After extensive conversations with dozens of parents, a principal, and a financial aid officer, it's clear that the common belief that only poor or middle-class families can receive financial aid is incorrect. As evidenced by MIT's announcement on November 20, 2024, undergraduates with family incomes below $200,000 can attend tuition-free starting next fall. Eighty percent of American households meet this income threshold, and for those with incomes below $100,000, parents pay nothing towards their students' MIT education.

Financial Aid Thresholds and Their Impact

A household income of $200,000 may seem substantial compared to the U.S. median of about $80,000. In non-coastal cities, it can support a comfortable middle-class lifestyle. However, in high-cost-of-living areas with multiple children, it doesn't stretch as far. Elite colleges like MIT recognize this, offering tuition-free attendance for families earning under $200,000. But the question arises: how much over $200,000 can one earn and still qualify for aid? Surprisingly, the answer is more than expected.When we talk about free financial aid, we mean grants and scholarships, not loans. Anyone can take out a loan. For example, my dentist's daughter received $20,000 annually in grants to cover her $38,000 private high school tuition despite their high income. Her family earns at least $200,000 combined, and yet they qualified for aid. Now, her daughter attends USC with a tuition of $69,904 and total annual costs of $95,225, but they still receive financial aid. However, rising home equity negatively affected their ability to secure additional grants.Another instance is a couple making close to $1 million a year. While playing pickleball, a fellow player shared that his wife's best friend, the school's head of financial aid, revealed that families earning up to $500,000 per child can still qualify for aid. This couple works in finance and tech and earns close to $1 million annually. Applying for financial aid with such a high income might seem audacious, but as the saying goes, "if you don't ask, you don't get." Their success shows the importance of considering not just income but also expenses, family size, and other factors.

Swallowing Pride and Applying for Aid

If you've been a long-time reader of Financial Samurai, you might have a mindset of achieving financial independence without relying on others. This philosophy aligns with my new three-legged stool for retirement. Growing up in developing countries, I saw how those relying on government support often remained trapped in poverty. In America, my personal journey reinforced my belief in self-reliance. But being too proud can make it difficult to consider receiving assistance even when eligible.For example, paying $2,500 monthly for healthcare helps subsidize others. Living healthily reduces our impact on the healthcare system, fostering independence. However, we need to be careful not to be too rigid in this self-reliance mindset.

The Arrogance of Believing You're Too Rich for Aid

Having the attitude of only relying on yourself to build wealth can lead to arrogance. After achieving financial comfort or independence, you might think you're too rich to qualify for aid. But there are always wealthier parents out there. For instance, if you make a top 1% income of about $650,000 with two kids and a fancy title, you might be reluctant to apply for financial aid. However, there are parents at your grade school and college who make 10X to 50X your amount and are willing to donate to subsidize other families.

Final Financial Misconception About Applying to College

After reading this article, you might be tempted to game the financial aid system. But remember, the notion that poorer applicants automatically have a greater chance of getting in is a misconception. Schools need tuition dollars and donations to fund operations. If your family can pay full tuition, you may have a better chance of getting in. It's similar to how the government relies on working Americans to subsidize those not paying income taxes.

Free Money for College as a High-Income Earner

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. Schools might offer discounts just to attract you. For example, in New York City, they might accept a family with parents in investment banking or an accomplished artist earning $600,000 a year and offer a 20% discount in aid.Readers, have you heard of any case studies where high-income-earning families received financial aid? Are you a high-income-earning family applying for aid? Do you think it's morally OK to be earning a top 10% income and still receiving free money for school? What other financial misconceptions should people be aware of?

Conversation With John Durante, High School Principal About Applying To College

You can learn more about John and his podcast and book here.

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If you're serious about financial planning for college, check out Boldin. It's one of the most powerful financial planning tools, helping families save for college, buy a house, plan for retirement, and more. It offers a free version and a PlannerPlus version for just $120/year, much more affordable than hiring a financial advisor. Boldin takes a comprehensive approach to financial management, addressing real-life financial scenarios.Subscribe To Financial SamuraiListen and subscribe to The Financial Samurai podcast on Apple or Spotify. I interview experts and discuss interesting topics. Your shares, ratings, and reviews are appreciated.To expedite your journey to financial freedom, join over 60,000 others and subscribe to the free Financial Samurai newsletter. Financial Samurai is one of the largest independently-owned personal finance websites, established in 2009, based on firsthand experience.