By Jeffrey Gangemi

Cathy Marsella, a 25-year-old strategy consultant working in Washington, D.C., has an enviable task. She was recently admitted to both The Wharton School at the University of Pennsylvania and Northwestern University's Kellogg School of Management, and needs to make her choice by April.

Marsella recently attended admit weekends at both campuses, where the schools made their pitch to prospective students. She says Wharton stressed its strong reputation, finance expertise, and reserved culture, while Kellogg highlighted its energetic environment, solid marketing program, and esteemed concentration in general management. Still, her decision may ride on the financial aid the schools offer; both are comparable in terms of culture and future job opportunities, says Marsella.

After three consecutive years of fewer applicants, top U.S. MBA programs are seeing a rise in the number of applications (see BW Online, 12/7/05, "First-Round Frenzy"). To maximize their yield, schools are increasingly wooing shining stars by beefing up their financial-aid offerings.

NEW INCENTIVES.  Although admissions directors and applicants agree that academic fitness is key, some experts say financial aid should be more important for students. Two years at a top B-school costs upwards of $150,000, including living expenses. Average total debt for MBA grads who use Graduate Leverage, a Waltham (Mass.) debt management and consolidation service that served 20,000 students last year, was almost $90,000 (see BW Online, 1/27/05, "How to Bear Those B-School Bills").

"MBAs surprisingly pay very little attention to financial aid because they all think they're going to get out and make millions, but a down economy can change that quickly," says Dan Thibeault, co-founder and president of Graduate Leverage.

Perhaps the biggest player in financial aid is the University of Chicago's Graduate School of Business. Unlike Harvard and Stanford, which offer only need-based aid, and Wharton, which now requires an extra essay for students seeking any combination of need- or merit-based assistance, Chicago doesn't require extra paperwork for students to be considered for both merit- and need-based aid.

Rose Martinelli, associate dean of student recruitment and admissions at Chicago's b-school, says 15% to 20% of students get some assistance based on academic performance. The aid packages range from sufficient to extremely generous. Chicago, which admits about 500 students in its class, offers at least seven full-tuition scholarships that also provide a yearly stipend of $15,000 or $20,000. Meanwhile, other recent incentives include the $50,000 marketing fellowships offered for the first time this year, funded by Jim Kilts, alumnus and Gillette CEO. To further supplement those fellowships already available, Martinelli says the school will unveil several more later this year.

RISING COSTS.  Not to be outdone by its crosstown rival, Kellogg also offers fellowships and other merit-based aid. So far, the school has added two new full-tuition scholarships. Fund-raising for financial-aid dollars is one of the school's three top priorities because students just seem to need it more, says Beth Flye, assistant dean and director of admissions and financial aid at Kellogg. Flye adds that the percentage of students requiring aid has reached an all-time high of 77%.

Other schools have taken a different approach. Harvard, Stanford, and Wharton, for example, have loan-forgiveness programs for graduates working in the nonprofit world and, increasingly, for those willing to work for less pay in developing countries.

Regardless of the aid the institutions offer, all of the top schools are working hard to help students bear the rising cost of B-school education. As part of their capital campaign that was launched in 2003 and completed in early February, 2006, Harvard has raised more than $113 million for financial aid. Assuming a 4% payout of their endowment, they figure they'll have more than $4 million in additional funds this year for need-based aid, says Brit Dewey, managing director of MBA admissions and financial aid at Harvard Business School. With 80% of students receiving need-based funds, the average package stands to grow by at least $5,500.

A DIFFICULT DECISION.  But should financial aid be the deciding factor in making the important decision of where to attend B-school? Pinki Mishra, a 27-year-old biotech and pharmaceuticals industry consultant, was admitted to New York University's Leonard R. Stern School of Business and Carnegie Mellon's Tepper School of Business in round one. Although she's waiting on her round-two decision from Kellogg, she has to reply to Tepper, which offered her a full-tuition scholarship, by Mar. 3.

"Full tuition paid for two years is not something to be turned away lightly," says Mishra. "I need to do a bit more soul-searching, but I'm leaning toward taking the money."