What You Need to Know About That ‘Master Promissory Note’ For School

 April 8, 2020
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master promissory note

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The majority of students borrow loans to pay for college these days, but many of them may not fully understand the terms and conditions of their debt when they sign on the dotted line. Given all the rules and jargon involved, it can be easy to get confused. But if there’s one document you should pay close attention to, it’s your Master Promissory Note for school loans.

Here we’ll take a closer look at school promissory notes and how they can clear up any questions you have about your student loans. Specifically, we’ll examine…

What is a Master Promissory Note?
What details can you find on your promissory note?
When do you sign your Master Promissory Note?
Using the Master Promissory Note to get your student loan
Plus: Student loans can be helpful, but avoid borrowing too much

What is a Master Promissory Note?

When you borrow from the federal government to obtain student loans, you promise to pay that loan back — with interest and fees. This is a legal promise made by signing the Master Promissory Note.

As your school promissory note will explain, you’re obligated to pay back your loan even if you leave school early or can’t find a job after graduation. The only exception would be if your school closed, violated state law or met another condition that would qualify you for student loan discharge, which, while rare, does happen on occasion. In most cases, however, you’re on the hook for repaying your debt, and your Master Promissory Note is the contract that contains that agreement.

Whether you are an undergraduate or graduate/professional student, you will sign a Master Promissory Note. There is one version of the Master Promissory Note for Direct subsidized or unsubsidized loans, and another for Direct PLUS loans.

What details can you find on your promissory note?

Your Master Promissory Note will explain items including:

  • How your interest will be calculated and how fees are charged
  • Annual loan limits
  • The items for which you can use your loan (room, board, tuition, books, etc.)
  • How your loan will be dispersed
  • Your options for repayment plans
  • Under which conditions you might get a lower interest rate

After you sign the note, you will find out specific details including the amount, interest rate and fees of your loan in a disclosure statement.

Pay attention to the details on your Master Promissory Note so you understand what’s expected of you when paying back your loan, and which repayment plan might work best for you — for example, the standard repayment plan, the graduated repayment plan or the extended repayment plan. You must choose a repayment plan, or you will automatically be put into a standard plan.

Some questions to consider as you read the Master Promissory Note:

  • Might you be able to get a lower interest rate (for example, if you are a military member)?
  • What will happen if you default on your loan?
  • What if you eventually need to be granted a deferment or forbearance?

You will get the answers to these questions and more within the note. Read carefully and make sure you fully understand your options before signing.

When do you sign your Master Promissory Note?

You’ll need to sign your Master Promissory Note before you receive any disbursement of your student loans. If you discover you’ve borrowed too much when you receive your exact loan amount, you do have a window of time during which you can return your loan, even if you’ve already signed the promissory note.

You can typically sign just one promissory note for multiple subsidized or unsubsidized loans, and it will be good for up to 10 years, as long as your school does not require that you sign a new note each year. One exception is if you borrow a PLUS loan with an endorser to boost your creditworthiness. In this situation, you can only receive one loan for each promissory note. If you choose to borrow another PLUS loan in the future, you’ll need to sign a new promissory note.

Your parent doesn’t have to sign the Master Promissory Note unless they are taking out a parent PLUS loan on your behalf.

If you’re not sure whether you need a new promissory note when borrowing a student loan, contact your school’s financial aid office for guidance. Even if you don’t reach out, the office should get in touch with you about completing any outstanding paperwork for your loans.

Using the Master Promissory Note to get your student loan

You can sign your Master Promissory Note online at StudentLoans.gov. Expect the process to take about 30 minutes, per the Federal Student Aid site.

First, you’ll sign in with your Federal Student Aid ID and provide personal information about yourself and your school.

Source: Department of Education

Next, you’ll provide information for two references. Your references must have known you for at least three years and have different addresses, both of which must be in the U.S.

Federal Student Aid asks for these references in case they can’t get a hold of you. If you stop paying your student loan and answering calls, collectors may contact your references to track you down.

Source: Department of Education

Finally, you can read over the contract to familiarize yourself with what it is you’re signing. After reviewing this language, you’ll electronically sign and submit your Master Promissory Note.

The above is a Master Promissory Note for direct subsidized or unsubsidized loans. By clicking here, you can see a version of the Master Promissory Note for PLUS loans.

Student loans can be helpful, but avoid borrowing too much

By keeping borrowing to a minimum and educating yourself on your debt, you’ll be off to a strong start in managing your finances. Even if you are able to borrow a large amount, you want to be careful not to borrow too much.

