A promissory note is a financial document that outlines a borrower’s promise to repay a loan under specified terms. In the context of student loans, promissory notes detail the amount borrowed, interest rates, repayment schedules, and other relevant conditions. Below are three diverse examples of promissory notes tailored for student loans, each serving different use cases.
This example is ideal for a student taking out a traditional loan through a bank or financial institution.
A student has been approved for a loan of $10,000 to cover tuition expenses for their college education. The terms include an interest rate of 5% and a repayment period of 10 years, starting six months after graduation.
Promissory Note Example:
“I, [Student Name], residing at [Student Address], hereby promise to pay [Lender Name], located at [Lender Address], the principal sum of $10,000 with an interest rate of 5% per annum. The repayment will commence six months after my graduation from [College/University Name] and will be completed in 120 monthly installments. I understand that if I fail to make payments as outlined, I may be subject to penalties and/or legal action.”
Notes/Variations:
Federal student loans often have specific guidelines and terms that differ from private loans. This example is for a federal Direct Subsidized Loan.
A student is borrowing $5,500 with a federal subsidy covering interest while enrolled in school. The repayment period will be 10 years, beginning six months after graduation, with no interest accrued during the enrollment period.
Promissory Note Example:
“I, [Student Name], residing at [Student Address], acknowledge that I have received a Federal Direct Subsidized Loan in the amount of $5,500. I agree to repay this amount to the U.S. Department of Education with an interest rate of 4.53% per annum. Payments will begin six months following my graduation from [College/University Name] and will continue for 120 months. I understand that during my enrollment, the government will pay the interest on this loan.”
Notes/Variations:
This example pertains to a Parent PLUS Loan, which allows parents to borrow money for their child’s education.
A parent is borrowing $8,000 to help cover their child’s college costs. The loan will have an interest rate of 6.31% and requires repayment to begin immediately after disbursement.
Promissory Note Example:
“I, [Parent Name], residing at [Parent Address], hereby promise to pay [Lender Name], the principal sum of $8,000 for the education expenses of my child, [Child Name], as part of the Parent PLUS Loan program. I agree to repay this amount with an interest rate of 6.31% per annum. Payments will commence immediately upon disbursement of the loan, and it will be paid in monthly installments over a 10-year period. I understand that failure to make timely payments may result in consequences such as damage to my credit rating and potential legal action.”
Notes/Variations:
These examples illustrate the importance of clear terms and conditions in promissory notes for student loans, ensuring that both borrowers and lenders understand their obligations.