The document that explains your rights and responsibilities as a federal student loan borrower is known as the Master Promissory Note (MPN). This legal document outlines the terms and conditions of your federal student loan, including your rights and obligations as a borrower.

The MPN is an important document that every federal student loan borrower must read and understand before accepting a loan. It serves as a contract between you and the U.S. Department of Education, stating your responsibilities and rights throughout the life of the loan.

What document explains your rights and responsibilities as a federal student loan borrower?
What document explains your rights and responsibilities as a federal student loan borrower?

What is a Master Promissory Note (MPN)?

The MPN is a legally binding document that outlines the terms and conditions of your federal student loan. It includes information about the type of loan, interest rate, repayment options, and other important details.

When you sign an MPN, you are agreeing to repay your loan in full and on time. This means that you must make all required payments, even if you do not graduate or find a job in your field of study.

Related blog: What option will not be available if you are behind on loan payments?

Rights as a Federal Student Loan Borrower

As a federal student loan borrower, you have several rights that are protected by law. These include:

1- Right to Receive Full Disclosure:

The MPN must provide you with all the important details of your loan, including the amount borrowed, interest rate, repayment terms, and any fees or penalties that may apply. This information must be clear and easy to understand.

2- Right to Choose Your Repayment Plan:

You have the right to choose a repayment plan that best fits your financial situation. The Department of Education offers several options, including standard, graduated, income-driven, and extended plans. You can also change your repayment plan at any time if needed.

3- Right to Deferment or Forbearance:

If you are facing financial hardship, you have the right to request a deferment or forbearance on your federal student loans. These options allow you to temporarily pause or reduce your loan payments without incurring penalties or interest.

4- Right to Prepay Your Loan:

You have the right to make extra payments or pay off your loan in full at any time without penalty. This can help you save money on interest and pay off your loan faster.

5- Right to a Grace Period:

Most federal student loans come with a grace period, which is a set amount of time after graduation or leaving school when you are not required to make payments. This gives you time to find a job and get financially stable before starting your repayment.

Responsibilities as a Federal Student Loan Borrower

Just as you have rights, you also have certain responsibilities as a federal student loan borrower. These include:

1- Responsibility to Repay Your Loan:

As mentioned earlier, by signing the MPN, you are legally obligated to repay your loan. This means making all required payments on time and in full.

2- Responsibility to Notify Your Loan Servicer of Any Changes:

If there are any changes in your personal or financial information, such as a change of address or income, you must notify your loan servicer immediately. This will ensure that your loan is properly managed and that you receive important updates and notifications.

3- Responsibility to Use Loan Funds for Educational Expenses:

Federal student loans are intended to cover the cost of education, including tuition, books, and living expenses. It is your responsibility to use these funds for their intended purpose and not for personal expenses.

4- Responsibility to Complete Entrance and Exit Counseling:

Before receiving a federal student loan, you must complete entrance counseling to understand your rights and responsibilities as a borrower. You are also required to complete exit counseling when leaving school or dropping below half-time enrollment to learn about repayment options.

5- Responsibility to File Taxes Correctly:

If you have any income-driven repayment plans, it is your responsibility to accurately report your income on your tax returns. This will ensure that your loan servicer calculates your payments correctly.


In conclusion, the Master Promissory Note is a vital document that outlines your rights and responsibilities as a federal student loan borrower. It is important to thoroughly read and understand this document before accepting a loan to avoid any confusion or issues in the future.

By understanding your rights and responsibilities, you can effectively manage your federal student loans and successfully repay them.

Remember to stay in touch with your loan servicer and communicate any changes or concerns regarding your loan. Always prioritize making timely payments towards your loan to avoid defaulting and negatively impacting your credit score.

By fulfilling your responsibilities as a borrower, you can achieve financial success and build a strong foundation for your future. So, be a responsible borrower and make the most out of your federal student loans!

Frequently Asked Questions

Who do you contact if you’ve already accepted more loan money than you need?

If you have accepted more loan money than you need, you should contact your school’s financial aid office or your loan servicer immediately. They can help you return the excess funds and adjust your loan amount accordingly.

It is important to address this issue as soon as possible to avoid accruing unnecessary interest on the excess funds.

Which loan type provides interest subsidy?

The Direct Subsidized Loan is the only federal student loan that provides an interest subsidy. This means that while you are in school, during the grace period, and during deferment periods, the government will cover the interest on your loan.

What increases your total loan balance?

Several factors can increase your total loan balance, including accruing interest, late fees or penalties, and requesting a deferment or forbearance. It is important to carefully manage your loan and make timely payments to avoid increasing your total balance.

Which loan type allows you to borrow up to the cost of attendance?

The Direct PLUS Loan allows you to borrow up to the cost of attendance, which includes tuition, fees, room and board, books, and other education-related expenses.

However, keep in mind that this loan requires a credit check and may have higher interest rates compared to other federal student loans.

Which repayment plan will you be placed on automatically unless you change it?

The standard repayment plan is the default option for federal student loans and borrowers will be placed on it automatically unless they choose to change their plan.

This plan has fixed monthly payments over a 10-year period, but borrowers can switch to a different plan at any time if needed. It is important to regularly review and evaluate your repayment plan to ensure it aligns with your financial situation.

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