SINCE THE 1950s, the 23 colleges that make up the Ivy Overlap Group have met annually to adjust financial aid packages for students who applied to more than one member of the group. Last month, the Overlap schools decided not to hold their annual meeting.

This year's meeting was canceled as a "sign of good faith," according to Daniel Steiner '54, vice president and general counsel for Harvard. The colleges have wisely realized that the worst thing they could do politically is antagonize the Department of Justice, which two years ago launched an antitrust investigation of their approaches to tuition, faculty salaries and particularly financial aid packages.

Overlap is collusion and collusion is illegal. Overlap universities protect their financial aid packages from free market competition. But is this a bad thing?

As a matter of fact, it is.

SOME CLAIM that ending overlap will sap academic programs, cut into faculty and staff salaries, force layoffs, threaten need-blind admissions, discourage growth. But no one really knows what the effects of competition will be, primarily because the people with access to the data are under investigation and are unwilling to talk. But most indications are that free market competition will benefit students and promote the colleges' academic missions.

Some studies have downplayed the importance of cost in students' college choices. (In fact, incoming President Neil L. Rudenstine has done extensive research in this area.) But some schools certainly seem to think that increasing financial aid packages will improve the likelihood that an admittee will matriculate. Stanford, for example, has consistently offered more lucrative aid packages than members of the overlap group.

When overlap ends, schools will give more money to the students they want the most. Minorities, academic aces and athletic recruits will benefit the most. But marginal admittees could benefit, too. Remember, Harvard prides itself on its unequalled yield rate. Harvard wants to attract the top 1600 students that apply. In the open market, Harvard--and other schools--will have to jack up their aid packages for everyone.

ASSUMING THAT the universities will have to give more financial aid, the money will have to come from some-where. Universities have fixed budgets like everyone else. The money won't bite into the endowment or current salary contracts. Universities will make up their deficits by cutting unnecessary (and perhaps necessary) programs, reducing staff, eliminating research grants, decreasing library development and hiking tuition. Students would suffer from these cuts. Of course, students on financial aid are already forced to work a certain number of hours a week. They are often unable to exercise the full range of academic and extracurricular options Harvard has to offer, anyway.

In any case, funds for financial aid can also come from capital campaigns. Harvard is about to launch a $2.5 billion fund drive. That's a lot of money. Surely some of it can go to make college more affordable for lower-and middle-income students. And if the campaign is successful, Harvard may be able to do it without cutting into programs, facilities and staff.

Perhaps tuition will continue to climb in order to keep up with the increased need for funds. So be it. Those who can pay will pay. Those who can't pay will get help. Financial aid will continue to have its redistributing effects.

That's why they call it "aid," isn't it?