Faced with limited financial means and increasingly generous competition, the University of Pennsylvania (UPenn) last month found its own solution for financial aid reform: all needy students are equal, but some are more equal than others.

Expanding a policy known as "preferential packaging," UPenn announced it will give 50 of its most prized applicants new "Trustee Scholarships"--aid packages that replace all loans with outright grants.

Since January, Princeton, Stanford, Yale and MIT have pledged to spend millions of dollars more on aid next year. By contrast, UPenn estimates its Trustee Scholars program will cost about $125,000.

"Preferential packages" are not formally considered merit scholarships--anathema to the Ivy League for years--because they still offer aid based on calculations of demonstrated need.

But that demonstrated need is met completely with grants instead of "self-help" aid like work-study and student loans. Princeton Director of Financial Aid Don Betterton, whose school does not use preferential packaging, called it "merit within need."

Preferential packages in this case serve the same end as full-tuition scholarships, making UPenn more financially attractive to accepted students who have several higher education options.

According to Yale Director of Financial Aid Donald McM. Routh, programs like this were once common in the Ivies. Harvard at one time offered similar incentives in its National Scholars program, which was scrapped in the early 1990s.

"[Preferential Packaging] has been around forever, and lots of people have used it," said Harvard Director of Financial Aid James S. Miller. "Penn has just upped the ante."

Yale, Princeton, Harvard and Dartmouth have all dropped preferential packaging in recent years, according to Betterton. He said Columbia and Cornell continue to use the program in addition to UPenn. Financial aid officials from those two schools did not return phone calls this week.

UPenn Director of Financial Aid William Schilling also did not return repeated phone calls this week, but aid officers at other universities say preferential packagingprograms like Penn's are usually run with the helpof the admissions office.

"The admissions office will say, `Here's a listof 100 strong candidates,'" who would then beoffered aid packages with less self-help,according to Routh.

Routh said that Penn had previously offeredfive different levels of self-help aid, whichdiminished based on a student's attractiveness tothe university. The new program goes further bycompletely eliminating self-help for the 50Trustee Scholars.

Schilling told the Daily Pennsylvanian lastmonth that Penn chose this plan because of thelimitations of its endowment, which is dwarfed bythose of Princeton, Stanford and Yale.

"What we did was hard [to follow]," Bettertonof Princeton said. "I think [Penn] looked at thesize of their population and the size of theirendowment and realized that they could not do asblanket a program as we did.