January 31, 2008

Cornell Caps Loans for Those in Need

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It may be hard to enjoy the college experience knowing that tuition alone requires $34,600 a year, but the outlook for debt-ridden students may improve today with Cornell’s announcement of its new financial aid initiative. By the 2009-2010 academic year, students whose families make less than $75,000 a year will receive grants in place of the traditional need-based loans, while those from families with incomes between $75,000 and $120,000 will see their loans capped at $3,000 a year.
Meanwhile, for the 2008-2009 transition period, the University will replace loans for students with family incomes under $60,000 and cap loans at $3,000 for those with household incomes between $60,000 and $120,000.
According to Provost Biddy Martin, the average Cornell student graduates with about $23,000 in loans.
“Essentially we’ve been thinking about doing this for a long time and the primary reason is because we think that’s too much debt,” she said. According to Martin, these financial aid problems have also long been on President David Skorton’s mind.
“I want to remind you that I’m a first-generation college student from a family that couldn’t afford to do much,” Skorton said. “It took me 20 years to pay my loans off. And for that reason, I have a personal commitment to see us do better in this regard.”
Hopes are therefore high for more students from lower-income backgrounds to come to Cornell, according to Deputy Provost David Harris. Before the change, a student whose family made $50,000 would have had about $22,000 in loans upon graduation. Under the new policy, the student would graduate loan-free.
“The hope is that because of the increased information and transparency that appears on our financial aid website, students who previously would have said, ‘I can’t afford Cornell; I’m not even applying,’ will now say, ‘Oh, look at the example of [the student with a family income of] $50,000. Hey this is something I can imagine doing,’” Harris said. “So that would increase the number of people from lower socioeconomic categories that would apply to Cornell.”
According to Martin, this goal represents Cornell’s traditional commitment to economic diversity.
“Cornell is already more economically diverse than most of our peers, but we want to stay one of the more economically diverse,” Martin said.
Though the announcement comes on the heels of financial aid changes at Harvard, Yale and Dartmouth, Skorton was careful to differentiate between Cornell and such universities that have recently announced financial aid policies supporting more middle-class students.
“They have smaller student bodies by far and much larger endowments, so it is true that it’s nearly impossible for us to do exactly what a school does that has an endowment five times ours and half the number of students,” he said. “On the other hand, I have to tell you that after being at a public university for 25 years with an endowment that still isn’t even at $1 billion, even though we had the biggest campaign in the history of any non-profit in the state of Iowa, that Cornell is still a resource-rich institution,” Skorton said, in reference to his previously held position as the president University of Iowa.
Martin was also hesitant to propose changes that compare to those of the other Ivy League schools because of the consequences it could have for the way higher education is currently funded.
“I think the way higher education in the United States has been funded over time implies and requires what we could call a three-legged stool, with investments from the state and federal governments, the universities themselves, families and students,” she said. “I really think that higher education ought to be a partnership with investments from all of these parties and that we don’t want to remove the leg of stronger government support for student aid or families and students contributing and being engaged and invested for that reason.”
Cornell’s policy changes also differ in that they involve a 4.9 percent and 5.1 percent increase in tuition for undergraduate students in endowed colleges and out-of-state students in state-supported colleges, respectively.
“Tuition, as a kind of sticker price, it’s only a portion of what it costs to educate any student,” Martin said. “And we believe that those who can afford to pay tuition should pay, and that helps us then discount tuition for students who can’t afford it. So that’s the philosophy that underpins our policies — we’re not reducing tuition, but we do discount it for students and families with need.”
However, graduate students in endowed colleges will see a 10.1 percent cut in tuition to $29,500 in the 2008-2009 academic year and an additional 30 percent decrease in the three years after that. This change will likely improve and expand research at Cornell, which is becoming increasingly important, as Harris noted.
“We’re at a time when research is a huge chunk of the university budget. You’re not seeing NIH (National Institutes of Health) and NSF (National Science Foundation) budgets escalating at the rate we’ve seen in the past, so that means we’re being asked to do more and more as a university. Financial aid is only a piece of that,” Harris said.
According to Martin, the changes require an estimated additional $116.8 million, which will come from a mix of its financial aid resources, an increase in the payout from its endowment, gifts and reallocations of existing resources. A press release states that by the 2008-2009 academic year, the University’s annual financial aid expenditure will increase by $14 million.