Getting financial aid is a common way for students and parents to afford college. This article will share how to get financial aid making multiple six figures a year.
That’s right. Even if your family makes multiple six figures a year, you can still get financial aid. That said, not financial aid is created equal. Ideally, you want free money, or grants not loans.
Despite earning a six-figure household income, many parents struggle to pay for their children’s education without going into debt. In many big cities, it now requires earning about $300,000 a year to live a middle-class lifestyle. It sounds kind of nuts, but inflation has really made the cost of living more expensive for everyone.
Let’s discuss how a family can qualify for tuition assistance despite making $300,000, $400,000, or even $500,000 a year. We can then have a moral discussion about the topic in the comments section!
Wealthy Six-Figure Households And Financial Aid
I was talking to a parent of four who used to send his kids to a private grade school K-8 about the makeup of families who pay $35,000+/year in tuition per child.
I cherished my time growing up in Africa and Asia up until middle school and enjoyed my experience attending a public high school in Virginia. To have my son attend a homogenous school where everybody looks the same and comes from similar economic backgrounds would be a shame.
The dad mentioned the school tried to diversify its student body through financial aid. When I asked how the school determined which families got financial aid, he said something surprising.
“Households qualify for financial aid if they don’t make at least $100,000 a year per child.“
In other words, if you have four children, you qualify for financial aid if you make $390,000 a year. Financial aid consists of low interest rate loans, but mostly free grant money. I thought this was a high threshold because $390,000 is right around the top 1% income level in the country.
Nobody needs to send their kids to private school given every child can go to public school for free. Further, I’m not sure if too many folks decide to have four children if they can’t afford to raise them. Sure, one or two children may be unplanned. But having four is definitely intentional.
Because the dad and mom could not afford to continue paying $120,000+ a year in after-tax tuition for their kids, they moved their family to the suburbs to attend free public school. Ah hah, at least they decided to take action instead of complain why life was so hard making $500,000 a year!
Financial Aid While Making $500,000 A Year
Despite finding a solution, the dad seemed a little bitter about not being able to get financial aid for his kids because he asked me the following,
“Is it better to provide financial assistance to underrepresented minorities and lower income households whose kids have a much higher probability of dropping out after several years at the school because they don’t have enough parental support? Or is it more worthwhile to help families like mine who make just over $100,000 a kid, but whose kids will likely graduate from school?“
His argument was that social engineering in private school wasn’t working, just like how the lottery system for public schools in San Francisco is arbitrary and a waste of property tax dollars. In San Francisco, living in a neighborhood where you want your kids to go to school gives you no edge.
Graduation Rates Are Important
Part of every private school’s wish is for as many of its students as possible to graduate so the school can score higher marks when rated. The higher the marks, the greater the school´s demand, prestige, and tuition revenue. Further, the more successful the graduate, the higher the donation rate, which over time has grown in importance.
I still believe trying to diversify the student body to better reflect the makeup of the city is a more worthwhile goal than trying to help families who make just over $100,000 a kid, but who all look the same.
The real world is diverse. If you spend your entire life in an un-diverse bubble, don’t know how to connect with other people and only speak one language, you will have a tougher time getting ahead.
Before taking out the pitchforks, let’s take a look at why this $500,000/year family could no longer afford sending their four kids to private school. A recent divorce might also have something to do with it.
Budget Breakdown For A $500,000 Household
Based on a 36% effective tax rate, the couple needs to earn $203,125 a year just to cover the cost of private school tuition for four kids. What I haven’t included are the additional givings every family is pressured to offer each year.
Although a $1,700,000 home sounds like a lot, the median home price in San Francisco is $1,500,000. With a six person household, you need at least four bedrooms and preferably three bathrooms. The median house size in San Francisco is closer to three bedrooms, two bathrooms.
Not Many Expenses To Cut
I’ve gone through the budget in detail, and there is very little left to cut, except for contributing less to their respective 401ks, taking one less vacation a year, and donating less than 2% of their gross income to charity. Expensive cities are expensive!
Even if they donated $0 to charity and spent $0 on vacation, they’d still be $3,620 a year in the hole without lowering their 401k pre-tax contributions.
The problem with this family is that they are not accumulating any liquid savings to pay for any emergency expenses. With six people in the household, something always comes up. In other words, this family was scraping by on $500,000 a year and now has $130,000+ of breathing room by sending their kids to public school.
If this family is ~$23,620 in the hole each year on a $500,000 household income, then a family making only $390,000 a year is certainly going to be hemorrhaging money if they send their four kids to private school. Let’s take a look at their budget.
Why A $390,000 Household Qualifies For Financial Aid
As you can see from the chart above, even after lowering the student loan debt, donating less to charity, spending less on vacations, and lowering their effective tax rate by 4%, this household is $70,440 in the red every year. From a school administrator’s point of view, financial aid is warranted.
