(MONEY Magazine) – Marianne Ragins has what it takes to triumph in today's race for financial aid: a real need for money, coupled with brains and persistence. Ragins, 18, one of five children of a widowed seamstress, graduated from Northeast High School in Macon last June with a 4.47 grade point average on a scale of 5. She spent about 15 hours paging through college scholarship guides in a public library, then toiled many nights until 2 a.m. over applications and essays. The payoff: a total of $315,000 in grants and scholarships offered by a dozen colleges and six corporations and foundations. Her bonanza included $20,000 from Coca-Cola and full scholarships from Jackson State, Rhodes College, the University of New Orleans and Florida A&M, where she will enroll this fall. ''I knew I would need assistance, because my mother's financial resources are limited,'' says Ragins. ''And when I put my mind to something, I do it.'' Although students from more affluent families are unlikely to hit the jackpot the way Ragins did, there's a lesson for everyone in her Cinderella story: competing fiercely for fewer kids, colleges are increasingly using beefed-up financial aid packages to attract outstanding prospects. ''Colleges are under tremendous pressure to fill their classes with the best possible students,'' says Philip C. Johnson, a certified financial planner in Clifton Park, N.Y. who specializes in helping parents finance education costs. ''And private schools must be particularly aggressive because they're battling state colleges that cost much less.'' The competitive spirit may soon take hold even among the 30 or so elite schools like Harvard, Yale and Princeton that routinely reject far more applicants than they admit. Last May, the eight Ivy League colleges avoided federal antitrust charges by agreeing not to exchange information about their financial aid practices or to coordinate their awards. The colleges had argued that it was in the best interest of the students to receive identical aid packages from the schools. That way, students who got into two or more of the Ivies could choose among them on factors other than cost. But critics, including the Justice Department, contended that the system deprived students of the benefits of open price competition. Although the Ivies say they still plan to grant aid strictly on the basis of financial need, at least the possibility now exists that they will vie for the best scholars with financial incentives. This new competitive atmosphere may boost your son's or daughter's chances of finding one or more colleges willing to offer all the aid you need, preferably with a package that's heavy on grants and scholarships and light on loans. This story will tell you how to apply for aid (also see the four boxes that begin at right) and will take you inside the decision-making process so that you can be sure to get every penny you deserve. Will any colleges reject your child just because he or she asks for financial help? That's the first question on many parents' minds, and indeed, some prestigious schools, including Brown and Smith, publicly acknowledge that they reject some otherwise qualified candidates because they cannot afford to give them sufficient financial help. But don't let that keep you from applying for aid. For one thing, if you need substantial help to pay college bills, who else is going to give it to you? And in general, a request for money doesn't hurt students who comfortably meet the college's academic standards. ''Non- need blind admissions policies affect marginal students who need lots of aid,'' says Kalman Chany, president of Campus Consultants, a New York City firm that advises parents applying for financial aid. Ideally, you could find out whether your family qualified for aid -- and for how much -- before your child even applied to a college. That way, you could shop around knowing how much each school would cost. But you won't get that information from financial aid officers. ''We don't want to give parents an answer up front, then have to backpedal and create bad feelings after we get their financial aid application,'' says Michael Brown, director of financial aid at Union College in Schenectady, N.Y. That doesn't mean your child must shop in the dark, however. Schools calculate financial aid by first figuring out how much you can afford to pay -- what financial aid officers call your ''expected family contribution.'' The institution then makes up some or all of the difference with a package of loans and grants. You can estimate your expected contribution by filling out the simplified worksheet found on page 48. (The official figure will be calculated when you apply for aid.) For a more precise estimate, you can complete the questionnaires in Don't Miss Out: The Ambitious Student's Guide to Financial Aid (Octameron, Box 2748, Alexandria, Va. 22301; $7), The College Cost Book 1992 (College Board, $14.95) or Applying for Financial Aid, a brochure available in high school guidance offices, or from ACT Financial Aid Services, Educational Services Division-11, P.O. Box 168, Iowa City, Iowa 52243. Once you've estimated your share, you can come up with the other key number in the aid game: your actual need. You arrive at that figure by subtracting your family contribution from the total annual cost of the college in question. Thus if your expected family contribution is $5,000 and the annual cost is $15,000, your need is $10,000. At a school with a total tab of $5,000 or less, your need would be zero. But the arithmetic doesn't end there. As part of your investigation, you must ask financial aid officers about the schools' own policies. Colleges must use a federal formula (see the