Issues concerning mortgage-backed student loans are examined, with attention to the new tax law, policy and practical concerns that a college should address before starting this type of loan program, public policy issues, and two types of plans. The Tax Reform Act of 1986 phases out the deductibility of consumer interest charges and as a result will cause the expense of most loans to increase. However, loans secured by a home mortgage are fully deductible, and special consideration is offered for home loans used to finance educational and medical expenses. The following requirements that must be met are discussed: qualified residence interest, qualified indebtedness, and qualified educational expenses. Colleges should consider administrative and logistical problems before beginning a mortgaged-backed lending program, including title searching and mortgage recording. Public policy issues include: whether higher education may abuse the tax law for self-serving reasons, whether colleges will compete unfairly with the commercial sector, and whether the plans are fair to students and their families. Information is provided on two protypical programs offered by the University of Pennsylvania and the Massachusetts Education Loan Authority. (SW)