Kids Are As Expensive As You Want Them To Be
A quality education is becoming the biggest contention point between the rich and poor. I know many ultra wealthy parents who donate heavily to every level of education to increase their child’s chances of getting in. And then there is a whole swath of multiple six figure income parents who feel downright middle class because they can’t get any assistance.
The great thing about the internet is that it makes knowledge accumulation free. And when something can be obtained for free, the value of anything that requires payment declines.
For those who like to plan, it’s good to realize the $100,000 income per child threshold for financial aid is becoming more common among private grade school and universities today.
If you’re making $199,000 a year and have two kids, it might not be worth the extra hours and stress to make $50,000 more. And if you have kids under five, it’s probably best to spend as much time with them as possible anyway.
At the same time, if you’re making $380,000 a year and are considering adopting a fourth child, knowing you’ll be eligible for tuition assistance may make helping a little one easier.
Related Posts About Financial Aid:
Recommended 529 Plan Amounts By Age
Achieve Financial Freedom Through Real Estate
If you are fortunate enough to make multiple six figures a year, you should do your best to invest your savings into income-producing assets. I recommend investing in real estate, my favorite way to achieving financial freedom.
Real estate is a tangible asset that is less volatile, provides utility, and generates income. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.
In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms. With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common.
Take a look at my two favorite real estate crowdfunding platforms.
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the way to go.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. Growth rates tend to be faster as well due to demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio.
How To Get Financial Aid Making Multiple Six Figures is a Financial Samurai original post. Make sure if you get financial aid, you get grants. A grant is free money. A loan needs to be paid back with interest.
For an even deeper discussion on private schools and making optimal decisions, I recommend picking up a hardcopy of my instant Wall Street Journal bestseller, Buy This, Not That.
I read this extremely long article and I have yet to find out how large income families pays for their kids college tuition. Or aid or loans or grants. What am I missing ??? All I read was different scenarios.
Financial Samurai says
It definitely takes patience to read my articles to the end. But if you can, I think you’ll find the solutions.
The solution here is to earn below a certain income limit per child and then apply for financial aid.
Related: Recommended 529 Amounts By Age
Hi, this article is uncannily close to my current situation! And I’ve just applied for financial aid for the first time which feels embarrassing but necessary, especially facing potential future layoffs.
I am confused on one major point: how are these families qualifying for aid? I see their net income after expenses is negative but I don’t think they’d be fortunate enough to receive aid, as most schools would expect them to further reduce spending or perhaps split children into a mix or public and private schools.
I have a friend who did exactly this: make hundreds of thousands and have 2 kids in private school for literally free. They built a new house 3 x $$ of their previous house. The previous house was 2 yrs old when they sold it (which was also custom built). Their previous home had 4 bedrooms 3 baths. Their new home has more than 5 beds. They sold their previous house for the simple reason of taking on more debt.
They just bought a new vehicle. They vacation more than 4 times a year. Those are just the big ticket items. Their day-to-day spending habits will make you roll your eyes as well.
On the other end, we send 2 kids to private school WITHOUT a dime from financial aid. We are frugal and live in a home that we can afford to pay for. Our car is old, but we do not need to upgrade as we take the bus everywhere (it’s more convenient). We take one vacation every year.
So what’s wrong with this picture? We are simply stupid for not upgrading to a $5M home in Medina WA. Does anyone else feel the same way?
Financial Samurai says
Sounds pretty smart to me if they can get away with it.
Couldn’t agree more!!!
Why on earth should I live frugally and responsibly while others are playing the system? They’re brilliant, and I am finally just catching on.
After much debate with myself, and tons of reading – I did decide to send my daughter to a private HS. Its not easy to have an additional $20K/year expense for parents of 2 kids, living in a city, and checking the price of each food item they buy.
Financial aid MUST be based on merit. If a poorer (as in parents making $100K in SFO) kid proves to be meritorious, then by all means s/he should be given extra aid over a more meritorious kid but whose parents make $150K in the same city.
Of need, and merit.
Without merit based aid, a lot of parents of excellent hard working kids, are treated very unfairly in this system.
I grew up attending both private and public schools in SF. I started out in private school but once my younger brother(I’m the oldest of 3 with my sister being the middle) was going to start kindergarten, my parents did not want to pay tuition for all three of us and decided to transfer us to a public school when I was starting the 5th grade. I went back to private school when I started high school because the public school I was being sent to was rated really low at that time.
Since I have gone through both, what can I say is private school should set their own rules for financial aid. If they know that the same set of parents have two or more of their kids going to their school, they should provide an income threshold for them to qualify for financial aid. Also because private schools all have different tuition rates so it’s all independent.
