Two weeks after Princeton University announced a major increase in financial aid, Yale University followed suit last Thursday with a plan to spend millions more on needy students.

Unlike the Princeton plan, Yale's changes will apply to both current students and entering first-years.

The new system is expected to bring the average student $1,400 more per year and some students more than $6,000 annually.

Yale Director of Financial Aid Donald McM. Routh said yesterday that the plan has been in the works for most of the year but that the Princeton announcement had made his office finalize their changes much faster than expected.

"The timing was related to Princeton's announcement," Routh said. "We weren't concerned about losing big numbers of students to them, but we felt that the ones we would be losing would be the ones we really wanted."

Both schools have now broken with the decades-old Ivy system of cooperation and consultation in financial aid.

This system began with the "overlap group," a consortium of colleges that began meeting in 1958 to ensure that applicants receive similar aid offers from every school.

This group dissolved after a Justice Department price-fixing probe in the early 1990s, but most Ivy League schools, including Harvard, continued to offer similar packages until Princeton's announcement.

Harvard President Neil L. Rudenstine reacted to this news last weekend in a speech to leaders of the Harvard Alumni Association.

He told alumni, among whom were several prominent donors, that Harvard would take competitive offers into account when building aid packages.

Rudenstine said the University would seek to keep its aid offers "within shouting distance" of its competitors in these cases.

Harvard Director of Financial Aid James S. Miller said in an e-mail yesterday that the University has no offi- cial comment on either Princeton or Yale'sfinancial aid changes.

Yale's new system will ignore the first$150,000 of a family's assets--typically includingsavings and home equity--in calculating thatfamily's expected contribution. Routh said abouthalf of all Yale students' families would benefitfrom the changes.

"We became concerned after the last few classeswhen we continued to see a gradual fall-off inmiddle-class representation," Routh said. "Itwasn't a dramatic problem, but it's something wewould have had to tackle sooner or later."

Yale's policy is similar to one facet ofPrinceton's plan, which ignores the first $90,000of home equity in calculating expected familycontribution. Princeton also replaces needierstudents' loans with outright grants.

Other facets of the Yale plan include areduction in the amount students must contributefrom summer job incomes, making possible alower-paying internship or a summer abroad. LikePrinceton, Yale will also increase aid forinternational students.

Routh said that Yale was seeking to attractmiddle-class students who might otherwise attendPrinceton, Harvard or cheaper state schools likethe University of Michigan or the University ofNorth Carolina at Chapel Hill.

"We wanted to remain competitive," Routh said."We don't want to lose out on good studentsbecause of a big discrepancy in aid.