After speaking to dozens of parents, a school principal several times, and a financial aid officer, I’ve concluded that the biggest financial misconception about applying to college is that you have to be poor or middle class to receive financial aid. The feedback I’ve gotten from everyone is that you can have a multi-six figure income and still have free money for college.
For evidence not based on my conversations, MIT announced On November 20, 2024,
“Undergraduates with family incomes of less than $200,000 can expect to attend MIT tuition-free starting next fall, thanks to newly expanded financial aid. Eighty percent of American families meet this income threshold.
As for the 50% of American families with incomes under $100,000, parents can expect to pay nothing at all for the full cost of their student’s education at MIT, which includes tuition plus room, board, fees, tuition, and books. Personal expenses.
That $100,000 threshold is up from $75,000 this year, while the $200,000 threshold for tuition-free attendance next year will increase from its current level of $140,000.
$200,000 is now considered “poor enough” to qualify for free financial aid
There is no doubt that a family income of $200,000 is large compared to the average family income in the United States, which is about $80,000. Families earning this amount of income can generally maintain a comfortable middle-class lifestyle, especially in landlocked cities.
However, in cities with a high cost of living and number of children, $200,000 is not as much as one might expect. These financial pressures are increasingly recognized by elite colleges like the Massachusetts Institute of Technology (MIT), which now offer tuition-free attendance for families with incomes under $200,000. Other institutions may soon follow suit.
Then the natural question arises: How much can you earn over $200,000 and still qualify for aid? Surprisingly, the answer is much more than I expected.
To be clear, when I refer to free financial aid, I mean grants and scholarships — free money for college — not loans. Anyone can get a loan.
Dentist’s daughter receives grants
During my routine dental cleaning, my dentist told me an unexpected insight about financial assistance. Her daughter received grants worth $20,000 a year to help cover her private high school tuition of $38,000 for four years, despite their high income.
My dentist likely earns at least $200,000, and her husband, who works in technology, likely earns a similar amount. Even with a combined income of $400,000 or more, they qualify for assistance.
Her daughter now attends the University of Southern California (USC), where tuition for the 2025 academic year is $69,904 and total annual costs are estimated at $95,225. Fortunately, the family is still receiving financial aid. However, one dentist noted that rising home values negatively impacted their ability to secure additional grants.
You probably also have this financial misconception that a dentist and a tech worker are rich enough to pay 10% to a private university on their own. What is the average cost of dental school? Over $125,000 per year in tuition In some places, the return may not be as high as one might think.
A couple earning nearly $1 million a year receives financial aid
While playing pickleball, a conversation with one of the players took an interesting turn. His children go to an expensive private school in San Francisco with a tuition cost of $59,000 a year. He said his wife’s best friend, the head of the school’s financial aid department, revealed that families earn as much as… $500,000 per child It is still possible to qualify for financial aid.
This revelation may seem shocking, as earning $500,000 per child and receiving financial aid seems almost surreal. However, it is consistent with previous insights I’ve explored, such as in a post depicting a family earning $500,000 but with four children. Their expense profile made them eligible for free education funds, despite their high income.
In this final example, my baseball partner described a family in which the husband works in finance and the wife works in technology, and both hold middle and senior management positions. Collectively, they earn nearly $1 million a year, yet still receive financial aid.
Applying for financial aid with such a high income may seem bold. But as the saying goes If you don’t ask, you won’t get. Their success underscores the importance of understanding how financial aid formulas take into account not only income but also expenses, family size and other factors.
Swallow your pride and apply for financial aid
If you are a long time reader Financial samuraiYou may have adopted the mindset of achieving financial independence without relying on anyone but yourself. This philosophy aligns with my new three-legged stool for retirement, which is all about self-reliance. That’s why I embraced this mindset.
Growing up in developing countries, I witnessed first-hand how some of those who relied on government support remained stuck in poverty. In contrast, individuals who took risks and pursued entrepreneurship often became successful.
My personal journey took me to America for high school and college, where overcoming challenges as a minority solidified my belief in self-reliance. People are naturally biased toward helping those who are most like them. Therefore, you are at a distinct disadvantage when there are fewer people of your background in leadership roles.
