Promissory Notes (Borrower's Contract)

When you take out a loan, you must sign a contract with the lender confirming an understanding of the loan and how it is to be repaid. This contract is called a "promissory note" and is used for most loan types, including student loans, car loans, and home mortgages.

Your Promise to Repay

Simply put, a promissory note is your promise to repay the loan under the terms detailed within it. Because the promissory note is a legal document, you should read it very carefully and make sure you understand all the information before you sign.
The details will include the terms and conditions under which the loan is made as well as your rights and responsibilities as the borrower. If there are errors on the promissory note, contact your lender before signing it.
A promissory note for a student loan is also an agreement between the borrower, the lender, and the school that authorizes the school to credit the funds to the student's account, to use the borrower's Social Security number, to report to credit bureaus, and to share information about the loan.

Master Promissory Note (MPN)

The MPN covers multiple Federal Stafford or PLUS loans at any participating four-year or graduate school with the following exceptions:

• The student's education lasts longer than 10 years.
• You change lenders, which requires a new MPN.
• The student changes schools, which may require a new MPN.

The difference between the MPN and any other promissory note is that you may have to sign only one "master" note for your Stafford or PLUS loan borrowing. Previously, you would have signed a note for each academic year in which you received Stafford and PLUS loans.
Schools also have the option of having students and parents complete and sign an electronic promissory note. Usually, the promissory note will be completed through a website, and the organization operating the site will be responsible for authenticating the electronic signatures.

Other Benefits of Signing the MPN

The MPN helps you in a number of ways.

• It simplifies the loan application and promissory note process.
• It reduces paper requirements.
• It provides faster turnaround time when the multi-year feature is used because you won't have to sign a new promissory note each time you need additional money.
• It increases the chance that one company will hold all of your loans. That means you will have one place to send loan payments.

Expiration Date

Your MPN will expire if:

• You tell your lender in writing to terminate the note's use for future loans.
• Your MPN note is 10 years old (it's 10 years after the date you signed the MPN).
• The first loan disbursement is not made within 12 months after you signed your note.

Signing a new MPN

Here are some of the reasons you might sign a new MPN.

• You want to change lenders. (A new MPN is required because the MPN is a contract between you and a specific lender.)
• The student does not complete his or her studies within 10 years. After 10 years, borrowers must sign a new MPN.
• Your school is not eligible to participate in the multiple-loan process, so you must sign a new MPN for each new loan you receive.
• Your lender transferred the right to make further loans to another lender, and you wish to obtain future loans from a lender other than the lender listed on your MPN.
• You wish to opt out of the multiple-loan feature of the MPN and sign a new note for each new loan that you secure.