This background paper on institutional lending examines institutional lender policy in the Stafford Student Loan Program, the study of which was mandated in the 1986 reauthorization of the Higher Education Act. The paper's particular purpose, however, is to familiarize the reader with the general operation of programs and the historical participation of schools in institutional lending. Several broad themes emerge in the information presented. One is that institutional lending is far from being a new issue, and thereby should not be considered unique or atypical as a topic of policy debate. Institutions have been making loans to students for decades and government experience with institution based lending dates back to the late 1950s with the Perkins program. Another motif of the paper is that, over time, the issue of access to loan capital has been important in shaping the role of institutions as lenders. Today, with nearly 13,000 banks and a robust secondary market, access to capital is a comparatively minor concern and institutions have correspondingly seen their roles as lenders markedly reduced. The question of who should lend and under what circumstances has played a crucial function in the development of institutional lender policy over the last two decades. These themes are developed in four chapters. The first is a brief introduction. Chapter 2 is divided into sections that focus on the Federally Insured Student Loan (FISL) program, the Stafford program, and the Perkins Loan Program. Chapter 3 reviews a sample of nongovernment programs with a look at innovative features of some of the recent ones. Chapter 4 provides a summary of the information provided in the report and suggests issues for further study. An appendix lists institutional lenders in approximate order of total dollars outstanding as of 1987. (JB)