After speaking to dozens of parents, a principal a couple of times, and a financial aid officer, I've determined 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 received from everybody is that you can earn a multiple-six figure income and still receive free money for college.

For proof not based on my conversations, MIT announced on November 20, 2024,

“Undergraduates with family income below $200,000 can expect to attend MIT tuition-free starting next fall, thanks to newly expanded financial aid. Eighty percent of American households meet this income threshold.

As for the 50 percent of American families with income below $100,000, parents can expect to pay nothing at all toward the full cost of their students’ MIT education, which includes tuition as well as housing, dining, fees, and an allowance for books and personal expenses.

This $100,000 threshold is up from $75,000 this year, while next year’s $200,000 threshold for tuition-free attendance will increase from its current level of $140,000.”

$200,000 Is Now Considered “Poor Enough” for Free Financial Aid

A household income of $200,000 is undoubtedly substantial compared to the U.S. median household income of about $80,000. Families earning this much can generally maintain a comfortable middle-class lifestyle, especially in non-coastal cities.

However, in cities with a high cost of living and multiple children, $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 under $200,000. Other institutions may soon follow suit.

The natural question then arises: how much over $200,000 can you earn and still qualify for aid? Surprisingly, the answer is much more than expected. But the other variable is the amount of non-retirement assets you own as well, that will be reviewed in the FAFSA and CSS Profile.

To clarify, when I refer to free financial aid, I mean grants and scholarships—free money for college—not loans. Anyone can take out a loan.

My Dentist’s Daughter Receives Grants

During a routine teeth cleaning, my dentist shared an unexpected insight about financial aid. Her daughter received $20,000 annually in grants to help cover her $38,000 private high school tuition for four years, despite their high income.

My dentist likely earns at least $200,000, and her husband, who works in tech, likely earns a similar amount. Even with a combined income of $400,000 or more, they qualified for aid.

Her daughter now attends the University of Southern California (USC), where tuition for the 2025 school year is $69,904, with total annual costs estimated at $95,225. Luckily, the family still receives financial aid. However, my dentist noted that rising home equity negatively impacted their ability to secure additional grants.

Perhaps you also have this financial misconception that a dentist and a tech worker are rich enough to pay 100% for private university on their own. With the average cost of dental school at over $125,000 a year in tuition at some places, perhaps the return is not as high as one might think.

A Couple Making Close to $1 Million a Year Receives Financial Aid

While playing pickleball, a conversation with a fellow player took an interesting turn. His kids attend an expensive private school in San Francisco with tuition costs of $59,000 per year. He 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 financial aid.

This revelation might seem shocking—earning $500,000 per child and receiving financial aid feels almost surreal. However, it aligns with prior insights I’ve explored, such as in a post profiling a family earning $500,000 but with four children. Below is their expense profile. Inflation is helpful as it raises the income threshold for financial aid determination!

In this latest example, my pickleball partner described a household where the husband works in finance and the wife works in tech, both holding upper-middle management positions. Combined, they earn close to $1 million annually, yet they still receive financial aid.

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 underscores the importance of understanding how financial aid formulas take into account not just income but also expenses, family size, assets and other factors.

Swallow Your Pride And Apply For Financial Aid

If you’ve been a long-time reader of Financial Samurai, you may have adopted a mindset of achieving financial independence without relying on anyone but yourself. This philosophy aligns with my new three-legged stool for retirement, which is centered on self-reliance. Here’s why I’ve embraced this mindset.

Growing up in developing countries, I witnessed firsthand how those who depended on government support remained trapped in poverty. In contrast, individuals who took risks and pursued entrepreneurship often became successful.

My personal journey brought me to America for high school and college, where navigating challenges as a minority further ingrained my belief in self-reliance. People naturally are biased to help those who look more like them. Therefore, you are at a distinct disadvantage when fewer people with your background are in leadership roles.

Once I started earning, I became accustomed to paying significant taxes and unsubsidized expenses. For example, paying $2,500 monthly for healthcare helps subsidize others who cannot afford it. Similarly, living healthily helps reduce my impact on the healthcare system to free up space for those who need more help. These habits foster a sense of independence, which can make it difficult to consider receiving assistance, even when eligible.

But be careful with adopting this philosophy of self-reliance so rigidly. Having too much pride may result in a more difficult life than necessary. Plenty of well-to-do families are receiving good financial aid for private grade school and college.

The Arrogance Of Believing That You Are Too Rich For Aid

Another “issue” with having the attitude of only relying on yourself to build wealth is that you might actually succeed! When your back is against the wall, you tend to do everything possible to survive and then thrive.

After making enough money and building enough wealth to feel comfortable, or even financially independent, you may arrogantly believe you're too rich to qualify for any aid. I say “arrogant” because you may mistakenly believe you are wealthier than the vast majority of your peers, when in reality, there is an even richer subset of parents who are far wealthier than you.

For example, let's say you make a top 1% income of about $650,000 and have two kids. You've got the fancy title with a dozen company reports. Most people wouldn't dare to apply for financial aid in such a circumstance. It would feel too embarrassing.

However, the reality is that there are parents at your grade school and college who make 10X to 50X your amount, or $6.5 million to $32.5 million every year for years. They are the ones donating the big bucks to help subsidize other families.

To them, your $650,000 annual income is like pocket change. They and school financial aid officers would happily subsidize some of your tuition if you are a great family who might also fit a demographic they are especially lacking. In my podcast interview, this is referred to as “institutional needs.” Colleges will use merit aid as an incentive for you to join them.

Final Financial Misconception About Applying To College

After reading this article, you might feel tempted to game the financial aid system. At the very least, learn how the system works by clicking the post.

However, I want to leave you with one final financial misconception to consider when applying for college or private grade school: the notion that poorer applicants automatically have a greater chance of getting in than wealthier ones.

While there has been a strong and justified push toward socioeconomic diversity, this trend doesn’t always translate into a competitive advantage for families of less affluent students.

Whether non-profit 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 stand a better chance of getting in. Colleges need full-tuition payers to help subsidize non-full-tuition payers.

It's a similar concept to the government relying on 60% of working Americans to subsidize the 40% who do not 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. Someone has to pay full freight, otherwise, the system collapses.

Although schools claim your finances don't matter when applying (e.g. need blind), they often do. They just can't publicly say so out of fear of receiving too much backlash.

Free Money For College As A High-Income Earner

So I 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 chance at free money. You never know.

If you make less than $300,000 per child and have less than $500,000 in non-retirement assets per child, you will most likely get some type of financial aid.

Let's say the school is located in New York City. They could accept another family whose parents work in investment banking, which represents one of the largest industries parents hail from. Or, they might decide to choose a family whose mother is an accomplished artist. Although she's earning $600,000 a year, the school might offer a 20% discount in the form of aid to entice the family to join.

Applying for financial aid as a moderately-high-income family will not hurt you. The only thing it will cost is your time and perhaps an application fee. If there is free money for private grade school or college, you might as well try and qualify.

Related: The Different Ways To Pay For College

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 financial aid? Do you think it's morally OK to be earning a top 10% income and still receiving free money for school? What are some other financial misconceptions about applying to college or private grade school that people should 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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