The student loan promissory note contains the details of your student loan agreement. It provides the information required to calculate your loan debt to be paid back. These notes are also referred to as “the contract.” They are used to explain all aspects of your student loans such as how much you owe and how much interest is applied to that debt.
The student loan promissory note details what you owe; it tells when that debt is due; and how interest is applied to those debts. In some private loans, there is a specific agreement between the lender and student borrowers regarding the repayment of the debt. Here, the lender is expected to provide a promissory note with all of the necessary information, so that the borrower can make informed choices about their federally regulated private loans.
Private student loans cannot be discharged in bankruptcy, but can be discharged by court order through the filing of a petition by the defendant. This means the lender must file legal documents with appropriate filings with the courts. The lender may then decide whether to file a petition in bankruptcy court or to go through a process where they can negotiate a settlement. If they agree to a settlement, they will be legally obligated to repay the interest rate that they set for the loan, plus the late or penalty fees for non-payment. In this case the lender’s promissory notes become legally binding.
As previously mentioned, the student loan promissory notes are not necessarily legal documents, but they are still binding. When you sign the contract, you are usually waiving all rights to reimbursement. This means you are not giving up any rights to compensation. This waiver of liability clause is also contained in all federal student loan contracts. You will need to keep these legal documents in a safe place and update them from time to time.
In some cases, banks may add a confidentiality clause as part of the terms of the loan contract. This means that you cannot discuss your loans with anyone except the bank. Private student loans can be especially sensitive, so you should seriously consider obtaining a non-disclosure agreement as well. If you have bad credit, you could benefit from an SFA or other type of cosigner. This is not common, but it does happen, so you should look into any available options before you submit your application.
Private lenders will typically not allow you to repay your federal loans with anything but cash. The only way they will let you borrow money is if they receive a master promissory note for the full amount of the loan. This means you would have to repay the entire federal loan, plus interest, in full before you could legally receive any more federal student loan funds. The federal loan programs offer so many repayment options, that there are ways to repay your student debt without even signing up for another loan. The promissory notes that allow you to repay your loans are legally binding, which means you will not be released from your obligation to repay until you fully repay the balance.