The Vanguard Fully Paid Lending Program: Should a WCIer Even Bother?

In early 2024, Vanguard rolled out its “Fully Paid Lending Program” where individual investors could lend securities for short periods of time and be paid for doing so. This is generally a good thing for investors, where the fund lends out securities to short sellers and others and gets compensated for it. Vanguard has estimated this boosts returns by 1-16 basis points per year. It's not a lot, but that income can potentially entirely eliminate some of the very low Vanguard expense ratios.

(Note that the Fully Paid Lending Program is slightly different from the “securities lending” done by the Vanguard funds themselves.)

Let's talk about whether participating in Vanguard's Fully Paid Lending Program is worth it for a WCIer and how much money I made doing it.

What Is the Fully Paid Lending Program?

The Fully Paid Lending Program simply permits Vanguard to use the securities sitting in your brokerage account to lend to short sellers and then compensates you directly for it. In anticipation of writing this post, I signed up our largest account, a brokerage account in our trust, back in April 2024. It holds a relatively large amount of index funds representing most of the different stock asset classes in our portfolio. During 2024, that account has held all of the following securities . . .

VTI ITOT VXUS IXUS VBR VIOV AVUV DFSV VSS AVDV VTEAX VMMFX

. . . and I permitted Vanguard to loan out as much as it could during the year. As I write this post in December 2024, let's see how much money we made.

How Much Money We Made

We were enrolled in this program for eight or nine months in 2024, and as you can see, most of the loans were just 1-4 days. That's not a lot of days on which to pay interest. Sometimes, the loan was a ridiculously small number of shares, like just six shares on April 8. Just because you have a lot in the account doesn't mean a lot of shares will be loaned out. At any rate, over the course of 8-9 months, there were seven total loans made, and we received a grand total of $37.54 in payments.

It's pretty hard to get excited about that.

Again, I want to emphasize this is a large account, probably more money than most WCIers retire with. If we could only make $38 all year doing this with a big account, how much do you think you're going to make with a $50,000 taxable account invested in similar securities? Not very much.

More information here:

How to Take a Required Minimum Distribution (RMD) at Vanguard

Update Prior to Publication

We're finally getting around to publishing this article in April 2025, so I thought adding a little current information might be helpful to those considering signing up.

As you can see, we've made another $14.46 in 2025. It seems the biggest benefit I've gotten out of this program so far is some material to write a blog post about.

Risks of the Vanguard Fully Paid Lending Program

To be fair, I didn't exactly take on a lot of risk to make this money, and $52 is $52. That'll buy a nice lunch for two at Chick-fil-A. OK, maybe lunch for just one after our 45% marginal tax rate is applied to it. There were some great Bogleheads forum threads about these programs at the various brokerage firms:

Vanguard Fidelity Schwab

The risks were discussed in excruciating detail. The main ones seem to be losing qualified dividend status (although Vanguard makes you whole for this via cash-in-lieu-of payments) and losing SIPC protection on loaned shares. I even read a few stories about people making a few thousand dollars off loaned shares. They must be investing in something besides the typical broadly diversified, low-cost index funds that we advocate here at WCI. Or maybe it's just the fact that nobody wanted to short anything in 2024 when the market seemed to be going through the roof. Perhaps we'll leave the program turned on for another year or two until we go through a bear market and see if that changes anything.

How to Make More

Maybe you can make more if you do this at a brokerage where more investors are shorting stocks like Interactive Brokers or E-Trade. Maybe you can make more if you buy more volatile investments, like individual stocks. Maybe you can make more when markets are dropping. However, investing in a portfolio designed to maximize your fully paid lending income seems folly to me. I don't think anybody is primarily using this technique to reach any sort of significant financial goals.

More information here:

Securities Lending — Extra Income or a Mirage?

The Bottom Line

Should the typical index fund investor turn on the Fully Paid Lending Program in their Vanguard brokerage account? No. Focus on what actually matters with your finances:

Boosting your income Increasing your savings rate Sticking with a reasonable long-term investing plan

What do you think? Do you participate in the Fully Paid Lending program at Vanguard or elsewhere? How much money have you been making doing it? Any negative issues? 

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