Can high-income families qualify for financial aid? Yes, in many cases. Need-based grants shrink as income rises, but high-income families may still qualify for merit scholarships, institutional aid at high-cost schools, and federal unsubsidized loans, and planning around income and assets can improve what they’re offered.
Given the significant benefits higher education brings to society, a host of government-sponsored and college (or university) run financial aid programs exist to help families fund the increasing cost of higher education. Many of these programs are need-based, offering greater aid to families with lower incomes or multiple children in school. Others are merit-based, awarded for academic, athletic, or artistic excellence regardless of income.
In addition to programs that directly offset education costs, a number of loan programs exist to help finance costs not covered by direct aid. However, recent federal changes have limited borrowing and repayment options for parents, which we cover below.
Importantly, even high-income families may qualify for financial aid in certain situations, especially at high-cost institutions. For example, Harvard fully funds the cost of college, including room and board, for families with incomes of $100,000 or less per year and provides free tuition to families with incomes of $200,000 or less per year. At higher levels of income, aid in the form of grants will become minimal or unavailable. Where this point lies varies widely from one institution to another.
Key Takeaways
- File the Free Application for Federal Student Aid (FAFSA) regardless of income. Schools use it for merit aid, institutional grants, and federal loan eligibility.
- Aid forms look at income from two years earlier, so income planning can start as early as January of your child’s sophomore year of high school.
- Retirement accounts and home equity don’t count as assets on the FAFSA, but the CSS Profile may treat things differently.
- Merit aid doesn’t depend on financial need and is often one of the more accessible ways for high-income families to lower costs.
- Federal Parent PLUS loans now have borrowing caps, which makes saving and planning ahead more important.
Should High-Income Families Fill Out the FAFSA?
Yes. High-income families should file the FAFSA regardless of income, because it is often a mistake to assume that no aid will be available, especially at higher-cost institutions. Many institutions use it to determine not just need-based aid, but also merit-based grants and eligibility for unsubsidized loans, which are available to all income levels.
On the federal level, the Free Application for Federal Student Aid (FAFSA) serves as the starting point for the determination of the aid package a family may qualify for. The form is free to file at StudentAid.gov. Even if you don’t believe you will qualify for any aid, completing a FAFSA is a good practice. Many colleges and universities utilize this form for their own aid determination, which may phase out at higher levels than federal aid. A FAFSA is also required for unsubsidized federal student loans, which are available regardless of household income and can be a helpful financing option when planning for education costs.
What’s the Difference Between the FAFSA and the CSS Profile?
The FAFSA is the free federal aid application used by most colleges, while the CSS Profile is a more detailed College Board application that mainly private and highly selective schools use to award their own aid. For high-income families, obtaining financial aid often starts with one or both of these forms. While these are traditionally associated with need-based aid, many colleges use them to determine merit aid or offer low-interest financing options, both valuable tools for families with substantial earnings.
In addition to federal aid, many institutions administer their own private programs funded by endowments or other sources. Some of these institutions have adopted an alternative application for their own aid determination, known as the College Scholarship Service (CSS) Profile. This profile was developed and is administered by the College Board.
| FAFSA | CSS Profile | |
|---|---|---|
| Who uses it | Federal government and most colleges | Mostly private and highly selective schools |
| Cost to file | Free | Fee charged per school |
| Level of detail | Fewer questions; simpler formula | More detailed look at family finances |
| How aid is calculated | One federal formula for everyone | Each school applies its own methodology |
| When it opens | On or before October 1 | Typically around October 1 |
Both of these forms are lengthy and entail providing a variety of details regarding the student and their family. Questions cover student and family circumstances, details of family income, and information on assets owned by the student and family. Generally, the CSS Profile will ask for more in-depth information regarding family finances, with a consequentially more complex methodology. The FAFSA remains somewhat higher level and utilizes a methodology with fewer inputs.
Both forms become available in the fall of the year before enrollment at a college or university. The FAFSA must open by October 1 and has opened slightly earlier in recent years (the 2027–28 FAFSA opened in late September 2026), while the CSS Profile typically opens around October 1, so check the exact dates each year. Given the importance of these forms and the complexity that may be involved in gathering needed information, it is a good idea to start work on completing them as soon as they are made available.
Do You Need to Complete the CSS Profile?
You need to complete the CSS Profile only if a school on your list requires it, which is common at competitive private institutions that use it for their own aid decisions. All participating schools utilize the same form to reduce duplication, but this is a second type of application to complete on top of the FAFSA.
