Direct Subsidized or Direct Unsubsidized Loan, available to undergraduate, graduate, and professional students.
  • PLUS MPN: If you’re a graduate or professional student or the parent of a dependent undergraduate student who has taken out a Direct PLUS loan, you'll need to sign this type of MPN.

Do I Need a Master Promissory Note?

You typically have to complete and sign an MPN if you meet any of the following criteria:

  • You've never signed an MPN before for the loan you're taking out.
  • Your school asks you to renew your MPN every academic year.
  • You signed an MPN over a year ago but didn't receive the loan proceeds.
  • You signed an MPN over 10 years ago.

That being said, you can use a single MPN for one or more federal student loans for a period of up to 10 years if you remain enrolled continuously, as long as your school is authorized and chooses to use the MPN this way. This means you'll only need to sign an MPN once at most schools.

But if you're taking out multiple federal student loans, and your school isn't authorized for multi-year MPN use, or you or the school doesn't want to include more than one loan in the MPN, you'll need to sign a new MPN for each loan and for each new academic year. And if you have a poor credit history and need an endorser (co-signer) in order to take out a Direct PLUS loan, you can only include one loan in a single MPN.

A student who takes out multiple loans may or may not need to sign a separate MPN for each one. But a parent must sign a separate MPN for each dependent student for whom they obtain a federal student loan.

Master Promissory Note vs. Promissory Note

You might see the term "Master Promissory Note" or "Promissory Note" when borrowing money. These two terms aren't always interchangeable.

Both types of promissory notes are legally binding agreements between the lender and the borrower of a loan. And both federal student loans issued by the U.S. Department of Education and private loans from banks and other lenders mandate that student loan applicants sign a promissory note as a condition of borrowing. But an MPN is a binding agreement you make with the U.S. Department of Education, which is your lender when you borrow federal loans.

Moreover, a promissory note can also serve as the legal document you sign to agree to repay your mortgage, or as a type of debt that companies use to raise money.

Master Promissory Note Promissory Note
Agreement with the U.S. Department of Education Agreement with a bank or other lender
Used for federal student loans Used for private student loans or mortgages

How To Sign a Master Promissory Note

The MPN exists both on paper and online. Completion of an MPN usually takes around 30 minutes but online, it must be done in one sitting. Once you fill out the FAFSA form, follow the steps below to complete and sign your MPN online. If you're filling out a paper MPN, your school will guide you through the paperwork.

  1. Create an account on the FSA website. Identify your FSA ID, which will function as your username when you later log in to the site.
  2. Identify two references who will be willing and able to verify your personal information. They will need to live at different addresses and have known you for at least three years.
  3. Go to the U.S. Department of Education's MPN website and click "Log In to Start" next to the MPN that is right for you. Read-only versions of each of the forms are available on the same page for reference.
  4. Log in and fill out the MPN as instructed.
  5. Review the entire MPN before electronically signing and submitting it. If you don’t understand the terms and conditions, reach out to your school’s financial aid office for guidance.

Key Takeaways

  • A Master Promissory Note is a legally binding contract between a student loan borrower and the U.S. Department of Education.
  • It captures a borrower's promise to repay a loan, and the conditions and terms of the loan.
  • Borrowers can fill out and sign the MPN online, and often only have to do so once in a decade.
  • An MPN uniquely applies to federal student loans; private student loan and mortgage recipients also sign promissory notes.