Yale has joined a group of 27 colleges – including Columbia, Cornell and Stanford — in an agreement to use common guidelines to calculate student need for financial aid, a pact that will increase aid for Yale students by $1 million per year beginning with the Class of 2006, University President Richard Levin said.

The new guidelines for parental contribution are replete with relief for middle-class families: less consideration of home values in determining parental contribution, a reduction in the amount required to be spent out of students’ savings accounts, and a cost-of-living adjustment for parents in expensive cities.

Both of Yale’s closest competitors announced sweeping financial aid overhauls last year in the student contribution portion: Harvard will spend an additional $8.3 million to sharply reduce student work study and loans and Princeton will spend $5 million to replace student loans with outright grants. Neither Harvard nor Princeton signed on to the 28-school pact.

Yale administrators have said they will announce changes to the school’s student contribution policy in early fall.

The group of schools that signed onto the changes this week is hoping the agreement will strengthen the fight to preserve need-based aid, which in recent years has given way at some schools to merit-based scholarships offered to the most sought-out students instead of the neediest.

“It’s really committing a deeper layer of schools to need-blind admissions and need-based aid,” Levin said. “The whole regime was being threatened … The schools were considering more merit scholarships. [We had to] make sure that highly selective schools stuck to the philosophy of need-blind admissions.”

The 28-school pact’s standardized guidelines address only the calculation of parental contributions. The cost of attending college is broken into three portions: expected parental contribution, student contribution and school grant.

“There should be some worry to the growth of merit aid that goes to those who have the ability to pay,” Yale’s Dean of Admissions and Financial Aid Richard Shaw said. “[The schools that signed the pact] agree that we’re focusing our limited funds toward families with the greatest need.”

The biggest change will be a reduction of money taken from college savings accounts under students’ names from 35 percent to 5 percent, a percentage equal to the amount currently taken from parents’ savings accounts. This measure, which was part of Princeton’s sweeping aid reforms this past January, protects families who save in their children’s names.

The guidelines will also lower by 20 percent the ceiling on Yale’s consideration of home value in determining parents’ financial status. The change will benefit families who own their own homes.

Yale will take into account the higher living expenses in cities such as New York and San Francisco when deciding how much parents can contribute, and Yale will expect a lesser contribution from parents who have not saved for their own retirement.

Several of the 28-school pact’s guidelines are not new for Yale, a school that is more liberal in its aid than many of the other colleges. One guideline involves more careful consideration of divorced parents and stepparents’ incomes, which Yale already does.

Yale signed the pact only conditionally. The University added an across-the-board exemption of $150,000 of families’ assets in 1998, and Levin agreed to sign the pact only with the provision that Yale could continue to offer the exemption, which protects the first $150,000 of a family’s assets from consideration when calculating the parents’ financial contribution.

One aim of the standardized guidelines is to make the process easier for families receiving multiple packages, administrators said. A family will see that these 28 schools all found it to have a specific amount of need. From there, the schools’ packages will diverge, based on how schools treat the student contribution portion.

This diversion in packages allows for competition among top need-based schools, and lately there has been plenty of competition.

Princeton, Harvard, the Massachusetts Institute of Technology and Dartmouth announced financial aid reforms in the past few months that will lower student debt and work-study expectations beginning in the upcoming school year.

Yale officials are studying these schools’ recent changes and other possible changes to make to the University’s student contribution policy and will likely announce a response early in the fall.

The two discussions – the 28-schools’ group talk about parental contribution and Yale’s internal talk about student contribution – simultaneously do and do not relate.

Harvard and Princeton – two schools Yale would respond to with a change in its student contribution policy — did not sign on to the new guidelines. The New York Times reported that Harvard and Princeton aid officials said the guidelines would have reduced the amount of aid they currently give students.

“They tend to want to do things their own way,” said Caesar Storlazzi, Yale’s associate director of financial aid.

It comes as little surprise to administrators involved in the 28-school pact that Princeton did not sign on: the university did not send officials to the group’s meetings, officials at numerous schools said.

Don Betterton, Princeton’s director of financial aid, said in the spring that his office was discussing the pact’s proposals.

Financial aid has been a field of uncertainty in the past decade since the U.S. Department of Justice accused a number of top schools – most of those now in the 28-school pact– of tuition and financial aid package price fixing. As a result of the Justice Department’s suit, most top schools agreed not to discuss aid at all during the early ’90s.

In 1994, under Section 568 of the Improving America’s Schools Act, Congress granted an anti-trust exemption for these top colleges that practiced need-blind admissions to discuss general aid principles, though not particular students’ aid packages.

Two years ago, about 30 schools began meeting calling themselves the 568 Presidents’ Working Group, because – in the words of the group’s leader Cornell University President Hunter R. Rawlings III – they were concerned about “serious erosion in need-blind decision making.”

The 28-school pact on parental contribution guidelines was produced in these meetings over the past two years.