After talking to dozens of parents, a few principals, and a financial aid officer, I discovered the biggest financial misconception about applying to college is that you have to be poor or middle-class to get financial aid. The answer I got from everyone is that you can earn a high six figure income and get college free.
Based on evidence not based on my interviews, MIT announced on November 20, 2024,
“Undergraduate students with a family income of less than $200,000 can expect to attend MIT tuition-free starting next fall, thanks to recently expanded financial aid. Eighty percent of American families reach this income limit.
For 50 percent of American families with an income of less than $100,000, parents can expect to pay nothing for the full cost of an MIT student’s education, which includes tuition and housing, dining, fees and allowances for personal expenses.
This $100,000 limit has increased from $75,000 this year, and next year’s limit of $200,000 for people with no education will increase from the current $140,000.”
$200,000 Is Now Considered “Bad Enough” Free Financial Aid
A household income of $200,000 is arguably huge compared to the US median income of about $80,000. Families earning this amount can generally maintain a comfortable middle-class lifestyle.
However, in cities with a high cost of living and many children, $200,000 is not as much of a stretch as one might expect. This type of financing is increasingly being recognized by top colleges like MIT, which now offer free tuition for families earning less than $200,000. Other institutions may do the same.
A natural question then arises: how much more than $200,000 can you earn and still qualify for assistance? Surprisingly, the response is more than expected.
My Dentist’s Daughter Gets Grants
When I had my teeth cleaned, my dentist gave me some unexpected insight into financial aid. Her daughter received a $20,000 annual grant to pay for a $38,000 four-year private high school, despite their high income.
My dentist probably makes at least $200,000, and her husband, who works in technology, probably makes about the same amount. Even if they earn a total of $400,000 or more, they qualify for assistance.
His daughter now attends the University of Southern California (USC), where the tuition for the 2025 school year is $69,904, and the annual cost is approximately $95,225. Fortunately, the family is still receiving financial assistance. However, my dentist noted that the increase in home equity had a negative impact on their ability to receive additional grants.
Maybe you too have this financial misconception that a dentist and a tech worker are rich enough to pay for a private university on their own. With the average cost of dental school over $125,000 per year in tuition elsewhere, perhaps the return is not as high as one might think.
A Couple Making Almost $1 Million a Year Gets Financial Assistance
While playing pickleball, a conversation with another player took an interesting turn. His children attend an expensive private school in San Francisco with a tuition fee of $59,000 per year. He revealed that his wife’s best friend, who is the head of financial aid at the school, revealed that families earning up to $500,000 per child can still get financial aid.
This revelation may seem shocking—earning $500,000 per child and receiving financial aid sounds almost identical. However, it is consistent with previous data that I have checked, such as in a post that profiles a family that earns $500,000 but has four children. Their cost profile made them eligible for assistance, despite their high income.
In this latest example, my pickleball partner described a household where the husband works in finance and the wife works in technology, both holding upper-middle positions. Combined, they earn close to $1 million a year, but still receive financial aid.
Applying for financial aid with such a large sum of money may seem prudent. But as the saying goes, if you don’t ask, you don’t get. Their success underscores the importance of understanding that financial aid formulas take into account not only income but also expenses, family size, and other factors.
Protect Your Pride and Apply for Financial Aid
If you have been a student for a long time A financial samuraiYou may have embraced the idea of achieving financial freedom without relying on anyone but yourself. This philosophy resonates with my new three-legged retirement chair, which focuses on self-reliance. Here is why I embraced this idea.
Having grown up in developing countries, I saw firsthand that those who depended on government assistance were often trapped in poverty. Conversely, people who took risks and pursued entrepreneurship were often successful. My personal journey brought me to America in high school and college, where the challenges of finding my way as a minority deeply instilled my belief in self-reliance.
Once I started earning, I got used to paying huge taxes and unsubsidized expenses. For example, paying $2,500 a month for health care helps subsidize others who cannot afford it. Likewise, living a healthy lifestyle helps reduce my impact on the health care system. These habits promote a sense of independence, which can make it difficult to consider getting help, even when you should.
But be careful about taking this philosophy of self-confidence too seriously. Too much pride can result in a life that is harder than it needs to be.
The Arrogance of Believing You Are Too Rich to Get Help
Another “issue” with having a self-reliant attitude in building wealth is that you may actually succeed! When your back is against the wall, you tend to do everything you can to survive and thrive.
After you’ve made enough money and built enough wealth to feel comfortable, or even financially independent, you may arrogantly believe that you’re too rich to deserve any help. I say “arrogant” because you may mistakenly believe that you are richer than most of your peers, when in fact, there is a group of parents who are even richer than you.
For example, let’s say you make a top 1% income of about $650,000 and you have two children. You have a great article with reports on a dozen companies. Most people would not dare apply for financial aid in such a situation. It can also be felt shame.
However, the truth is that there are parents in your grade school and college making 10X to 50X your amount, or $6.5 million to $32.5 million annually for years. They are the ones who donate large amounts of money to help support other families.
To them, your $650,000 annual income is like pocket change. They and the school’s financial aid officers will happily fund some of your tuition if you are a good family that may fit into the low-income demographics.
The Last Financial Misconception About Applying to College
After reading this article, you may feel tempted to play around with the financial aid program. However, I want to leave you with one last financial misconception to consider when applying to a college or private school: the idea that poor applicants automatically have a greater chance of getting in than rich ones.
While there has been a strong and justified push toward socioeconomic diversity, this trend does not always translate into a competitive advantage for low-income student families.
Whether nonprofit or not, schools operate as businesses that need to generate enough revenue through tuition dollars and donations to fund operations. Therefore, if your family has the means to pay full tuition, your family may have a better chance of getting in. Colleges need full-fee payers to help fund non-full-fee payers.
It’s the same idea as the government that relies on 60% of working Americans to subsidize 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 cost of health insurance, while those who earn less receive a subsidy.
Even though schools say your finances don’t matter when you apply, they often do. They just can’t say it publicly for fear of getting a lot of backlash.
Free Money for College as a High Earner
So I say if you make less than $500,000 a year per child and have a household worth less than $1.5 million per adult, it’s worth applying for financial aid if you want a chance for free money. Schools may give you a discount just because they want you. You will never know.
Let’s say the school is in New York City. They may adopt another family whose parents work in investment banking, which represents one of the major industries the parents come from. Or, they may decide to choose a family with a mother who is a successful musician. Although he earns $600,000 a year, the school may offer a 20% discount in the form of help to entice the family to join.
Related: Different Ways to Pay for College
Readers, have you heard of case studies where high-income families receive financial assistance? Are you a high income family applying for financial aid? Do you think it’s okay to earn a top 10% income and get free tuition? What are some financial misconceptions about applying to college or private school that people should know?
Interview with John Durante, High School Principal About Applying to College
You can read more about John and his podcast and book here.
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