Understanding Your Federal Student Loan Documents
- Promissory Note: Stafford and PLUS Loans. To obtain a Stafford or PLUS Loan, three documents must be in place: the master promissory note or MPN, a notice of loan guarantee and a school certificate of enrollment. Each Stafford or PLUS borrower signs an MPN. The other documents are completed by other parties and sent to the lender or holder of your note prior to your loan disbursement.
The MPN is a legally binding agreement that contains the terms and conditions of your loan and explains how and when it should be repaid. By signing it, you are promising to repay your student loan. You should keep your copy of the MPN in a safe place for future reference.
The MPN is valid for ten (10) years meaning you can receive additional student loans under that MPN without having to sign another promissory note. The MPN may be signed in ink or electronically.
- Promissory Note: Consolidation Loan. To obtain a Consolidation loan, each borrower must complete and sign a combined application and promissory note. Like the MPN, the Consolidation promissory note is a legally binding agreement that contains the terms and conditions of the loan and explains how and when it should be repaid. Consolidation promissory notes may be signed in ink or electronically.
- Other Documents: FFELP Loans:
Initial Disclosure Statement for Stafford and PLUS Loans: This document provides key information about the loan such as the principal amount of the loan, interest rate and fees assessed in connection with disbursements. With some exceptions, all of the required information may be included in the Borrower's Rights and Responsibilities Statement or in the Plain Language Disclosure. Due to recent changes in federal law a number of additional disclosures must be included into this disclosure including, for example, the borrower’s option for deferment, forbearance and loan forgiveness
Borrower's Rights and Responsibilities Statement: This document is a part of the promissory note regardless of the type of FFELP Loan (Stafford, PLUS and Consolidation). It states in a "plain English" format additional information about the terms and conditions of the loan. Nearly all of the information required to be disclosed under federal law and the FFEL program is contained in the promissory note and the Borrower's Rights and Responsibilities Statement. This document is provided in connection with the initial loan under an MPN; the Plain Language Disclosure (discussed elsewhere) is provided with each subsequent loan made under an MPN.
Loan Repayment Schedule. At or prior to the beginning of the repayment period, your school or lender must give you a loan repayment schedule that states, among other things, your lender's name; the amount of each payment and the date payments are due; the number and frequency of payments and the interest rate on the loan. Due to recent changes in federal law, a number of additional disclosures will be added to the repayment disclosure including, for example, the amount of interest already paid and information on available repayment plans and benefits, including the reasons repayment benefits may be lost.
Plain Language Disclosure. The Plain Language disclosure is a notice prescribed by the Department of Education that must be provided to a borrower who obtains "serial" loans under a previously signed Master Promissory Note or MPN (that is, under a Stafford or PLUS Loan). This requirement does not apply to Consolidation Loans because Consolidation Loans are "serial" loans.
Billing Statement Disclosure. For loans on which the first payment is due on or after July 1, 2009, a new set of disclosures must be made during repayment with each bill or statement, including, for example, the original principal amount of the loan, current balance, interest rate and other information.
Loan Transfer Notice. A FFELP Loan borrower who is in a grace or repayment period must receive notice of the sale and transfer of his or her loan to a new lender or agency. Both the old and the new lender must provide this notification. In addition to a notice of the assignment the borrower must receive notice of:
The notice may be provided by each lender or, alternatively, in a joint notice. In addition, a lender must notify a borrower (who is in a grace or repayment period) each time the address to which payments must be made changes.
- The identity of the new lender or agency holding the loan;
- The address to which the borrower must send payments; and
- The telephone number of both the old and new lender or agency.
Notice Regarding the Availability of the Income Sensitive Repayment Option. This notice must be provided at the time of offering a borrower a loan and at the time of offering a borrower repayment options. This information may be provided in a separation notice or as part of the other required disclosures.
Exit Counseling Package. As part of your exit counseling on your FFELP or Direct Loans (other than a Consolidation Loan), you will receive the following information from your school, lender or the Direct Loan Servicing Center:
- A current description of your loans, including the average anticipated monthly payment;
- The amount of your total debt (principal and estimated interest), your current interest rate and the total interest charges on your loan;
- The name of the lender or agency that holds your loans, where to send your payment and where to write or call if you have questions;
- An explanation of the fees you might be charged during the repayment period, such as late charges and collection and litigation costs if your loan becomes delinquent or you default on your payment obligation;
- A reminder of available options for a loan consolidation and a reminder that you can prepay your loan without penalty at any time;
- Repayment options and advice about debt management;
- Notification that you must provide your expected permanent address and the name and address of your expected employer;
- Notification that you must also provide any correction to your school's records concerning you name, social security number, references and driver's license number (if you have one).