box on page 44) in doling out government funds, but they can make up their own rules when divvying up their own dough. And only about a quarter of all four-year colleges even say they will meet 100% of your need; you can find out how much of the gap a school will bridge by consulting the tables that begin on page 67 or Peterson's 1991 College Money ! Handbook (Peterson's Guides, $19.95). The same reference book can tell you whether a school's typical aid package is weighted toward loans and work/study jobs or more desirable grants. Most selective private colleges split aid about 75% to 25% in favor of grants, but some have a much lower ratio. For instance, Notre Dame's ratio is 54 to 46 in favor of grants. Most students at the university must take on substantial loans and a job of up to 12 hours a week (paying a maximum of $1,800 for the academic year) before they are even considered for a grant, says Joseph Russo, the university's financial aid director. But those ratios are only averages. Sought-after students can get more attractive packages from most schools through what financial aid officers call preferential packaging. The term, which you won't find in any college's promotional viewbook, refers to the practice of offering aid packages sweetened with lots of grants and scholarships to students rated most desirable by the admissions office. Recipients can be brains, jocks, minorities or even geos -- financial aid jargon for kids who hail from states that aren't well represented on campus. To qualify as an academic all-star, your child will have to land in the top 25% of students that the college has admitted, based on high school class rank, grade point average and college entrance exam scores. You can gauge your progeny's chances of achieving this favored status at specific schools by checking profiles of entering freshmen in Lovejoy's College Guide (Monarch, $18.95). Viewbooks also don't tell you how a scholarship from your local Moose Lodge or PTA will affect an aid package, so you'll have to ask financial aid officers. Most colleges cruelly deduct the value of outside scholarships from their own grants. There are exceptions, however, such as UCLA, which uses such scholarships to reduce a student's loan burden instead. If you get a lowball aid offer from a school that your child wants to attend, you can try haggling with the financial aid officers. Some will make adjustments only if you can document a change in your financial situation, such as the loss of your job or divorce. With others, you may be able to make the case that your child is something special and deserves more help, says Donald Moore, director of financial aid at the State University of New York at Oneonta and author of Financial Aid Officers: What They Do To You and For You (Octameron, $4.25). ''But if parents cannot prove that their child is particularly bright, athletic or, say, a gifted tuba player, they won't have a leg to stand on.'' A financial aid officer willing to bargain is more likely to give you a better mix of grants vs. loans than to reduce the amount you are expected to pay. ''Schools generally limit financial aid officers to budging 10% at most on your need figure,'' says Judith B. Margolin, author of Financing a College Education (Plenum, $14.95). There are times when you may be able to play one school's offer against another's, but only if the colleges consider themselves to be academic equals. ''If someone shows us a scholarship from another competitive school, we'll take a hard look at it and may match it if we consider the student very desirable,'' says Walter Cathie, associate vice president for financial resources at Carnegie Mellon University in Pittsburgh. Two heartening developments work in favor of parents who want to bargain over aid. First, competition among colleges for top students has led to a boom in dollars for scholars -- merit awards that have no connection to financial need. Such bonuses accounted for 23%, or $452.7 million, of all scholarships and grants at private colleges during the 1987-88 academic year, up from 15%, or $138.7 million, in 1970-71, according to the National Association of Independent Colleges and Universities. Most elite institutions, such as Stanford, Yale and the University of Pennsylvania, still shun non-need scholarships. But merit awards have increased most dramatically at prestigious liberal arts colleges. Each year, for example, Johns Hopkins offers 20 Beneficial-Hodson awards for as much as 60% of tuition to students who rank in the top 5% of their high school classes, boast grade point averages of at least 3.8 and score 1,400 or better on the SAT. And Emory University gives free rides to a dozen accomplished students it designates as Woodruff Scholars. Second, there's good news if your child wants to attend a state university: state grants based on merit alone increased by 82% to $70 million between 1983-84 and 1989-90. Politicians know that attracting top talent is one way to burnish their state system's academic reputation. Once you have the best possible deal in hand, ask the financial aid officer what you can expect when you reapply for aid in future years -- and how high your kid's grades will have to be to avoid losing grants and scholarships. ''In the vast majority of cases, you'll get a similar package if your financial situation hasn't changed much and your kid remains in good academic standing,'' says Margolin. Even with all the conditions in your favor, most college experts recommend that your child apply to one or two financial safety schools -- ones you could afford without any help at all. That way, you will have some protection even if you end up a loser in the financial aid game.