Around 2,700 additional student beds could be created over the next five years with loan support worth €434 million, half of which will come from the European Investment Bank.
An agreement between the bank and the Housing Finance Agency in Ireland was signed this morning.
The agreement will support the construction or refurbishment of student accommodation by Irish universities by offering the funding at a lower interest rate of 4% and with a repayment timeframe of up to 40 years.
Announcing the funding, Minister for Further and Higher Education Simon Harris said accommodation built via the new loan arrangement would have to be offered to students at a below market rate price.
However the details of this have yet to be finalised.
Mr Harris acknowledged that the universities would need additional funding from Government in order to proceed.
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Three Dublin universities - DCU, UCD and Trinity College Dublin - already have planning permission for almost 1,500 additional student beds.
It is expected that additional capital funding to support projects such as these may form part of capital spending plans due to be announced by Government later this year.
The Universities' sector has welcomed today's development, but it has said capital investment is needed if they are to be enabled to build accommodation that is affordable for students.
The Chief Executive of the Technological Higher Education Association (THEA) Dr Joseph Ryan said today's news, while very welcome, "should only be one element in a bigger picture".
THEA, which represents the country's Technological Universities, has called for changes to the structural mechanisms governing access to such borrowing, so that the technological universities can access loans on a par with the traditional colleges.
