That will cut the average cost by more than half for families with financial need, Yale officials said.
About 43 percent of Yale's 5,300 undergraduates are said to qualify for financial aid. Yale's tuition is about $45,000 a year.
"Yale should be a college of choice for the very best and brightest students from across America and around the world, regardless of financial circumstances," Yale President Richard Levin said in a statement. "We want all of our students to make the most of Yale - academically and beyond - without worrying about excessive work hours or debt. Our new financial aid package makes this aspiration a reality."
The changes go into effect this fall.
In making the announcement Yale joins a group of elite schools - including rival Harvard - in boosting financial aid. Harvard announced last month that it will provide $20 million more in financial aid. Harvard's tuition, room and board are $45,600 a year.
Duke had already announced a plan to spend an extra $13 million on aid by capping loans and eliminating any required parental contribution from families earning under $60,000.
The University of Pennsylvania, Pomona, Swarthmore and Haverford all announced they would eliminate loans, more than doubling the small number of schools promising all students a debt-free graduation.
Yale, which has the second biggest endowment in the nation, also announced that it would keep the increase in its tuition, room and board charges in 2008-2009 to the expected level of consumer price inflation of 2.2 percent.
Yale said it is increasing the number of families who qualify for aid, eliminating the need for students to take loans, enhancing its grants to families with more than one child attending college, exempting the first $200,000 of family assets from the assessment of need and increasing expense allowances for foreign students.
