DISRUPTIVE DEBATES over University finance and graduate education have become an annual Harvard Spring rite. For the second consecutive Spring, the Graduate School of Arts and Sciences (GSAS) instituted a new financial aid policy that met with widespread student hostility, erupting into a strike of about 700 graduate students and scattered undergraduate sympathizers.

Since Spring 1972, when the GSAS abruptly discontinued its program of Staff Tuition Scholarships for all teaching fellows, fundamental disagreements and confusions have cloaked the three-way debate between students, Faculty and administrators over financial aid to graduate education. At the heart of the debate are the questions of Harvard's budgetary prioities, decisionmaking process that sets those priorities, and the effect of both on the tone and quality of education.

If the parties in this year's debate agreed on nothing else, they concurred on the urgency of answering these questions. At least they did so verbally. In the end, however, the controversy produced no more than a few sadly vapid conversations between students and administrators. The unanswered questions at the heart of the problem were hardly brought out of the closet, and remain unanswered, which could lead to further disruptions when the plan comes up for revision next Fall.

Massive cutbacks this year in Federal aid to education can only bode increasing ills for Harvard's budget. The Nixon cutbacks hit Harvard right where it hurts--in the Faculty of Arts and Sciences budget--to the tune of at least $700,000. Rapid disappearance of Federal and other outside funds--previously dependable supports for large graduate student bodies--intensified Harvard's problem of setting priorities with its own income. In response, the Corporation upped its allotment for graduate student aid to $1.9 million, an increase of $400,000 over last year's budget, and the GSAS instituted its third financial aid plan in as many years to spread the additional funds around.

THE NEW plan, instituted in February and devised by Richard A. Kraus, financial assistant to the dean of the GSAS, was billed as a minor revolution in graduate education finance. Given the loss in outside funding, the Kraus plan in Harvard's effort to distribute the limited resources to those who need it most. The student's need is calculated from the students' parental income, personal resources and living expenses, which is applied to all first-through fifth-year students as a yardstick for determining aid. Under the plan, however, departments can choose to fund students $1000 below their calculated need, and use the difference to swell their number of "merit scholarships," which are awarded at the discretion of department chairmen.

Previous plans left most funding to the chairmen's discretion, and merit was the sole criterion for financial aid. Other plans had used need criteria to determine aid for teaching fellows only, but had awarded them enough to cover tuition plus living expenses. The Kraus plan evaluated teaching students in the same category as non-teachers--salaries counted as "resources" and were figured into the need estimate.

An important part of the Kraus plan was its stipulation that the graduate school reduce the size of its first-year class by at least 50 students. This reduction constituted the only response by an Ivy League university to the sudden financial crisis facing graduate education. Conferences in February with other Ivy League graduate school administrators revealed that although all schools had suffered equally from cutbacks in outside funding, Harvard alone had reduced the scope of its merit scholarship program.

As a result, department chairmen reacted to the plan with predictable anxiety. Because the Kraus plan's need criteria cut into their freedom to recruit and encourage the most "meritorious" applicants and students, the chairmen warned that such students might be lured away to Yale or Berkeley, where merit scholarships still rule graduate student financing. In short, they warned that the quality of graduate education was at stake. Nonetheless, department chairmen agreed unanimously to adopt the Kraus plan on a trial basis only for next year.

Graduate students were not quite so docile when they received word of the Kraus plan. What administrators had called "revolutionary" was billed "revolting" by graduate students who led the work stoppage in Spring 1972. Their objections dealt not only with the plan itself, but with the Administration's decision to institute it over student protests.

Student members of the Commission on Graduate Education had unanimously rejected the plan less than a month earlier. The 12-member student-Faculty advisory body--established at a Spring 1972 Faculty meeting in the aftermath of the graduate students' first protest--was charged with formulating a financial aid policy acceptable to both students and Faculty. A series of delays kept the Commission from taking shape until December, however, and a January deadline for the GSAS budget ruled out chances that the group would influence the 1973-74 plan. Kraus, who had met regularly with members of the Commission, showed them his plan before it became official, but the time factor took precedence over members' objections or recommendations.

Student objections, like those of department chairmen, centered on the plan's need criteria--but for opposite reasons. Their argument sounded generally like this:

* The Kraus plan's tax on parental income and other student resources is virtually prohibitive for students from middle income families. Within three years, half of the graduate student body will be bright, poor scholarship students and the other half will come from upper-class, professional backgrounds. Furthermore, the idea of asking graduate students--many of whom have been independent for the last few years--to turn to their parents for support is ludicrous.

* Harvard has no justification for cutting back on its financial commitment to students; if the government pulls out, Harvard should make up the difference.

* The option of funding students $1000 below their calculated need undermines the purpose of need criteria. Under the Kraus plan, need is clearly subordinate to merit. The plan should provide full funding up to need.

* The Kraus plan discourages teaching. If a student gets less aid because he has a teaching fellow's salary, only the richer-independent students will be able to teach undergraduate sections. And with the rising cost of education, who can afford to extend his school years by teaching?