What Is a Master Promissory Note (MPN)?

When you accept federal student loans, you don’t just receive money — you sign a legal agreement with the U.S. Department of Education. That agreement is called a Master Promissory Note, or MPN. It’s the document that makes your loan official.

Your MPN outlines your borrowing relationship with the federal government: the terms and conditions of your loans, your rights as a borrower, and your repayment responsibilities. When you sign it, you’re promising to repay every dollar you borrow under that note, plus any interest that accrues and any fees that are charged. This isn’t a formality you should rush through — it’s a contract that could follow you for decades.

There are two separate MPNs in the Federal Direct Loan Program. One covers Direct Subsidized and Direct Unsubsidized Loans (the loans you, as a student, borrow). The other covers Direct PLUS Loans, which are borrowed by parents of dependent undergraduates or by graduate and professional students. You’ll only sign the MPN for the type of loan you’re receiving.

The important thing to understand is that an MPN isn’t just for one loan. At most schools, a single MPN can cover multiple loans over multiple academic years — up to 10 years. That means the document you sign as a freshman could authorize loans all the way through graduate school if you stay at the same institution or transfer.

The Federal Direct Loan Program uses two distinct MPN forms, and which one you sign depends on the type of loan you’re borrowing.

The Direct Subsidized/Unsubsidized Loan MPN is what most undergraduate and graduate students sign. Direct Subsidized Loans are available only to undergraduates who demonstrate financial need — the government covers interest while you’re enrolled at least half-time and during your six-month grace period after leaving school. Direct Unsubsidized Loans are available to both undergraduate and graduate students regardless of financial need, but interest begins accruing immediately from the date of disbursement.

The Direct PLUS Loan MPN serves two groups: parents borrowing on behalf of dependent undergraduate students (Parent PLUS) and graduate or professional students borrowing beyond their Unsubsidized Loan limits (Grad PLUS). PLUS Loans require a credit check and carry higher interest rates and fees than Subsidized or Unsubsidized Loans.

For the 2025–2026 award year, the fixed interest rate is 6.39% for undergraduate Subsidized and Unsubsidized Loans, 7.94% for graduate Unsubsidized Loans, and 8.94% for all PLUS Loans. These rates are set annually based on the 10-year Treasury note auction and are locked for the life of each loan.

You should know that significant changes to federal student loan programs take effect on July 1, 2026, under the One Big Beautiful Bill Act. The Grad PLUS program is being eliminated for new borrowers, and new aggregate loan limits are being introduced for graduate and professional students.

Completing your MPN is one of the first steps in actually receiving your federal student loans. If this is your first time borrowing a Direct Loan, your school cannot disburse loan funds until your MPN is signed and processed. Here’s exactly how to get it done.

You’ll complete the MPN electronically on the Federal Student Aid website. The process typically takes 10 to 30 minutes, and you must finish it in a single session — you cannot save your progress and return later. Before you begin, make sure you have your FSA ID (the username and password you created for FAFSA), your Social Security number, your driver’s license number if you have one, and contact information for two personal references who have known you for at least three years and live at different U.S. addresses.

Your references are not cosigners — they have no responsibility for your loan. They’re only contacted if your loan servicer can’t reach you during repayment and needs updated contact information.
You also need to complete Entrance Counseling before your first loan can be disbursed. Entrance Counseling is a separate requirement from the MPN that ensures you understand your rights, responsibilities, and the full cost of borrowing. You can complete both requirements on the same website in the same sitting.

Many students treat the MPN as a click-through formality. That’s a mistake. When you sign, you’re making several legally binding promises to the U.S. Department of Education, and understanding them now can save you from costly surprises later.

First, you’re agreeing to repay every loan disbursed under that MPN. Because a single MPN can cover up to 10 years of borrowing, you could be authorizing future loans you haven’t even thought about yet. Your school will notify you each year about the type and amount of loans you’re eligible to receive, but the MPN has already been signed.

Second, you’re confirming that you’ll use loan funds only for authorized educational expenses at the school that certified your loan eligibility. This includes tuition, fees, room and board, books, and other costs of attendance — not discretionary spending.

Third, you’re agreeing that the federal government can report your loan status to credit bureaus and the National Student Loan Data System. Missed payments, delinquency, and default will appear on your credit report and can damage your credit score for years.

Fourth, you’re acknowledging the consequences of default. If you fail to repay, the government can garnish your wages, seize your tax refunds, and withhold portions of your Social Security benefits. There is essentially no statute of limitations on federal student loan debt, and it is extremely difficult to discharge in bankruptcy.

