Following on the tail of recent financial aid expansions by peer institutions like Harvard, Stanford University announced yesterday the largest increase ever in its undergraduate financial aid program.

Stanford will no longer charge tuition to families with an annual combined income below $100,000. And like at Harvard and Yale, families earning less than $60,000 will not be expected to contribute to other educational expenses, including room and board.

In 2006, Stanford announced that families earning less than $45,000 would be exempt from paying tuition.

The new initiative also eliminates the need for student loans by lowering the typical student contribution from $6,100 to $4,500, which students can cover with work-study or outside scholarships.

Under the program, the average family contribution for students receiving financial aid in 2008 will fall 16 percent. The initiative will go into effect for the upcoming academic year.

The maximum contribution by families earning between $60,000 and $100,000 will be $15,683 for both student contribution and room and board.

Under the Harvard Financial Aid Initiative, undergraduates whose families earn between $60,000 and $120,000 will contribute between zero and 10 percent of their annual income based on a sliding scale. Students whose families make between $120,000 and $180,000 will pay only 10 percent of their annual income, Harvard announced in December.

Stanford’s expansion of financial aid will cost the university an additional $20.7 million, bringing their total cost of need-based scholarship to $97.2 million.

“This is the third consecutive year we have allocated substantially more money to financial aid for lower- and middle-income families,” said Stanford University President John L. Hennessy in a statement. “No high school senior should rule out applying to Stanford because of cost.”

Stanford will spend half of its total undergraduate tuition revenue on financial aid for the upcoming school year.

To fund the new aid program, Stanford increased its endowment payout last year by 5.5 percent. The university also plans to double its financial aid goal to $200 million in their ongoing fundraising campaign. Stanford raised $832.4 million in 2007, more than any other university for the second consecutive year, according to The New York Times.

Three out of every four Stanford undergraduates currently receive some form of financial aid.

A spokesperson for Stanford declined a request for comment.

—Staff writer Alexandra Perloff-Giles can be reached at aperloff@fas.harvard.edu.