Stanford University is jumping into the competitive world of deep discounting.

Tapping into its burgeoning endowment to make college more affordable, Stanford announced Wednesday that beginning next year it will offer free tuition -- worth $36,000 a year -- to middle-class students whose parents make less than $100,000 a year.

Joining a trend started by other elite universities such Harvard, Princeton and Yale, Stanford is also eliminating student loans.

The move will make Stanford a better value than UC Berkeley and San Jose State University for many students.

For low-income youths, Stanford will pick up almost the entire tab for tuition, room and board -- a $47,000 value. Even wealthy families may get a break: While the value of a home is still taken into consideration, it will play a smaller role than before.

"No high school senior should rule out applying to Stanford because of cost," university President John Hennessy said in a statement.

Like its Ivy League rivals, The Farm is ratcheting up financial aid offerings to expand the economic diversity of its student body -- and deflect criticism that it is hoarding its $17.1 billion endowment.

"If this keeps up, top colleges will soon be offering free shipping and $500 cash back to the first thousand applicants," joked Kathrin Day Lassila, editor of Yale Magazine.

The catch, of course, is getting in the door: Last year, Stanford accepted only 11 percent of applicants.


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For many of those lucky students, the changes mean that Stanford could be cheaper than state schools. For instance, a youth from a family with an annual adjusted gross income of $55,000 would pay $4,400 to $4,900 a year at UC Berkeley after scholarships. They'd get a free ride at Stanford.

At both campuses, those students would be expected to work.

"One of our goals is that students shouldn't have to make decisions about where to go to college based on how much it costs," said Karen Cooper, director of Stanford's Financial Aid Office.

Both current and future students will get help. About one-third of Stanford students' families earn less than $100,000 a year. The median family income of a Stanford student is $120,000 a year.

Children of faculty and staff, who already get a discount, may also be eligible. Even international students can expect help.

With next year's changes, Stanford will spend $97.2 million for need-based scholarships, up from the current $76.5 million. It will pay for the changes from its endowment and extra fundraising.

Local parents cheered the announcement. They said many average families are caught in the middle -- too wealthy for federal grants but not wealthy enough to absorb rising costs.

"It is fabulous news -- able kids might have a shot at getting an education without mortgaging their future," said Preeva Tramiel, president of the Parent Teacher Student Association at Palo Alto High. "Real scholarships like this are an accelerator in the mechanism of upward mobility."

Palo Alto parent Cecilia Long agreed, saying, "Stanford and other private schools are just a dream for many families."

Prospective Stanford freshman Alexei Koseff of Palo Alto said: "I have friends who are altering their post-high school plans because they aren't able to pay. ... I think that it's great that Stanford is reaching out to an even wider group of students."

Stanford sophomore Tim Hyde, 19, welcomed the news -- but said it's long overdue.

"The elimination of loans is also a good thing, but one that merely catches us up to Princeton and Harvard," said Hyde, who is from Potomac, Md. "And the continued consideration of home equity is problematic. I know of students whose parents refinanced their houses to continue to afford tuition."

Throughout the nation, top schools have been seeking ways to end tuition anxiety. Until recently, top colleges offered little or no aid to average families.

Three years ago, Harvard waived all costs for families earning less than $40,000 per year. A year later, Stanford and Yale followed suit for all families making up to $45,000.

In December, Harvard declared a plan to cut costs for families earning less than $180,000. Harvard families earning $120,000 to $180,000 pay no more than 10 percent of their income toward college. At Princeton, families who make $120,000 to $180,000 contribute 16 percent of their income, on average, toward school.

Swarthmore, the University of Pennsylvania and a growing number of other schools are also jumping on the no-loan bandwagon.

The jockeying is partly competitive. Elite schools are always strategizing about how to bring in the best students. Even Stanford routinely loses top applicants to UC and private schools with better financial aid offers.

But the move is also part of a recruitment campaign: Stanford fears that too many poor, smart students don't get the message that they should apply.

Reach Lisa M. Krieger of San Jose Mercury News at 408- 920-5565 or lkrieger@mercurynews.com.