You do have important rights, too. You can cancel a loan or request a lower amount by contacting your school within certain timeframes. You can prepay your loans at any time without penalty. And you’re entitled to deferment and forbearance options if you hit financial hardship.

One of the most common questions students have is whether they need to sign a new MPN every year. In most cases, the answer is no. At multi-year schools — which include the vast majority of colleges and universities — a single MPN can cover all Direct Loans you receive for up to 10 years from the date it’s received by the Department of Education’s system.

Your MPN is not school-specific. If you transfer from one institution to another, your previously completed MPN can be used to authorize loans at the new school. The new school simply links your loan to the existing MPN in the federal system. However, some single-year programs or schools may require a new MPN for each year of borrowing.

An MPN expires under a few circumstances: if 10 years pass since it was accepted, if no loans are linked to it within one year of acceptance, or if you specifically request that no new loans be made under it. You can close your MPN at any time by contacting your loan servicer — this prevents future loans from being authorized under it while keeping your existing loans intact.

If your MPN expires and you need to borrow again, you’ll simply complete and sign a new one. The process is the same as the first time.

Understanding the true cost of your federal student loans goes beyond the dollar amount on your award letter. Two additional costs — interest rates and origination fees — affect what you’ll actually receive and what you’ll ultimately repay.

For loans first disbursed between July 1, 2025, and June 30, 2026, the fixed interest rates are 6.39% for undergraduate Direct Subsidized and Unsubsidized Loans, 7.94% for graduate Direct Unsubsidized Loans, and 8.94% for Direct PLUS Loans. These rates are determined by adding a statutory percentage to the 10-year Treasury note auction rate and are locked for the life of each loan.

On top of interest, every federal student loan carries an origination fee that’s deducted before the money reaches your account. For Direct Subsidized and Unsubsidized Loans disbursed between October 1, 2020, and October 1, 2026, the origination fee is 1.057%. For Direct PLUS Loans in the same period, the fee is 4.228%. That means if you borrow $5,500, you’ll only receive about $5,442 — but you’re responsible for repaying the full $5,500 plus interest.

For subsidized loans, the government covers interest while you’re enrolled at least half-time and during the six-month grace period. For unsubsidized loans, interest starts accruing from the day the loan is disbursed — even while you’re in school. If you don’t pay that interest as it accrues, it capitalizes (gets added to your principal), and you’ll end up paying interest on interest.

Once you graduate, drop below half-time enrollment, or leave school, you enter a six-month grace period before your first payment is due. During this time, you should complete Exit Counseling (required by federal law), identify your loan servicer, and choose a repayment plan.

For borrowers with loans disbursed before July 1, 2026, several repayment plans are currently available: the Standard Repayment Plan (fixed payments over 10 years), the Graduated Repayment Plan (payments start low and increase every two years), the Extended Repayment Plan (up to 25 years for large balances), and several income-driven repayment plans including Income-Based Repayment and Income-Contingent Repayment.

Major changes are coming for new borrowers. Under the One Big Beautiful Bill Act signed in July 2025, loans disbursed on or after July 1, 2026, will have only two repayment options: a new Tiered Standard Plan with fixed terms of 10, 15, 20, or 25 years based on your balance, and the Repayment Assistance Plan, a new income-driven plan that bases payments on 1% to 10% of your adjusted gross income.

If you already have loans and borrow again after July 1, 2026, you’ll lose access to existing repayment plans and must use the new options for all your loans. This is a critical detail — borrowing even one dollar in new federal loans after that date changes your repayment landscape entirely.

Signing your MPN is only half of what’s required before you can receive your first federal student loan. The other half is Entrance Counseling — a federally mandated educational session designed to make sure you understand what you’re borrowing and what it will cost you.

Entrance Counseling covers six key topics: estimating the cost of your education, understanding different types of financial aid, learning how federal student loans work, projecting how much you’ll borrow over your entire program, preparing for repayment, and understanding the consequences of not repaying your loans. The session includes short quizzes to confirm you’ve absorbed the material.

You can complete Entrance Counseling online at StudentAid.gov. The session takes about 20 to 30 minutes and, like the MPN, must be finished in one sitting. You need to be logged in with your FSA ID for your school to receive confirmation that you’ve completed it. Once you’ve completed Entrance Counseling, you don’t need to do it again unless you transfer to a new school or borrow a different loan type for the first time.

When you leave school, you’ll also need to complete Exit Counseling — a similar session focused on repayment strategies and your specific loan balance. Your school is required to provide this before you graduate or drop below half-time enrollment.