When you take out any loan, the lender will ask you to sign a promissory note stating that you agree to the terms and conditions of the loan, and that you promise to repay the loan with interest within the agreed time. This is no casual note. A promissory note is a legally binding contract between you and the lender.
The Master Promissory Note and Federal Student Loans
The Master Promissory Note or MPN is a specific type of promissory note that you sign when you take out a federal student loan. You will be required to sign this legal document before you receive your funds. When you sign the MPN, you are in effect promising to abide by the terms and conditions of the agreement, and repay your student loans with all accrued interest and other applicable fees.
The Master Promissory Note will typically include all the information you need regarding your loan. In the MPN you will find details about:
- The terms and conditions governing your loan
- How the interest on your loan is calculated
- Standard repayment information
- Alternative repayment options
- Options for deferring or cancelling your loan
- Forgiveness options
- Your rights and responsibilities as a borrower
The most important thing to remember about the MPN is that it is legally binding. Once you sign this document, you are legally bound to honor your commitment. To avoid any problems down the line, you must go through the details carefully and make sure you understand and agree with the terms and conditions before you sign it.
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