Cornell College, a small private college in Mount Vernon, Iowa, will provide an annual $30,000 scholarship to students from five surrounding states. Dubbed the “Freeway Scholarship,” it will be 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.
“The idea behind the Freeway Scholarship is to reduce the red tape. People often feel like they have to apply, get admitted, and fill out forms before they learn what their financial aid package may be,” said Vice President for Enrollment Management Wendy Beckemeyer. “With this scholarship, they know they’re getting $30,000 up front. That’s valuable as families consider colleges.”
The scholarship is renewable for four years for students from the five Midwest states, plus Kansas City, Kansas. One of the basic ideas behind it was to lower the cost of attendance at Cornell 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 colleges.
“We researched five different flagship state institutions in our neighboring states, and we know that with this scholarship we are within reach of the same price of their attendance, and at Cornell students get a high-quality private education,” said Beckemeyer. (Cornell’s published tuition for this year is $47,100.)
The Freeway Scholarship is a extension of Cornell’s Iowa Promise Scholarship. which went into effect for students entering this fall. The college offered $30,000 to all admitted 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. Based on the 50% increase in enrollment of Iowa students for this year, the college decided to extend the opportunity to students in the additional states.
The scholarship is neither means tested, nor based on special academic merit. All students meeting Cornell’s admission standards are eligible, and the aid will be renewable for up to four years as long as students remain in good academic standing and live on campus. As part of the rollout, Cornell is also introducing a $25,000 Freeway Scholarship for Transfer students from the Midwest.
Cornell’s total enrollment is about 1,000 students, a quarter of whom are Iowa residents. Students from the other five states who will be eligible for the Freeway Scholarship made up approximately 29% of the current entering class. So by 2022-23 more than half of Cornell’s incoming students could be receiving the aid. In a phone interview, Beckemeyer told me that Cornell was planning for the new scholarship to yield a net gain of 20 students, adding that this was a very conservative estimate.
Small colleges, which are generally heavily dependent on tuition to fund their ongoing operations, have experimented with a number of pricing strategies to attract new students and maintain enrollment. The most frequent approach is what’s called “tuition discounting,” usually through institutional aid that is delivered in the form of so-called merit scholarships. Another option is the tuition reset, whereby a college lowers its tuition sticker price for all students and then decreases its institutional financial aid by some offsetting amount.
Tuition discounting has at least two problems. The first is the lack – or delay – of transparency for students in what their actual costs of attendance will be. The second is that as the discount increases, colleges must continue to increase their tuition sticker price and the number of students who will pay full, or close to full, freight if they want to maintain adequate net tuition revenue. In the 2020-21 academic year, the average tuition discount rate for entering undergraduates at private, nonprofit colleges reached an all-time high – 53.9%, meaning that for every $100 in tuition that colleges charged, they only collected $53.90.
Tuition resets also have their drawbacks, namely a connotation that the institution must be facing some kind of impending financial troubles that requires it to put its education on sale to attract buyers. It poses a repetitional risk that many institutions prefer to avoid.
Cornell may have hit something of a sweet spot with its targeted approach. It’s not making a wholesale tuition reset. And, according to Beckemeyer, the school’s overall discount rate was unchanged as a result of this year’s Iowa Promise Scholarship.
The Freeway Scholarship also has the advantage of giving up-front clarity to students and their families about net college costs at the same time it targets its main public university competitors. It will be interesting to see if other private colleges emulate the Cornell model.