While the CSS application is uniform across all schools that utilize it, the methodology used in translating the application to an aid offer is not. This makes it harder to develop specific planning recommendations that will optimize aid offers based on the CSS Profile. Most schools that utilize the CSS Profile make available their own calculator based on the specific methodology they use. If there are specific institutions a student is likely to attend that use the CSS Profile, these may be helpful in estimating costs and seeing whether there are reasonable planning steps that may be taken to improve an aid offer. Caution should be exercised here before taking any drastic steps, as admission to the competitive institutions using the CSS Profile is far from guaranteed even for the most qualified applicants.
How Is the Student Aid Index (SAI) Calculated?
The Student Aid Index (SAI) is calculated from four factors: parent income, parent assets, student income, and student assets, with student income and assets counted far more heavily than the parents’. After a FAFSA is processed, the SAI is assigned to the student. This value is used as the basis for determining eligibility for aid. For high-income households, understanding how the Student Aid Index is calculated is essential to setting realistic expectations and identifying planning opportunities to improve potential aid eligibility. The SAI is determined based on several key financial factors, each weighed differently in the calculation:
- Parental Income: After allowances for taxes and basic living expenses, the parents’ remaining income is assessed on a sliding scale, from 22% at lower levels up to 47% at higher levels.
- Parental Assets: Notably, some assets, such as equity in your primary residence and the value of retirement plans, are not counted in this calculation. Assets that are included in the calculation (such as taxable investments and 529 plans) will be expected to be drawn down by about 3% to over 5% per year to help fund education costs.
- Student Income: Students can earn a modest amount before it affects aid. The FAFSA protects a set amount of student income each year, adjusted annually. Above that allowance, about half of each additional dollar of the student’s available income is counted toward their expected contribution, a much steeper rate than parents face.
- Student Assets: Compared to parental assets, student assets are expected to be drawn at a much higher rate of 20% per year, even at lower asset levels.
While it is no substitute for a full application, this calculator, operated by the Massachusetts Educational Financing Authority (MEFA), is a simple way to estimate your SAI and evaluate how changes in your circumstances may impact this figure.
How Can High-Income Families Reduce Reported Income for Financial Aid?
High-income families can lower the income reported on aid forms mainly by timing when income is recognized, so less of it falls in the tax years the FAFSA and CSS Profile use. In many circumstances, planning steps may be taken to impact the figures reported on these forms and consequently improve potential aid offers from institutions.
Timing Taxable Income
For those families that have the ability to control their taxable income, planning steps that minimize income in the reporting periods used by aid forms can help improve their prospects for aid offers, though it also changes when and how much tax you pay.
Both the FAFSA and the CSS Profile use prior-prior year tax information when calculating aid packages (for example, the 2027–28 FAFSA uses 2025 income). As a result of the alignment (or misalignment) of tax years, academic years, and tax filing deadlines, the tax year that will be considered for a student’s first FAFSA or CSS Profile begins in January of a student’s sophomore year in high school, and the last one ends in December of their sophomore year of college. For income strategies to work, some advance planning is required.
While the particulars will vary widely based on individual circumstances, possible strategies to consider here include:
- Accelerating the exercise of certain stock options ahead of a reporting year
- Delaying the exercise of stock options until after all reporting years
- Strategically timing business expenses or income to minimize reported income
- Selling taxable investments intended to fund education costs ahead of time to realize gains prior to reporting years, then reinvesting if desired at a higher basis. Keep in mind that the gains are taxed in the year you sell, and the proceeds still count as a reportable asset if they stay in a bank or taxable brokerage account.
These decisions affect your taxes and your aid eligibility at the same time, and stock option timing in particular can raise issues like the alternative minimum tax. This is a good place to run the numbers with a financial planner before acting.
If income can be maintained at a low enough level through the years in which tuition bills are paid, education tax credits may be utilized to reduce tax liabilities in the years in which education costs are incurred. The American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit (LLC) are fully phased out at $90,000 of modified adjusted gross income (MAGI) for single filers or $180,000 of MAGI for a joint return, and married couples filing separately can’t claim either credit. Below these levels, they may provide an attractive reduction in a family’s tax liability. Keep in mind that you can only claim one of these for the same child in a given year.
Which Assets Count on the FAFSA?
Assets that count on the FAFSA include cash, investment accounts, 529 plans owned by a parent or dependent student, real estate other than your primary home, and custodial accounts, while retirement accounts, equity in your primary residence, and qualifying family businesses do not. Income is usually the bigger driver of aid, but assets still affect the amount offered. While planning around assets is not as impactful as is often believed, being aware of and attentive to how assets are held can help families have realistic expectations about the aid they will receive and the steps to take where possible to maximize aid amounts.
