Federal Student Loans

Master Promissory Note (MPN)

A binding legal document that you must sign when you get a federal student loan. The MPN can be used to make one or more loans for one or more academic years (up to 10 years) at one or more schools. It lists the terms and conditions under which you agree to repay the loan and explains your rights and responsibilities as a borrower. It's important to read and save your MPN because you'll need to refer to it later when you begin repaying your loan or at other times when you need information about loan provisions, such as deferments or forbearances.

Loan Servicer

A company that collects payments, responds to customer service inquiries, and performs other administrative tasks associated with maintaining a federal student loan on behalf of ED. If you're unsure of who your federal student loan servicer is, you can look it up in "My Federal Student Aid" at StudentAid.gov/login

Subsidized Loan

A loan based on fnancial need for which the federal government generally pays the interest that accrues while the borrower is in an in-school, grace, or deferment status. A borrower is eligible to receive subsidized loans for up to 150 percent of his or her program length.

Work-study

A federal student aid program that provides part-time employment while a student is enrolled in school. Work-study earnings help pay the student's education expenses.

Principal

Loan principal can refer either to the original amount borrowed (original principal), or to the remaining amount of principal to be repaid (current principal). The current principal balance may include interest that has been capitalized (for example, interest that was capitalized at the end of a period of deferment or forbearance).

Scholarship

Money awarded to a student based on academic or other achievements to help pay for education expenses. Scholarships generally do not have to be repaid.

Unsubsidized Loan

A loan for which the borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan. This type of loan is not based on fnancial need.

Net Price

An estimate of the actual cost that a student and his or her family need to pay in a given year to cover education expenses for the student to attend a particular school. Net price is determined by taking the institution's cost of attendance and subtracting any grants and scholarships for which the student may be eligible.

interest

a loan expense charged for the use of borrowed money. Interest is paid by the borrower to ED. The expense is calculated as a percentage of the unpaid principle amount of the loan.