One way to reduce the amount you borrow in student loans is to apply far and wide for scholarships and grants. These are great options because you typically do not have to pay the money back.

You might also work a part-time job during college to bring in extra income. While you don’t want to take time and energy away from your studies, earning some spending money could mean you don’t have to take on as much debt.

Once you’ve determined how much you should borrow, make sure you understand the details of your student loans. You can use our student loan calculator to estimate your future monthly payments and how much you’ll spend on interest.

Lauren Bowling and Rebecca Stropoli contributed to this report.

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LenderVariable APREligibility 
2.49% – 13.85%1Undergraduate

Visit College Ave

2.55% – 11.44%2Undergraduate

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3.25% – 13.59%3Undergraduate

Visit SallieMae

0.00% – 23.00%4Undergraduate

Visit Edly

3.25% – 9.69%6Undergraduate



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1 Important Disclosures for College Ave.

CollegeAve Disclosures

College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.

  1. As certified by your school and less any other financial aid you might receive. Minimum $1,000.
  2. Rates shown are for the College Ave Undergraduate Loan product and include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
  3. This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.

Information advertised valid as of 9/15/2022. Variable interest rates may increase after consummation. Approved interest rate will depend on the creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of full principal and interest payments with the shortest available loan term.

2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 3.47% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 2.80% APR to 11.69% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

3 Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.

4 Important Disclosures for Edly.

Edly Disclosures

1. Loan Example:

  • Loans from $5,000 – $20,000
  • Example: $10,000 IBR Loan with a 7% gross income payment percentage for a Senior student making $65,000 annually throughout the life of the loan.
    • Payments deferred for the first 12 months during final year of education.
    • After which, $270 Monthly payment for 12 months.
    • Then $379 Monthly payment for 44 months.
    • Followed by one final payment of $137 for a total of $20,610 paid over the life of the loan.

About this example

The initial payment schedule is set upon receiving final terms and upon confirmation by your school of the loan amount. You may repay this loan at any time by paying an effective APR of 23%. The maximum amount you will pay is $22,500 (not including Late Fees and Returned Check Fees, if any). The maximum number of regularly scheduled payments you will make is 60. You will not pay more than 23% APR. No payment is required if your gross earned income is below $30,000 annually or if you lose your job and cannot find employment.

2. Edly Student IBR Loans are unsecured personal student loans issued by FinWise Bank, a Utah chartered commercial bank, member FDIC. All loans are subject to eligibility criteria and review of creditworthiness and history. Terms and conditions apply.

5 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  • Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of September 1, 2022, the 30-day average SOFR index is 2.23%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%.
  • Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.
  • Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.


    Undergraduate Rate Disclosure: Variable interest rates range from 3.25%-10.35% (3.25% – 9.69% APR). Fixed interest rates range from 4.24% – 10.59% (4.24% – 9.93% APR). 

    Graduate Rate Disclosure: Variable interest rates range from 3.75%-9.90% (3.75% – 9.68% APR). Fixed interest rates range from  5.22% – 10.14% (5.22% – 9.91% APR). 

    Business/Law Rate Disclosure: Variable interest rates range from 3.75%-9.35% (3.75% – 9.16% APR). Fixed interest rates range from 5.20% – 9.59% (5.20% – 9.39% APR).

    Medical/Dental Rate Disclosure: Variable interest rates range from 3.75%-9.02% (3.75% -8.98% APR). Fixed interest rates range from 5.18% – 9.26% (5.18% – 9.22% APR). 

    Parent Loan Rate Disclosure: Variable interest rates range from 3.25%-9.21% (3.25% – 9.21% APR). Fixed interest rates range from 3.96%-9.50% (3.96%-9.50% APR).

    Bar Study Rate Disclosure: Variable interest rates range from 6.58%-11.72% (6.58% – 11.62% APR). Fixed interest rates range from 7.39% – 12.94% (7.40% – 12.82% APR). 

    Medical Residency Rate Disclosure: Variable interest rates range from 5.67%-9.17% (5.67% – 8.76% APR). Fixed interest rates range from 6.99% – 10.49% (6.97% – 10.08% APR).

6 Important Disclosures for Funding U.

Funding U Disclosures

Offered terms are subject to change. Loans are made by Funding University which is a for-profit enterprise. Funding University is not affiliated with the school you are attending or any other learning institution. None of the information contained in Funding University’s website constitutes a recommendation, solicitation or offer by Funding University or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.