Following the lead of Harvard University and a handful of other elite colleges, the University of Pennsyvlania will phase in a plan to replace student loans with scholarships for middle-income students starting in the fall, the school announced today.

Nex year all undergraduates whose families earn up to $100,000 will be eligible for the grants. The cut-off this year is $60,000. By 2009, any undergraduate eligible for financial aid will receive the grants regardless of family income.

Currently, half of all Penn's undergraduates are financing their education in part with loans that they have to repay.

When fully implemented, the program will increase Penn's financial aid to $110 million from $90 million per year and will be funded in part from its new's $3.5 billion "Making History" fundraising campaign.

Contact staff writer Kathy Boccella at 610-313-8123 or kboccella@phillynews.com