The Johnson Graduate School of Management at Cornell has developed a special program designed to repay up to $25,000 of student loan debt as a way of helping its MBA graduates pursue entrepreneurial ventures straight out of school.

The Jonas Weil Entrepreneur Fellowship distributes up to $5,000 each year -- depending on the annual amount of student loan repayment -- for up to 5 years to Johnson School MBA graduates. The grant awards do not have to be repaid, although recipients are under a "moral obligation" to support the program with donations equal to the award should future financial circumstances permit. This year, the program has awarded more than $25,000 to nine students.

"There are a number of approaches business schools can take to support their students interested in starting their own business," said David BenDaniel, the Don and Margi Berens Professor of Entrepreneurship, who teaches the course Entrepreneurship and Enterprise at the Johnson School. "We selected this one because student loan debt is one of the biggest impediments for young graduates looking toward entrepreneurship. An MBA student can graduate with as much as $70,000 in debt. That's not an easy bill to pay if one is trying to build his or her own business."

Paul Kavuma received $2,350 from the program this fall to help pay off his student loan debt, now somewhere in the neighborhood of $15,000.

Kavuma characterizes this support as "desperately needed financial relief," especially since his own business, the Virtua Cafe, located in Coconut Grove, Fla., is now up and running.

"Every resource and ounce of energy I have has gone into this project," said Kavuma, who earned his MBA in 1993. "Having help in paying off my student loans has certainly made my life as an entrepreneur a little less stressful."

Virtua Cafe is a theme restaurant on the order of Rainforest Cafe or Planet Hollywood, only this eatery surrounds diners in virtual reality with computer-simulated rides and artifacts from "alien cultures," while offering a menu with such fare as cosmic burgers.

"Student loan debt is definitely a burden in trying to start your own business," said Kavuma, whose business partner, Joseph Sabga, also received his MBA from the Johnson School. "It's not just a drain on my cash flow, but it also strongly affects my personal balance sheet, which could adversely affect my ability to get credit. Certainly, being debt-free would be more conducive to starting a business."

With the Weil Fellowship support going toward his monthly student loan debt payments, Kavuma can devote his resources to opening other Virtua Cafes. "We have an aggressive expansion plan, one that calls for opening 20 more locations over the next four years."

Sima Uluc and her business partner, Michi Calcagno, received more than $7,000 in Weil Fellowship support this fall to help pay their student loan debt, which totals more than $30,000.

"We very much wanted to be in business for ourselves," Uluc said, "but the burden of student loans makes it difficult for any entrepreneur to get started. The Weil Fellowship helps us to keep up with our monthly loan payments and concentrate on our business."

Partner Calcagno agrees. "Starting any business is risky, and cash flow is an everyday concern," she said. "Not having to worry about student loans for the next year is a huge relief and certainly enables us to focus our energies toward building our company," she said.

Their business is Liliput, a line of 100 percent cotton children's wear ranging in size from infant to toddler. "Our objective is to provide European-style clothing with an affordable price tag," Uluc said.

The collections are designed in Liliput's New York office and sold in six showrooms located throughout United States. Currently, Liliput may be found in children's specialty boutiques and small chains across the country.

"Over the next six months, we'll be adding another three showrooms and pursuing larger department store accounts more aggresively," Calcagno said. "The support from the Weil Fellowship is helping Liliput achieve a presence in every major apparel market in the country."

Other fellowships have been awarded to students with a variety of business pursuits, such as an online real estate information service, a software manufacturer and developer, a biotechnology firm that hopes to develop a new treatment for Type II diabetes and a manufacturer of a new home security system.

According to Ann Richards, registrar of the Johnson School, to be eligible for the fellowships, students must either be:

-- starting their own businesses;

-- participating in start-up ventures in which they obtain the founder's stock; or

-- participating in a small business with stock or stock options in lieu of salary.

The application process requires students to submit tax returns and other materials, such as business plans. In addition, they must demonstrate that they are taking a risk by receiving stock in lieu of salary.

"We're not making judgments as to whether the business venture will be profitable," BenDaniel noted. "Rather, we are helping foster the entrepreneurial spirit in any of our graduates who are interested."

The fellowship is named for and endowed by an individual who fortunately encumbered no student loan debt while studying at the Johnson School. Weil received his MBA in 1959.

"It's difficult for students to graduate from school with this debt burden around their necks and still be risk-takers, and that's what entrepreneurs are," said Weil, who recently sold his own company, OfficePlus, which provided office space and shared office services to emerging and expanding companies in eight cities. Weil, now a venture catalyst living in Colorado, said, "In supporting the fellowships, I hope to make the initial entrepreneurship experience less risky and more feasible for those graduates who have what it takes to start up a new business."

Cornell's Johnson School is widely recognized as one of the premier schools of entrepreneurship in the country. Success magazine consistently rates the school as one of the best business schools for entrepreneurs, and in 1996 Business Week selected BenDaniel as one of America's top 10 teachers of entrepreurship.