Once I started earning income, I got used to paying significant taxes and unsubsidized expenses. For example, paying $2,500 a month for health care helps support others who can’t afford it. Likewise, living healthy helps reduce my impact on the healthcare system to make room for those who need more help. These habits foster a sense of independence, which can make it difficult to think about getting help, even when you qualify.
But be careful when adopting a philosophy of strict self-reliance. Having too much pride can lead to a life that is more difficult than necessary.
The arrogance of believing that you are too rich to get help
The other “problem” with relying solely on yourself to build wealth is that you may actually succeed! When your back is against the wall, you tend to do everything you can to survive and then thrive.
After you make enough money and build enough wealth to feel comfortable, or even financially independent, you may arrogantly believe that you are too wealthy to qualify for any assistance. I say “arrogant” because you may mistakenly believe that you are wealthier than the vast majority of your peers, when in fact, there is a wealthier subset of parents who are much wealthier than you.
For example, let’s say you have a top 1% income of about $650,000 and you have two children. You’ve got a fancy title with dozens of company reports. Most people would not dare to apply for financial aid in such circumstances. It would feel too embarrassed.
However, the reality is that there are parents in your elementary school and college who are earning anywhere from 10 times to 50 times as much, or $6.5 million to $32.5 million every year for years. They are the ones who donate big money to help support other families.
For them, your annual income of $650,000 is pocket money. They and school financial aid officials will be happy to subsidize some of your tuition if you are a large family that may fit into a demographic they are particularly lacking in.
The ultimate financial misconception about applying to college
After reading this article, you may feel like gaming the financial aid system. However, I want to leave you with one final financial misconception to consider when applying to college or elementary school: the idea that poorer applicants automatically have a greater chance of getting in than wealthier applicants.
Although there has been a strong and justifiable push toward socioeconomic diversity, this trend does not always translate into a competitive advantage for families with less affluent students.
Whether non-profit or not, schools operate like businesses that need to generate sufficient revenue from tuition dollars and donations to fund operations. Therefore, if your family has the ability to pay the full tuition, your family may have a better chance of enrolling. Colleges need full tuition payers to help support non-full tuition payers.
It’s a similar concept to the government relying on the 60% of working Americans to support the 40% who don’t pay income taxes. The same principle applies to health care, where working Americans who earn more than 400% of the federal poverty level must pay the full price of health insurance, while those who earn less receive subsidies.
Although schools claim that your finances don’t matter when you apply, they often do. They can’t say it publicly for fear of receiving too much backlash.
Free money for college as a high earner
So I’d say if you’re making less than $500,000 a year per child and have less than $1.5 million in household assets per adult, it’s worth applying for financial aid if you want a shot at free money. Schools may give you a discount just because they want you. You never know.
Suppose the school is located in New York City. They could accept another family whose parents work in investment banking, which is one of the largest industries the parents come from. Or they may decide to choose a family whose mother is an accomplished artist. Although she earns $600,000 a year, the school may offer a 20% discount in aid to entice a family to join.
Related: Different Ways to Pay for College
Readers, have you heard of any case studies where high-income families received financial assistance? Are you from a high-income family and applying for financial assistance? Do you think it’s morally acceptable to earn the top 10% of income and still get free money for school? What are some other financial misconceptions about applying to college or elementary school that people should be aware of?
A conversation with John Durante, High School Principal, about applying to college
You can learn more about John, his podcast and his book here.
Plan to pay for college better with two sons
If you’re serious about financial planning to pay for college, Check out Bouldin. Boldin is one of the most powerful financial planning tools I’ve come across that helps families save for college, buy a home, plan for retirement, and more. They offer a free version and a PlannerPlus version for just $120 per year — which is much less expensive than hiring a financial advisor.
Bouldin takes a holistic approach to financial management. Rather than focusing solely on stock and bond investments, Bouldin addresses a wide range of real-life financial scenarios that we all face. One of the biggest challenges families face today is finding the best way to save and pay for college without compromising their retirement plans.
Subscribe to Samurai Finance
Listen and subscribe to The Financial Samurai podcast on apple or Spotify. I interview experts in their respective fields and discuss some of the most interesting topics on this site. Your posts, ratings, and reviews are appreciated.
To accelerate your journey to financial freedom, join over 60,000 others and sign up Samurai’s free financial newsletter. Financial Samurai is among the largest independently owned personal finance sites, founded in 2009. Everything is written based on first-hand experience.