Federal Stafford Master Promissory Note

There are two different versions of the MPN – one for the Federal Family Education Loan Program (FFELP) and one for the William D. Ford Federal Direct Loan Program (Direct Loans).

Multi-Year (Serial) Feature

Most U.S. colleges participating in FFELP may allow borrowers to use the multi-year feature of the MPN. Eligible colleges using the MPN as a serial note do not have to require students to complete a new MPN each new academic year. Foreign colleges may not use the multi-year feature unless the U.S. Department of Education (ED) specifically informs them that they may do so.

MPN Forms

The Borrower’s Rights and Responsibilities statement assists the borrower in understanding and managing borrowing. At or before the first disbursement, the borrower will also receive a disclosure statement from the lender/servicer that contains the following information:

• the principal loan amount;
• the origination fee;
• the cumulative principal debt for loans made by that lender/servicer;
• the actual interest rate;
• how the rate was calculated; and
• the name and address of the lender/servicer.

With the implementation of the MPN, a Plain Language Disclosure (PLD) was developed to provide the borrower with a plain English summary of key disclosure items from the original MPN form. Lenders are required to provide the PLD to the borrower at or before the disbursement of any subsequent loan made under the MPN after the initial loan is made. The PLD can be sent to the borrower as part of, or along with, the disclosure of a subsequent loan, or it may be sent separately. The PLD is not required as part of the initial Federal Stafford loan, but the lender does have the option to send it to the borrower.

ISAC Loan Materials Available for Order

• ISAC’s loan folder is designed to hold the Federal Stafford and PLUS promissory notes and provides the student/parent borrower with information about the borrowing process, capitalization of unsubsidized Federal Stafford interest, and the consequences of default.
• ISAC’s Federal Stafford Loan Guide explains information regarding the eligibility requirements as well as loan limits, interest rates, and application procedures for the Federal Stafford Loan Program.
• ISAC’s Federal PLUS Loan Guide explains information regarding the eligibility requirements as well as loan limits, interest rates and application procedures for the Federal PLUS Loan Program.
• Life Begins With College is an entrance counseling booklet for new student borrowers.
• Life After College is an exit counseling booklet that explains the importance of repaying student loans.

Completing the MPN

Required Borrower Information on the MPN

The MPN collects identifying information for the borrower, including name, address, date of birth, Social Security Number, driver’s license number and two personal references. If the borrower previously borrowed from a particular lender or the lender uses electronic loan processing, some of this information may be preprinted on the MPN. The borrower must read, sign and date the MPN.

In completing the FFELP MPN, the borrower must also provide the name of a lender. As a convenience, many schools give their students a list of lenders who have commonly made student loans at that school (preferred lender list). However, the student has the right to choose his or her lender, even if that lender is not one that the school has previously used.

Borrower Confirmation for Subsequent Loans

A crucial step in a multi-year use of the MPN is the confirmation process, which takes the place of the previous requirement that the borrower sign a new note for each academic year or period of enrollment. Schools must develop and document a confirmation process to ensure that the borrower wants subsequent loans. The confirmation process may be part of the required notices and disclosures that already exist, or it may be separate and supplement them.

To ensure student control over the borrowing process, a student must accept, either actively or passively (i.e. through notification), the loan amount offered.

Active Confirmation – School does not disburse the loan until the borrower accepts the proposed loan type and amount, or requests changes to the proposed loan package.
Passive Confirmation – School does not disburse the loan until the borrower is notified of the proposed loan package. (The notification can come from the school, lender and/or guarantor.) The borrower only needs to take action if he or she wants to decline the loan or make adjustments to the type or amount of the loan.

For example, the school’s award letter may include proposed loan amounts and types. For active confirmation, the student would be asked to confirm the loan amount offered by responding to the school’s offer. For passive confirmation, the student would be asked to respond only if he or she wanted to cancel or reduce the loan amount offered.

Lender Origination of the Loan

A lender’s responsibilities in originating a Stafford or PLUS loan include the following:

• ensuring that the MPN has been properly completed and signed by the appropriate parties;
• ensuring that alterations to any information completed by the borrower or the school on the MPN are legible and initialed, as appropriate;
• establishing the date from which to track the expiration of the MPN. This is the date the borrower signs the MPN. If the borrower fails to date the MPN or provides an erroneous date, the date on which the lender received the MPN may be used; and
• providing an explanation of the borrower’s rights and responsibilities with respect to the loan. This information is provided as part of the MPN materials.

Subsequent Loans using the MPN

The lender has the following additional responsibilities when making subsequent loans using the multi-year feature of the MPN.

• Determining the school’s authorization to certify Stafford loans using the multi-year feature of the MPN, based on information provided by ED.
• Ensuring that either an active or passive confirmation process is in place.
• Determining that the lender retains the right to originate loans using the MPN, if a previous loan made using the MPN has been sold to another holder.
• Verifying that the loan is supported by a signed MPN and that the ability to make subsequent loans using that MPN has not expired.

MPN Expiration and Conditions

The ability to make additional loans under the MPN to students attending a school eligible to use the multi-year feature will automatically expire on the earliest of:

• the date the lender/servicer receives written notification from the borrower asking that the MPN no longer be used as the basis for additional loans;
• 12 months after the original MPN was signed if no disbursements were ever made under that MPN; or
• 10 years from the date the student signed the MPN. However, if a portion of a loan is made on or before the 10 years from the signature date, remaining disbursements of that loan can be made.

The lender/servicer is responsible for ensuring compliance with these restrictions. A lender/servicer may choose not to make a subsequent loan under the MPN or decide to require the borrower to submit a new MPN even though the student remains enrolled at a school authorized to use the multi-year process. This might occur due to a change in borrower circumstances (e.g. bankruptcy, delinquency, etc.).

For additional information, refer to the Common Manual.

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