After speaking with dozens of parents, a principal, and a financial aid officer, I’ve determined that the biggest financial misconception about applying to college is that you must be poor or middle class To get financial aid. The feedback I’ve gotten from everyone is that you can earn a multi-six figure income and still get free money for college.
For proof not based on my conversation, MIT announced On November 20, 2024,
“Undergraduates with family incomes under $200,000 can expect to attend MIT tuition-free starting next fall, thanks to new expanded financial aid. 80 percent of American households meet this income threshold.
For the 50 percent of American families with incomes below $100,000, parents can expect to pay anything toward the full cost of their students’ MIT education, including tuition as well as allowances for housing, meals, fees and books. Personal expenses.
This $100,000 threshold is up from $75,000 this year, while next year the $200,000 threshold for tuition-free attendance will increase from the current level of $140,000.”
$200,000 is now considered “too poor” for free financing
A household income of $200,000 equates to a U.S. income of about $80,000. is undoubtedly quite significant compared to the average household income of Families earning so much are usually a Comfortable middle-class lifestyleespecially in non-coastal cities.
However, in cities with a high cost of living and more than one child $200,000 doesn’t stretch as far as one might expect. This financial strain is increasingly recognized by elite colleges like MIT, which now offer tuition-free attendance for families earning less than $200,000. Other organizations may soon follow suit.
The natural question then arises: How much can you earn over $200,000 and still qualify for assistance? Surprisingly, the response is more than expected.
To clarify, when I refer to free financial aid, I mean grants and scholarships—free money for college—not loans. Anyone can take a loan.
My dentist’s daughter gets a grant
During a routine dental cleaning, my dentist shared an unexpected insight about financial aid. Her daughter receives a $20,000 grant annually to help cover her $38,000 private high school tuition for four years, despite her high income.
My dentist probably makes at least $200,000, and her husband, who works in tech, probably makes the same amount. Even with a combined income of $400,000 or more, they are eligible for assistance.
Her daughter now attends the University of Southern California (USC), where tuition for the 2025 school year is $69,904, for a total annual cost of $95,225. Fortunately, the family still receives financial support. However, my dentist noted that rising home equity has negatively affected their ability to secure additional grants.
Perhaps you also have the financial misconception that a dentist and a tech worker are rich enough to pay 100% for a private university on their own. With the average cost of dental school Over $125,000 a year in tuition In some places, perhaps the return is not as high as one might think.
Couples earning close to $1 million a year receive financial support
A conversation with a fellow player while playing pickleball took an interesting turn. Her children attend an expensive private school in San Francisco that costs $59,000 per year in tuition. He shared that his wife’s best friend, the school’s head of financial aid, revealed that the family earns up to $500,000 per child May still be eligible for financial aid.
The revelation may seem shocking—earning $500,000 per child and receiving financial aid seems almost surreal. However, this is consistent with previous insights I have explored, such as in a post Profiling a family earning $500,000 but with four children. Despite their high income their spending profile qualified them for free tuition money.
In this recent example, my pickleball partner described a household where the husband works in finance and the wife works in tech, both in upper-middle management positions. United, that Earn close to $1 million annuallyYet they still receive financial aid.
Applying for financial aid with such a high income may seem daring. But as the saying goes, If you don’t ask, you don’t get. Their success underscores the importance of understanding how financial aid formulas take into account not just 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 vision matches mine New three-legged stool for retirementwhich focuses on self-reliance. Here’s why I’ve adopted this mindset.
Growing up in developing countries, I saw firsthand how some people dependent on government assistance remained trapped in poverty. Conversely, individuals who take risks and Pursued entrepreneurship Often succeeded.
My personal journey brought me to America for high school and college, where navigating challenges as a minority strengthened my belief in self-reliance. People are naturally biased To help those who look like them. So, you’re at a distinct disadvantage when fewer people with your background are in leadership roles.
Once I started earning, I got used to paying significant taxes and unsubsidized expenses. For example, paying $2,500 a month for healthcare helps subsidize those who cannot afford it. Likewise, staying healthy helps reduce my impact on the healthcare system to free up space for people who need more help. These habits create a sense of independence, which can make it difficult to consider getting help even if it’s worth it.
But be careful in adopting this philosophy of self-reliance so rigidly. to be Too much pride A more difficult life than necessary can result.
The arrogance of believing that you are too rich to support
Another “problem” with the attitude of just relying on yourself to build wealth is that you can actually succeed! When your back is against the wall, you do everything you can to survive and then thrive.
After earning enough money and Creating enough wealth to feel comfortableOr 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 an even wealthier subset of parents who are far wealthier than you.
For example, suppose you a Top 1% income About $650,000 and have two kids. You’ve got a great title with a dozen company reports. Most people would not dare apply for financial aid in such a situation. It will also feel embarrassing.
However, the reality is that you have parents in grad school and college who make 10X to 50X your amount every year for years, or $6.5 million to $32.5 million. They donate large amounts to help subsidize other families.
To them, your $650,000 annual income is like pocket change. They and school financial aid officers will happily subsidize some of your tuition if you’re a great family who might A demographic fit They are particularly lacking.
The final financial misconception about applying to college
After reading this article, you might feel tempted Play the financial aid system. However, I want to leave you with one final financial misconception to consider when applying to college or private grad school: the assumption that poor applicants are more likely to get in on their own than wealthy ones.
Although there has been a strong and legitimate push toward socioeconomic diversity, this trend does not always translate into a competitive advantage for families of less affluent students.
Whether nonprofit or not, schools operate like businesses that need to generate enough revenue from 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 admission. Colleges need full-tuition payers to help subsidize non-full-tuition payers.
It’s the same concept as the government relying on the 60% of Americans who work and subsidizing the 40% who don’t pay income taxes. The same principle applies to healthcare, where working Americans earning more than 400% of the federal poverty level must pay full price for health insurance, while those earning less receive subsidies.
Although schools claim that your finances don’t matter when applying, they often do. They may not say so publicly for fear of receiving too much backlash.
Free money for college as a high-income earner
So I say if you are making less than that $500,000 per year Household assets of less than $1.5 million per child and per adult are eligible to apply for financial aid if you want a chance at free money. Schools can give you a discount just because they want you to. You never know.
The school is located in New York City. They may accept another family whose parents work in investment banking, which represents one of the largest industries the parent has. Or, they may decide to choose a family whose mother is an accomplished artist. Although she is making $600,000 a year, the school may offer a 20% discount as support to entice the 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 a high-income family applying for financial aid? Do you think it’s morally okay for the top 10% to earn income and still get free money for school? What are some other financial misconceptions people should be aware of when applying to college or private grad school?
A conversation with high school principal John Durante about applying to college
You can learn more about John and his podcast and book here.
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