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Execute Your Federal Direct Student Loan: Entrance Counseling and Master Promissory Note

At College Aid Pro™, we believe it’s critical that all college-bound families know that they are entitled and guaranteed Federal Direct Student Loan funding to put toward the cost of college. These loans are designed to be “use it or lose it. In other words, they’re available for all four years of a student’s college career, but can’t be leveraged retroactively. A student needs to take out up to the maximum amount each year in order to take full advantage of this program. 

The loans total $27,000 over the fours years of college:

  1. $5,500 Freshman
  2. $6,500 Sophomore 
  3. $7,500 Junior
  4. $7,500 Senior

If borrowing is on your radar at all, we recommend pursuing FDSL loans prior to looking at any other options. Let’s look at a few facts about the FDSL program:

  1. If your FDSL is a subsidized loan, it is 0% interest rate while the student is in college. 
  2. The loan becomes due 6 months after the student graduates.
  3. There are no prepayment penalties.

Executing Your FDSL

Many college-bound students and their parents assume that once they apply for a Federal Direct Student Loan (FDSL) they’ve completed what’s required of them. This isn’t the case! With more and more college students taking government loans out to cover the college funding gap, or pay for a portion of their tuition, the Department of Education has started to require two items prior to the loan being disbursed:

  1. Entrance counseling. 
  2. A master promissory note.

Lets’ dive into what these two “to do’s” are, and why they’re important.

What Is Entrance Counseling?

The Department of Education is striving to educate college-bound students on what it means to take out a student loan, and what the terms and conditions of repayment are. Through their Federal Student Aid website, they provide (and require) entrance counseling for all new borrowers. 

Here are the steps to complete your entrance counseling requirement:

1.    Student must login to studentloans.gov

2.    Select “Log in”

3.    Enter STUDENT FSA ID username/password

4.    Click “accept”

5.    Enter language and email preference

6.    Select “Complete Loan Counseling”

7.    Select “Entrance Counseling”

8.    Follow Instructions to complete counseling (~15 minutes)

Why Is It Important?

If you are a college-bound student, or your child will be going to school this upcoming enrollment season, entrance counseling may feel like a frustrating extra step to getting the funding you’re guaranteed by the US Department of Education. 

However, this is a fantastic opportunity to educate yourself about what your federal loans entail, and what’s required of you after graduation for repayment. Too often, college students are surprised by their loan repayment when it comes due, and this is a great way to ensure that you’re empowered with knowledge on what’s expected of you post-graduation. 

What is a Master Promissory Note (MPN)?

A Master Promissory Note (MPN) is the second requirement new borrowers must complete before loans are disbursed. This is a legal document that has borrowers promise to repay their student loans (and accrued interest and/or fees) back to the Department of Education. Promissory notes are not uncommon in the world of lending. Often, borrowers will be required to sign a promissory note for other large loans such as a mortgage. 

Here are the steps to complete your MPN:

1.    Select “Complete Loan Agreement (Master Promissory Note)”

2.    Select “MPN for Subsidize/Unsubsidized Loans”

3.    Follow instructions to complete agreement (~5 minutes)

Why Is It Important?

Your Master Promissory Note is a place where you’re promising to pay back your student loan – complete with interest and fees – to the Department of Education. Although this is standard practice, it’s important to keep in mind that this is a legally binding document. Before borrowing, make sure you understand what you owe and what’s required of you upon graduation.

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