Public schools are great but you need students that are focused on wanting to learn in order for the school to be great. And that depends on the school themselves and if they want to push their students to strive to the best of their abilities.
Brilliant Post Sam! Our family of 3 has this in our futures as there are several private schools in our area with tuition at roughly $25k/yr with many well to do families receiving aid. Our plan is to scale back and be in the $150-$200k/yr range thus reducing our tuition bill by 1/3 to 1/2! The schools actually post a grid that shows fin aid per income level. Luckily they don’t count total liquid assets at this level, so we are just playing the game!! This way we can summer/winter and spend more time together as a family.
Also, what we’ve found is that “Acceptance” into these schools is a more challenging issue than most families financial concerns about tuition prices. For example, I’ve seen these schools value “Legacies, High contributing families, sibling students and staff students” more highly than underrepresented and underprivileged minorities. This is coming from a well to do minority family who routinely witnesses the actual recruitment of “Legacies, High contributing families, etc.” versus the minority crowd. Gotta pay the bills! The only thing I’ve noticed is that some schools seem somewhat relieved to know that we are not planning for financial aid initially so maybe we are a better “social class” fit. Also in terms of increased diversity, I was told by several heads of school that it’s the request of the incoming white “Millennial” crowd!
But fear not, increased diversity usually indicates 1 or 2 underrepresented minorities per class of 20 kids with two supervising teachers. So, while diversity isn’t everyone’s “thing” it’s such a small addition, what’s the big deal??
For example, ONCE a YEAR you see someone who was just recently a victim of a severe beat down through no fault of their own. Wouldn’t you give them a hand up? How about if you knew another beat down was around the corner for this person, would you then give them a hand up and direct them in the other direction? I understand some people would walk past and others would give a hand.
That’s no different than what some minorities and others deal with on a daily basis only because they were born with the “skin color ” or “sexual preference” issue which puts them in a path of vary biases from all levels (peers, judicial system, education, etc.). My only ask is that “Some” people can be sensitive to this situation. Also, if you’re “FOR” aid for lower income then by default you’re probably “FOR” diversity as well! This is just based on stats and systemic oppression that has depressed the progress of many minorities (aka Jim Crow laws, post war benefits that went to “White ONLY” veterans, redlined communities that affected wealth accumulation, criminal justice, etc.). Am I wrong?
Actually, in the present society you are completely wrong. We’re it 20-30 years ago I would say you’ve definitely hit the nail on the head for the privileged rich crowd being targeted for recruitment into these high end schools, but that has completely changed now due to people’s efforts to change those in charge over time. The problem is those change agents, who initially had good intentions, have now gone entirely too far and the shoe is now on the other foot! Everything you’re claiming here is the polar opposite of what is truly happening now, but you’ve listened to the propaganda for sooooooo long that you can’t even open your eyes to see that the change you had hoped for happened, and is now done! Those schools that you’re claiming make more money off privileged children now receive more federal dollars for diversifying and underprivileged children than they do from straight paying people! Also, minorities need to stop mixing gay and trans issues in with racial issues, because you are doing no service to the religious private schools out there where a lot of parents like to send there kids to try and stave off the drug infestation of public schools. Religious schools have to abide by Gods law, and not the governments, and that means not catering to a 16 year old boy that has decided he wants to wear a dress and look like a girl! The rules have always been that those kids will be removed, period! I have watched the world change drastically in my 49 years on this earth, but I’ve also seen an entire generation of people grow up without the racial overtones that I did. I remember one of my sons coming up to me when he was 5 years old and telling me he was playing with “that brown boy” at the skating rink because he didn’t even know to call him black! That would be because race is not something talked about in our house, ever! I never taught my 3 boys the racist terms I was taught in the 70’s, as I’m sure millions of other white households have done in modern times! Can you say the same for black households? Or are they still taught at a young age that whites are keeping them down, or whites are evil, or whites hate them? I have close black friends, and they’ve told me how they were brought up, so you can’t fool me into believing you weren’t brought up that way. I’ve said enough here, and could continue, but I’m sure you’ve already labeled me a racist even though that’s far from reality. True racism is the hatred of another solely based on their skin color. Most claims of racism come no where near that definition. I just tell the truth unlike a lot of the white guilt people out there these days.
Achieving a doctorate/professional degree that allows me to work 3 days/week without call or weekends has offered me great balance, although the trade-off did stymy advancement professionally. I agree with the other parents in that teenagers need you constantly, just less obviously. They learn to “check in” in different ways as they mature. Knowing my husband and I are consistently here for them has paid off in spades. We are a blended family of five children, and my husband is an airline pilot who travels 50% of the time. I have had to learn to go with the flow. You cannot plan for everything–in fact, the older children resent it if you try. Be yourself, enjoy your unusual financial flexibility, and enjoy the ride!