The Faculty last week approved a new financial aid plan for the Graduate School of Arts and Sciences, ending a year-long battle with students over the distribution of the decreased funds available to support graduate work at the University.

The plan, a shift away from merit-oriented awards, is a compromise. The new system balances the departments' need for merit funding to compete with other schools for top students with many graduate students' demand that students be funded as closely as possible according to financial need.

Under the plan, each department will be limited as to the total number of students it can admit and the proportion for which it can supply financial aid. The difference between a department's total number of students and the number who can receive support will be made up by admitting students who can find private funding.

The plan also permits the department to fund each student up to $1000 below his minimum support needs. This option allows each department to generate money which it can use to lure top-caliber students to Harvard, regardless of their financial need.

The plan sidesteps the basic problem underlying the conflict at the GSAS: lack of money. A decline in corporate and government contributions in the last five years has placed a substantial burden on the University to fund graduate students with its own money. Next year, the number of Harvard-supported first-year graduate students will drop from 381 to 300 and yet the GSAS will have to raise an additional $500,000 in order to implement the plan.

The student members of the Committee on Financial Aid, which formulated the aid plan, issued a statement which said, "Our primary objection to the plan is that there is not enough money in it."

The students explained that they believe the merit-oriented funds should not be generated at the expense of other graduate students.

But because the GSAS is dealing with a problem of fixed resources, the money used for merit-oriented scholarships must come at the sacrifice of students who need support for financial reasons.

Both President Bok and Dean Rosovsky said last week that a University-wide financial drive on behalf of students would probably not be successful, but suggested that individual departments begin individual fund-raising efforts.

Students and Faculty have hesitations about the unpredictable results of the plan's peculiar financial mechanisms for separating the needy and the highly qualified.

Some graduate students say the aid program will create a "two-tiered" graduate body comprising needy supported students and wealthy students who can affort to pay full tuition.

The separation of places for the needy and the rich could also have a detrimental effect upon the academic quality of the GSAS. If the decrease in support funds force many more needy students to abandon graduate plans and the lack of merit-oriented scholarships sends the best students to other schools, Harvard could lose both ways.

In addition, some professors fear that the reduction in the overall number of graduate students could also have bad repercussions upon undergraduate education by causing a decline in the number of available teaching fellows.