The policy applies to approximately 1,300 juniors and seniors who will be eligible for housing on campus.
Students will be allowed to select a "household" of up to eight other students, each getting their own room to sleep in.
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In a letter from Stanford President Marc Tessier-Lavigne and Provost Persis Drell, administrators said the decision was based on several factors, including predictions from their own team of epidemiologists.
"Modeling of infections and hospitalizations by experts in our Stanford School of Medicine suggests that the trajectory of COVID-19 this spring is likely to be manageable," wrote the letter.
Nearly a year into the pandemic, they also said the university had learned how to best test and isolate students when a positive case occurs.
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"We have concluded that the conditions support moving forward with offering juniors and seniors the opportunity to return to campus for the spring quarter, with systems and safeguards in place to protect our community's health," said the letter.
According to campus protocols, students living on campus are required to get tested twice a week, a service provided by the school.
Students coming back to campus will also have to quarantine until April 7.
After that, socializing will be mostly limited to their declared households.
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"Though we expect some gatherings to be possible, campus life still will be far less vibrant than students would experience in normal times," read the letter from administrators.
The news that upperclassmen could return came as relief for senior Cricket Bidleman, who said she had an unstable housing situation that forced her to spend the last year bouncing around the country from Philadelphia, to Massachusetts, to San Diego and finally, Arizona.
"We are definitely hoping to have a quarter with friends and loved ones before we graduate," she said.
However, her excitement was tempered by the reality of dorm living in a pandemic.
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"There has been a serious issue with non-compliance with safety protocols," she said, referring to reports in student newspapers of large parties. "It's a concern for me."
Still, she said she has already created a household with a group of friends and is looking forward to salvaging what she can of her Stanford experience.
"I hope my peers and I will be willing and able to adhere to safety protocols to keep each other healthy," said Bidleman.
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