Explanation MPN student loans

Susan Fernandez June 06 2022

Master Promissory Notes, or MPNs, are a type of student loan issued by the federal government. They're a legal document that you sign when you first take out a Direct Loan. As a student, you may wonder, "Why do I need to sign an MPN?"

The answer is simple: an MPN protects both you and your lender. It's a binding promise to repay your loan, with interest, according to the terms of the promissory note. By signing an MPN, you're agreeing to the conditions under which you'll receive and repay your loan.

What is an MPN student loan for?

An MPN can be used for different loans as long as they're all Direct Loans from the same program. So, if you're a first-year student and sign an MPN for Direct Subsidized Loans and Direct Unsubsidized Loans, you may use that same MPN to access additional Direct Subsidized or Unsubsidized Financial Assistance. If you're a graduate student and sign an MPN for Direct Unsubsidized Loans, you may use that same MPN to get additional Direct Unsubsidized Loans.

You'll need to sign a new MPN if:

  • You change loan programs (for example, from Direct Subsidized to Direct PLUS)
  • Your school changes lenders

You only have to sign one MPN for each type of Direct Loan you receive. For example, if you're a first-year student and you sign an MPN for both Direct Subsidized and Unsubsidized Loans, you won't need to sign another MPN if you receive additional Direct Subsidized or Unsubsidized Loans in future years.

Who completes MPN?

There are two types of MPNs: Direct Subsidized/Unsubsidized Loan MPN - Before a school can make the first disbursement of a Direct Subsidized or Direct Unsubsidized Loan, a student borrower must fill out and sign a Direct Subsidized/Unsubsidized Loan MPN.

Different types of MPNs are available for PLUS Loans. If you're a parent borrowing for your child through the Direct PLUS Loan program, you'll sign a Master Promissory Note (MPN) for a Direct Parent PLUS Loan. If you're a graduate or professional student borrowing through the Direct PLUS Loan program, you'll sign an MPN for a Direct Graduate PLUS Loan.

As with all other federal student aid, you must complete the Free Application for Federal Student Aid (FAFSA) form to apply for a Direct PLUS Loan.

How to apply for this student loan?

Master Promissory Notes or MPN's are required for all Direct Stafford/PLUS Loans. This is a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the Department of Education. It also explains the terms and conditions of your loan(s). You'll need your FSA ID handy—this is how the Department of Education will identify you as the borrower. The process takes about 20 minutes.

If you're taking out a Direct Subsidized or Unsubsidized Loan for the first time, you'll also need to complete entrance counseling, which provides important information about your obligations as a Direct Loan borrower. You can do this online or over the phone.

Among other documents that are required for this type of student loan, the MPN is one of the most important. By signing an MPN, you're agreeing to the conditions under which you'll receive and repay your loan. If you have any questions about your MPN, contact your financial aid office or lender.

Why do you need references for MPN?

References should be individuals who will be able to assist us in contacting you later if we are unable to reach you. For this purpose, only references are used and are never required to repay your loan. Your reference should be someone who:

  • Knows you well enough to answer questions about you
  • Has a U.S. mailing address and telephone number where he or she can be reached during business hours
  • Is not related to you

So, with any of those references students can continue their process in order to have their MPN and be able to get their Stafford Loans.

Can I cancel an MPN?

There are cases when you can cancel all or part of your loan before it's disbursed. If you're a first-time borrower, you have the right to cancel your loan within 14 days of signing your MPN. After that, you can only cancel your loan if your school permits it. For example, you might be able to cancel if you drop below half-time enrollment or withdraw from school entirely. If you have questions about canceling your MPN, contact your financial aid office.

Do I have to complete an MPN every year?

In most situations, you won't have to fill out a new MPN for future loans if you submit the MPN and it's accepted for Subsidized or Unsubsidized Loans. For PLUS Loans, you will need to complete a new MPN for each academic year. If any of the following apply to you, though, you will need to fill out a new MPN:

  1. You're changing loan programs (for example, from Subsidized to Unsubsidized)
  2. The school or lender has changed
  3. Your previously completed MPN has expired

What happens after signing MPN?

After you sign your MPN, it becomes a legally enforceable contract that will apply to student loans you take out over the next ten years. Even if you leave school or are dissatisfied with your education, you'll have to keep to the terms of the agreement and repay your loan amounts as required.

