I was asked to loan a substantial sum to a local yeshivah. It happens to be that my grandson is applying to that yeshiva and we are concerned that he may not be admitted.

Q: Am I allowed to stipulate that I will grant the loan on condition that they accept my grandson? We will be paying full tuition and are not looking for a discount; we just want to guarantee his acceptance.

A: In the laws of ribbis (interest), it is not only forbidden for the borrower to pay interest in the form of monetary compensation, it is also prohibited to give even an implicit benefit (tovas hana’ah) to the lender. The question here is whether giving you this opportunity is a benefit that violates the prohibition of ribbis. The yeshiva is not giving a tuition break or anything that is worth money; they would merely be allowing you to enroll a child in their yeshiva. Does this form of benefit violate the prohibition of ribbis?

Interestingly, the matter is subject to debate. The stringent opinion (Shulchan Aruch Y.D. 160:23) maintains that, for instance, if a lender works as a painter, he may not stipulate that if the borrower needs painting done, he will hire the lender for the job. If this condition is formulated as part of the loan agreement, it may even be Biblically prohibited. Even if it was not part of the agreement, but the borrower chooses to hire the lender in consideration of the loan, the prohibition against ribbis has been violated.

The lenient opinion (Taz ibid 22) disputes this ruling based on a seemingly contradictory halacha (Y.D. 172:4). It is permitted for a lender to say to the borrower, “If you sell your house, you must sell it to me at its fair market price,” and even stipulate this as a condition of the loan. This case indicates that the borrower may provide the lender with an opportunity (i.e. the right to purchase his home) made possible by the loan. A possible resolution to the contradiction is that in the case of the house, if the borrower decides to sell, the money that he received originally as a loan is applied towards the purchase of the house. Accordingly, it emerges retroactively that the money received was never a loan; rather, it was the first payment towards the purchase. Consequently, the “lender” never received an added benefit in consideration of the loan. In other cases, however, it would be prohibited for the lender to stipulate that he should receive an opportunity, even though he will pay fair market price for that service (Chavas Da’as ibid 17).

The lenient opinion does not consider giving the painter the job as a benefit, since there is no difference for the borrower between one painter and another. Therefore, hiring him and paying for his work is not ribbis.

In your case, the yeshiva has standards for admission. If they were to compromise those standards in consideration of the loan, they are giving you something of value, rather than merely the opportunity to enroll your grandson (see also C.M. 237:2). Thus, according to all opinions, it is prohibited to make the acceptance of your grandson a condition of the loan.