In the early 1980's, the Iowa Association of Independent Colleges and Universities identified a need for an entity to provide cost-effective financing through the issuance of tax-exempt bonds for Iowa's independent colleges and universities. Legislation was introduced and passed by the Iowa Legislature in 1982 and the Iowa Higher Education Loan Authority (IHELA) was founded under Chapter 261A of the Iowa Code.

IHELA was initially established for the purpose of financing education loans through the investment of private capital. In 1985, the Legislature expanded the function of the Authority to provide for loans to finance the acquisition, construction and renovation of educational facilities, structures and equipment, and to refund, refinance, or reimburse outstanding indebtedness incurred by eligible Iowa independent institutions. In 1997, the Legislature amended and expanded the function of the Authority for a project that is to be leased by the authority to an institution and to provide for loans in anticipation of the receipt of tuition by an institution. The Legislature also removed a restriction that IHELA shall not have outstanding, at any given time, obligations issued in an aggregate principal amount exceeding $150 million. In 2000, the legislature further amended Chapter 261A to provide that interest on obligations issued by the Authority is exempt from state income tax and to authorize the Authority to finance facilities that will be leased to institutions by a third party.

All obligations incurred by the Authority are exclusively those of the Authority and do not place an obligation on, or have the guarantee of, the State of Iowa. All administrative expenses of the Authority are paid from funds provided through the operation of its programs. The Authority has never received any appropriations from the State of Iowa. The Bonds issued are special and limited obligations of the Authority and do not represent, constitute or create an obligation, general or special, or debt, liability or moral obligation of the State or any political subdivision of the State within the meaning of any constitutional or statutory limitation.