Cornell College Will Pay Off Up To $12,000 Of Graduates’ Federal Student Loans

Cornell College, a small liberal arts college located in Mount Vernon, Iowa, announced a Debt Reduction Pledge today, under which it will pay off students’ federal loan debt up to a maximum of $12,000 at the time of their graduation.

The commitment will begin with 65 first-year students who enroll in Cornell for the 2022-23 academic year. There are four requirements for students to be eligible for the payoff. They must:

• graduate from Cornell in four years,
• live on campus,
• maintain good academic standing,
• and stay enrolled as a full-time student throughout the four years.

Although some colleges have used private donations and Higher Education Emergency Relief Funds to cover tuition and fees that students owed them, Cornell Vice President for Enrollment Management Wendy Beckemeyer believes the scope of the new program is unique. “We want Cornell to be a difference-maker in higher education, and run-of-the-mill programs aren’t providing the solutions to the current problems with access and affordability,”she said. “The Debt Reduction Pledge is one more thing we can do to help students access a quality education and reduce debt, so our graduates can take the next steps in life with fewer financial worries.”

Here’s how Cornell is setting up the deal:

• If a student takes on $24,000 or more of federal loans, the college will pay up to $12,000 upon the individual’s graduation.
• If the student takes out less than $24,000, the college will cover half of the federal student loan bill that’s outstanding.

The amount of $12,000 was selected because it’s the maximum amount of federal loans that dependent undergraduate students can borrow for their first two years.

Cornell will not require students to fill out additional complicated forms to take part in the program other than the FAFSA and a brief Cornell form by which they can apply for the program. The payment will be made directly to students’ federal student loan servicers, on their behalf, before the first loan payment is due.

Cornell’s Debt Reduction Pledge will be available in addition to all its other institutional financial assistance and doesn’t impact any scholarships, work-study, or other financial aid students can receive.

Cornell has not yet worked out all the details about how candidates will be selected for the program, but it’s likely to involve a combination of factors such as student achievement, financial need (determined from the FAFSA), and the overall composition of the incoming class.

Cornell’s entering class this fall was about 400 students, so if the deal is continued as it is currently structured and entering classes stay the same size, just over 15% of entering students would be eligible. Beckemeyer told me the intent is to study the impact of the program in its first few years and – depending on its impact – possibly expand the number of students receiving the pledge in the future.

Cornell made news in August of this year when it launched its  “Freeway Scholarship,” a $30,000 annual scholarship available to first-year students from the neighboring states of Wisconsin, Illinois, Missouri, Minnesota, and Nebraska who apply for admission for the 2022-23 school year. 

That scholarship is renewable for four years for students from the five Midwest states, plus Kansas City, Kansas. The basic idea behind it was to lower Cornell’s cost of attendance to a price that was comparable to the flagship public universities in those states. With this aid, Cornell claims it will be within $3,250 of the average of those five universities.

The Freeway Scholarship was itself an extension of Cornell’s Iowa Promise Scholarship, which went into effect this fall and provided $30,000 to students who were Iowa residents, putting Cornell’s total cost of attendance in line with Iowa’s three state universities – the University of Iowa, Iowa State University and the University of Northern Iowa. As part of Cornell’s recent suite of financial incentives, it also introduced a $25,000 Freeway Scholarship for transfer students from the Midwest.

Cornell’s new offer comes at a time when student loan debt continues as a major concern among consumers and policy makers. At the national level, student borrowers owe a total of $1.6 trillion in federal and private student loan debt.

According to the Institute for College Access & Success, 62% of undergraduates graduating in 2019 owed student debt, and their average loan debt was $28,950. At Cornell itself, 61% of students take out federal loans, and their overall median debt is about $27,000.

Although President Biden has – as of yet – not heeded calls to do wide-scale student loan debt cancellation, his administration has used various mechanisms to cancel more than $10 billion of student loans. But that still leaves a lot of students with daunting amounts of outstanding debt. Cornell’s new commitment will significantly reduce that debt for a subset of its future graduates. Now, we’ll see how many other institutions offer something similar to their students.