Princeton University announced on Sunday that it will replace student loans with outright grants and scholarships, funding the change with its $8 billion endowment.

The policy change reduces the current average of $15,000 to $20,000 of debt that student graduate with annually.

Princeton's last major financial aid change was in 1998, and it substituted grants for loans for students whose families earn less than $46,500. Harvard followed suit, giving an additional $2,000 per semester to eligible students.

Harvard officials said they were also looking for ways to fund reductions in Harvard students' debt load.

"The $2,000 increase per student per semester worked for a while, but we are trying to reduce loan money," said Andrew Tiedermann, communications director of the University Development Office.

For the moment, however, Harvard officials say the University does not plan to take any action in response to Princeton's change in policy.

Princeton Director of Financial Aid Don Betterton said his university's latest financial aid reform was due in large part to its burgeoning endowment.

"We started three years ago with financial aid changes consistent with our values and actions. We want