It's important to remember that you're responsible for repaying your student loans even if you don't complete your education, can't find a job after graduation, or are unhappy with the education you received. So, before signing an MPN, be sure you understand your rights and responsibilities as a borrower.

The signing process for an MPN is quick and easy, but it's important to understand the consequences of signing before you do. Be sure to read and understand the terms of your MPN before you sign it. If you have any questions about your MPN or the borrowing process, contact your financial aid office.

How long does it take for a school to receive MPN?

You'll have until just before class begins to apply for the program, but you won't get the money until about 30 days after classes start. Next, you'll be asked to sign a Master Promissory Note (MPN). The note covers continuous enrollment for up to 10 years. Federal student loan funds are disbursed once you've signed it. If you're a first-time borrower, you'll also have to complete entrance counseling.

After your school gets your MPN, it will certify your loan and send the money to your school. Your school will then apply the money to your tuition and fees, room and board, and other education-related expenses. If there's any money left over, you'll get a refund.

You should contact your financial aid office if you have questions about the disbursement of your loan funds.

How long is an MPN good for?

The MPN is a legal document that specifies the Borrower's Rights and Responsibilities, as well as Terms and Conditions for repayment. Direct PLUS loans have a distinct MPN from Direct Subsidized/Unsubsidized loans. If certain enrollment requirements are met, an MPN can last up to ten years.

For first-time borrowers of Direct Subsidized/Unsubsidized loans, the MPN will expire after 10 years; for Direct PLUS Loan borrowers, the MPN is valid for the life of the loan. During these 10 years, students can take out new Direct Loans, which will use the original MPN. If a student changes schools or loan programs during these 10 years they will not need to fill out a new MPN.

Do I have to pay back MPN?

The issue is that not all student loans are created equal. For example, there are federal student loans, which typically offer more repayment options and lower interest rates than private student loans. So, if you’re having trouble making payments on your MPN loan, you might want to explore your federal repayment options first.

If you accept a master promissory note, you've committed to repaying your loan even if you must file bankruptcy. Signing an MPN implies that you're bound by any conditions mentioned on the document. You're also agreeing to repay the entire balance of your loan, including any interest and fees.

The repayment terms for an MPN depend on the type of loan you receive. For example, Stafford loans come with a 6-month grace period after graduation, while PLUS loans begin accruing interest immediately. You can find more information about repayment options and timelines in our repayment plans guide. If you’re struggling to make payments on your MPN loan, there are a few options available to help you get back on track:

  • You can contact your lender or servicer and ask about postponing or reducing your payments. This is called forbearance or deferment, respectively. Note that interest will continue to accrue during a forbearance, which means you’ll end up paying more in the long run.
  • You might also be eligible for an income-driven repayment plan, which can lower your monthly payments based on your income and family size. Keep in mind that these plans will extend the life of your loan and increase the amount of interest you pay over time.

If you’re having trouble making payments on your MPN loan, it’s important to reach out to your lender or servicer as soon as possible. They may be able to offer you a forbearance or deferment, which can help you get through a tough financial period. You can also look into income-driven repayment plans, which could lower your monthly payments. Whatever you do, don’t ignore the problem, as that will only make it worse.

What happens if I don't repay my MPN?

If you default on your student loan, it will have a major negative impact on your credit score and finances. Your lender will report your delinquency to the credit bureaus, which will damage your credit score. You may also be sued for the balance of your loan, plus interest and fees. If you’re unable to repay your student loan, it’s important to contact your lender or servicer as soon as possible to explore your options.

For those students who don`t pay their MPN, terrible things can happen. Most importantly, your credit score will take a major hit. This means it will be harder for you to get loans in the future, and you`ll probably have to pay higher interest rates. In addition, your lender can sue you for the balance of your loan. So if you're having trouble making payments, reach out to your lender ASAP to try and work something out.

Final thoughts

MPN student loans can be beneficial, but it's important to understand the terms and conditions before signing. If you're having trouble making payments, don't wait to reach out to your lender—the sooner you do, the better off you'll be. The benefits of an MPN loan can help you get ahead, but only if you're able to make the payments. defaulting on your loan will have major negative consequences, so it's important to stay on top of your payments.