The University’s move to cap most student prizes at $1,000 has sparked opposition from some faculty and students who argue that the policy deprives students dependent on the funds to finance creative or academic activities outside of Yale. And while administrators say the cap is just another means of expanding financial aid for needy students, they are still unsure how to execute the change.

Over the decades, Yale and its peers have increasingly favored giving students need-based aid rather than merit scholarships, and the new policy announced to department chairs this month — which will funnel prize money in excess of $1,000 toward financial aid for prizewinners who qualify — will help more students pay for their Yale educations, administrators said.

In effect, prizewinners each receive up to $1,000, and Yale keeps the rest. The excess income from prize endowments will be earmarked for prizewinners’ existing financial aid, freeing up funds in the general financial aid budget for Yale’s other expenses.

Chief among the concerns of students and faculty who oppose the move is that a large majority of the prizes must be awarded to seniors, for whom it would be too late to benefit from financial aid. Yale will keep the excess prize funds if prizewinners are not on financial aid, reserving the excess income for future awards.

The cap is especially hard on outstanding students who plan to forgo well-paying career paths to pursue the arts or take jobs in academia, critics argue.

“For graduating seniors, and really for any humanities majors, prize money makes possible certain ventures, creative or otherwise, that simple tuition defrayal would not,” said Jordan Jacks ’09, who won three prizes for fiction and poetry from the English department as an undergraduate.

Administrators are facing not only the objections of some members of the Yale community, but also the logistical challenge of putting the policy into effect by the time the prizes are awarded this spring. Every prize is being reviewed individually to determine if the donation agreements will allow for a redistribution of funds, Provost Peter Salovey said.

Since every gift is different, individual donors may have specified that excess funds should be used for purposes other than financial aid, Vice President and Secretary Linda Lorimer said, citing as an example the Charles Washburn Clark Prize, which the Political Science department awards every year for a senior essay on political philosophy or theory. Under the terms of the Clark agreement, she said, the department must award precisely $100 each year, with the excess income given to Sterling Memorial Library.

“No generalization can be made about how we would award the funding from these,” Lorimer said. “It’s too early to tell how many will go back into financial aid.”

Complicating their job is the fact that many of the prizes must be given to seniors, whether to reward them for outstanding senior essays, athletic achievement or leadership. And, like these graduating seniors, even younger prizewinners may not qualify for need-based financial aid. Lorimer said administrators may make exceptions to the $1,000 cap for senior prizes, allowing them to be set higher.

But both she and Salovey said they have many questions to resolve.

“I’m afraid these details have not yet been worked out,” Salovey said.

What administrators do know is that if they are able to pay for prizewinners’ financial aid by siphoning off prize funds in excess of $1,000, they will be free to shift money from the general financial aid budget to other University expenses, he said. In other words, the excess prize funds will replace, not supplement, winners’ financial aid awards.

Administrators said they see the plan as another way to protect Yale’s financial aid program from the endowment’s 24.6 percent decline and the budget cuts that have followed. Since the extra prize money is still funding prizewinners’ financial aid packages, Lorimer said, donors’ prizes are still supporting the excellence of Yale students.

But regardless of whether a prizewinner receives financial aid, prize money provides students with a way to fund activities that normal financial aid or even fellowships would not, past prizewinners argued.

Jacks won the Albert Stanburrough Cook Prize for poetry in his junior year, which helped him defray the cost of taking an unpaid internship at a New York publishing house the summer afterward. Neither his financial aid package, which he was not eligible for until his senior year, nor Yale’s fellowships, which usually carry specific requirements, would have helped, he said.

After Jacks graduated, his Gordon Barber Memorial Prize for poetry and the Elmore A. Willets Prize for Fiction, both worth well over $1,000, paid for several post-graduation activities, including traveling to Norfolk, Conn., to be a resident poet at the Norfolk New Music Workshop.

Similarly, five other prizewinners interviewed said their prizes had allowed them to take unpaid internships over the summer, go to graduate school for less or pay for summer classes.

Still, Jacks and the other prizewinners said they recognized that $1,000 was still a generous sum.

“I’m not about to look this gift horse in the mouth,” Jacks said.

The chair of the English department’s prizes committee, Leslie Brisman, said he believed cutting funds from upperclassman prizes would violate donors’ intentions. Prizes such as the Willets, which generated income of $20,750 last spring, or the $10,200 Sholom and Marcia Herson Scholarship for seniors intending to do graduate work in English could be vital for seniors choosing to pursue careers in writing or academia, he said.

But Salovey said the cap was designed to distribute Yale’s generosity more fairly.

“If you have $10,000, wouldn’t you rather give 10 students $1,000 than one student $10,000?” he said. “There are many deserving students at Yale.”

While the Provost’s Office is handling most of the prizes, Yale College Dean Mary Miller is in charge of setting the amounts given out for the so-called “high stand” prizes, which are awarded on Class Day to graduating seniors for excellence in academics, the arts or leadership. The Louis Sudler Prize, for instance, is awarded to seniors in the performing or creative arts. These awards will be decreased but kept above $1,000.

Miller said these prestigious prizes are not meant to support their winners’ future careers.

“High stand prizes are an honor,” she said. “They are not in any way a down payment on the future.”

Salovey, Miller, Lorimer and other proponents of the policy are simply working within the framework established in the 1950s, when elite colleges began to favor need-based aid over merit scholarships, said Skidmore College economics professor Sandy Baum, who serves as a financial aid policy analyst for the College Board.

That may be, but Yale should protect its financial aid without denying students prize money, said Andrew Williamson ’09, a Herson prizewinner last year.

“Need-based aid should always take precedence over merit-based aid as a general rule,” Williamson said in an e-mail, “but if the financial aid budget has a shortfall, the administration could at least begin by recovering money from those who have more, such as the highly-paid administrators in the University’s corporate superstructure, rather than from those who have less, such as graduating, 22-year-old English majors.”

The new policy applies to prizes in the Graduate School and professional schools as well as Yale College, though Lorimer said the cap for Graduate School prizes may be higher than $1,000.

Nora Caplan-Bricker contributed reporting.