The Government has signed a deal with the European Investment Bank that will cover a €100m school-building programme for the next two years.
It is hoped that as much as €500m a year can be borrowed from the EIB and matched with private sector investment in capital projects.
The programme will build more than 550 new classrooms, and involve modernisation and construction in 35 primary and 12 secondary schools.
The 25-year loan will form part of the Government’s €219m school expansion programme to be managed by the Department of Education.
Minister for Education Ruairí Quinn said: "The funding to be provided by the EIB will support the implementation of the five-year construction programme which I announced earlier this year. The long-term loan provides a more efficient and cost effective means of funding this programme than would otherwise be possible.
"It is a very welcome development and is good news for the taxpayer, not to mention pupils and teachers across the nation."
President of the EIB, Werner Hoyer, said money is available to Ireland for projects that are ready to go and create construction jobs.
Mr Hoyer said: "Without a good education, Europe’s children will not be able to compete in a global economy. This new funding, to provide thousands of new places in Irish schools, will directly benefit children across Ireland and improve the quality of their education.
"The European Investment Bank is pleased to work closely with the Department of Education and Skills to address the pressing need to increase school capacity in Ireland to match increased pupil numbers."