After 30 years of stability and tacit cooperation in Ivy League financial aid, a January announcement by Princeton University set off a chain reaction that pushed five of the nation's top universities into increased generosity in a matter of months.

But as Princeton, Yale, Stanford, MIT and the University of Pennsylvania (Penn) all announced new outlays aimed at attracting middle class students, Harvard sat on the sidelines for an entire semester--true to an institutional tendency not to follow a trend it didn't start.

President Neil L. Rudenstine originally reacted with a pledge to keep Harvard's offers "within shouting distance" of competing schools. As the spring wore on, Byerly Hall officials made similar pledges of generosity without instituting formal change.

These pledges seemed to work--an 80 percent admissions yield had the potential to blunt arguments for changes in the aid policy.

But only last week, after two months of explaining themselves to the Class of 2002, the financial aid office and Rudenstine committed to a formal policy change by next October.

No one in Byerly or Mass. Hall is sure what form these changes will take, but it seems likely that they will include a general reduction in self-help requirements--loan and work-study commitments which were targeted by other universities in the first wave of this spring's financial aid revolution.

But it remains to be seen whether, without the urgency which a drop in yield would have created, Harvard's final move will be as generous as those of its competitors.

The Way It Used to Be

This spring's revolutionary aid changes upset a system of collaboration among Ivy aid offices which formally began in 1958, with the formation of the Overlap Group.

This consortium of Ivies and other top schools met every admissions season to make sure students admitted to several schools got roughly the same offer from each. Their back-room bargaining caught the attention of the Justice Department in 1991 and dissolved under threat of price-fixing charges.

But until this spring the spirit of the Overlap Group lived on, in an informal understanding that all former Group members would give all students roughly similar packages.

But after a semester of change, only two of U.S. News & World Report's top six colleges--Harvard and cash-strapped Duke University--still functionally adhere to the older system. With Harvard's departure in the fall, the Overlap Group system will be formally buried after 40 years.

Making Changes

"We kind of got out of step," said Princeton Director of Financial Aid Don Betterton in February, as his school became the first to break out of the Overlap consensus system.

Princeton's percentage of students receiving financial aid had dropped to 39 percent last year--an embarrassing five or six points below schools like Harvard in a era painfully conscious of diversity. Alumni were talking about a "lingering F. Scott Fitzgerald aura."

Princeton addressed this problem in late January with a series of bold and costly moves. It eliminated all loans for students whose families make less than $40,000 per year, replacing them with outright grants. For middle-class families making more, a large percentage of loans was eliminated.

Princeton also removed home equity from calculations of family worth--and expected family contribution--in a move aimed at middle-class families with money tied up in their homes. All changes apply to the incoming class of 2002 and future classes. They are predicted to cost $4 to 6 million annually.

Just two weeks later, Yale University followed suit, with a less-nuanced plan which ignored the first $150,000 of family assets--including home equity and savings--in calculating family contributions. These changes were applied to all current undergraduates as well as incoming students.

Aid insiders said Yale--which frequently fights Princeton for the same pool of middle-class students--had to change its policies or face serious recruiting trouble. Yale officials admitted after the announcement that "[their] timing was related to Princeton's announcement."

One week later, Stanford University made its play for the same pool of students. Refusing to be left behind, Stanford launched an original plan to use outside scholarships to eliminate student loans.

Under traditional policies like the one Harvard used through this spring, 60 percent of outside scholarships are applied towards reducing outright aid, and 40 percent towards cutting loans. Stanford now uses scholarships to completely eliminate loans and work-study before applying them against grants.

The next policy overhaul occurred a month later at MIT. Officials there reduced self-help requirements--loans and work-study contributions built into nearly every aid package--by $1,000 for all students. They said the changes were spurred by the increased generosity of Yale, Princeton and Stanford.

"When that stuff hit the news, it definitely entered into our decision-making process," said MIT Director of Financial Aid Stanley G. Hudson.

Finally, Penn weighed in with a strategy suited to its relatively small endowment. This plan strengthened an existing program which gave out merit based "preferential packages" to 100 outstanding and needy students.

These packages will eliminate all loan requirements and, officials hope, will attract a core of outstanding students without straining the capacity of Penn's nest egg.

Harvard's Ability to Increase Aid

Meanwhile, the state of Harvard's endowment seemed all semester to say what Harvard officials wouldn't: the University could pay.

This spring officials pointed to the fact that Princeton's endowment is larger per student than Harvard's as an excuse for their policy inaction.

But as Harvard's endowment climbed toward $13 billion, it seemed that only an unusually conservative financial policy prevented a formal increase in aid outlays.

Harvard has traditionally paid out about 4.8 percent of its endowment to support institutional operations in a given year. In recent years, as endowment growth has exploded, total payout has remained steady, making the current payout percentage about 3.7 percent and falling.

If Harvard were to return its payout to even 4.5 percent for fiscal year 1999, there would be an extra $6 million specifically earmarked for Faculty of Arts and Sciences (FAS) financial aid.

This payout--well within the bounds of traditional policy--would enable Harvard to spend roughly the same amount of new money per student on financial aid as Princeton and MIT, and far more than Yale, Stanford or Penn.

A policy of making competitive offers on a case-by-case basis this spring cost the University between $750,000 and $1.5 million, taken from existing discretionary funds. Formalizing this fall's changes could mean at least an extra $2 million per class, though there are still no plans to pay for this increase with an endowment payout hike.

Holding Out and Giving In

All semester, Harvard officials admitted that the fiscal potential for change existed, but refused to comment on the possibility of making their own changes.

Rudenstine's was the loudest voice all semester, beginning with a February speech to alumni where he introduced the phrase "shouting distance" into financial aid parlance.

According to Miller, this phrase was translated into competitive generosity within the current aid system, combined with longer office hours as Byerly Hall explained its informal outreach to concerned parents and students.

Miller said generally about 30 percent of students offered aid packages call or write back requesting an adjustment. This year, as admitted students read about additional aid in other schools' admit packages that percentage jumped to 70.

But he and others now echo what Harvard officials said at the time: with a mountain of educational prestige, the University could survive a semester's learning curve. Not wishing to endanger its financial reserves with an unsustainable knee-jerk reaction, Harvard bided its time. And 8 out of 10 admitted students agreed, accepting Harvard's acceptance.

But now, officials say, it is time for a substantive change--vague "shouting distance" pledges won't last forever in a world where other universities commit themselves to higher aid levels.

The End of Inaction

The exact shape of next fall's changes cannot be predicted before this summer's aid review begins, but certain aspects of Harvard's aid policy are likely to remain static.

According to Miller and Rudenstine, the way Harvard calculates family need will not be changed by the committee's recommendation. The process could, however, be altered by a separate action by the College Scholarship Service, which sets up basic need calculations nationwide.

Harvard will also not turn to merit-based scholarships like Penn's, they said. But these attempts to draw a small but reliable core of top students might be in the next wave of aid changes at other universities--particularly those with less ability to pay.

However, what is likely to change at Harvard is the percentage of aid met by self-help requirements. Miller said this portion of the student's burden might be absorbed by an increase in direct grants, or reduced using outside scholarship funds on the Stanford model.

Officials will commit to few other details about next fall's changes. The worry remains that, without a dire drop in admissions yield, the University might only be as generous as it needs to be.

Instead of offering a generous new system of aid, an 80 percent yield may mean Harvard can avoid sweeping changes because "shouting distance" seems--at least for the moment--close enough.