Assets that are required to be included on a FAFSA — and that thus impact a student’s SAI — include bank accounts, investment accounts, equity in a second home or an investment property, 529 college savings plan accounts, the value of a small business that doesn’t qualify for the Small Business Exclusion described below, and custodial accounts. Assets held by the parent or the student will both be included, with student assets expected to be drawn down at a much higher rate than those owned by the parent.
Several types of assets are specifically excluded from the SAI calculation. Retirement plans are not required to be counted. The FAFSA defines these broadly to include employer plans such as 401(k) accounts as well as individual retirement accounts and qualified annuities. Equity in your primary residence also does not count as an asset on the FAFSA, nor does the cash value of permanent life insurance policies. As of July 1, 2026, the Small Business Exclusion is restored, meaning the value of a small business can be excluded from FAFSA asset reporting if certain conditions are met: More than 50% of business voting rights must be held by family members, and there must be 100 or fewer full-time or full-time-equivalent employees. This includes family farms where the family resides, and family commercial fishing operations.
| Counted on the FAFSA | Not counted on the FAFSA |
|---|---|
| Bank accounts, non-qualified annuities | Retirement accounts (401(k)s, IRAs, qualified annuities) |
| Investment accounts | Equity in your primary residence |
| 529 plans owned by a parent or dependent student | Cash value of permanent life insurance |
| Equity in a second home or investment property | 529 plans owned by grandparents or others |
| Small businesses that don’t qualify for the exclusion | Qualifying family-owned small businesses, family farms, and family fishing operations |
| Custodial accounts (UGMA/UTMA) |
How Can High-Income Families Reduce Reportable Assets?
Families can reduce reportable assets mainly by shifting money from counted assets, such as taxable accounts, into excluded ones, such as retirement accounts or the equity in a primary home. Where families have the flexibility to shift assets from one type to another, this creates planning opportunities to reduce the expected contribution from assets incorporated into an aid application. While the impact of shifting assets is often overstated, it is nonetheless a viable way of impacting an aid offer.
With knowledge of the excluded types of assets, some planning steps may be taken to shift resources from included to excluded assets. Ways in which this can be done include:
- Directing ongoing savings to qualified retirement plans instead of into taxable brokerage or bank accounts. Money already inside retirement accounts isn’t counted as an asset on the FAFSA. However, contributions made during the years your income is being reported may be added back as untaxed income. The CSS Profile generally adds back voluntary retirement contributions, and the FAFSA adds back certain contributions, such as deductible IRA and self-employed retirement plan contributions. To get the most benefit, consider building up retirement savings before the income reporting years begin.
- Using reportable assets such as taxable investments to pay down debt, including auto loans and the mortgage on your primary residence.
- Repositioning custodial accounts. Money in a custodial account under the Uniform Gifts to Minors Act (UGMA) or the Uniform Transfers to Minors Act (UTMA) legally belongs to your child and can’t be transferred back to a parent. However, if those funds are earmarked for college, the custodian can move them into a custodial 529 account. On the FAFSA, a custodial 529 owned by a dependent student is reported as a parent asset, which is assessed at a much lower rate than student assets. Keep in mind that selling investments in the custodial account may trigger capital gains taxes, and the money must still be used for the child’s benefit.
Remember that these strategies for limiting assets reported on the FAFSA may not be effective for increasing private aid offers based on the CSS Profile. The methodology used by private institutions based on the CSS Profile can vary dramatically from that utilized in FAFSA processing. Paying down a mortgage or redirecting savings also has tradeoffs that go beyond financial aid, so it’s worth weighing those with a planner who can see your full picture.
How Can 529 Plans Help High-Income Families?
A 529 plan can be a useful vehicle for tax-efficient college savings. There is no income limit for taking advantage of the tax benefits offered. The earnings are federally tax-free when used for qualified education expenses, and some recent changes have created additional flexibility, allowing you to roll unused 529 funds into a Roth IRA if you meet certain criteria. However, non-qualified withdrawals can result in income taxes and penalties on the earnings. In addition, a 529 plan is an investment account, and as with all investments, its balance will rise and fall with the markets. Here are other options and benefits to utilizing a 529 plan.
How Does Superfunding a 529 Plan Work?
Superfunding a 529 plan is a strategy you can use to maximize the tax advantages available. It lets you contribute up to five years’ worth of annual gift tax exclusions to a 529 plan in a single year, then elect on a gift tax return to spread that gift evenly over five years. In 2026, the annual exclusion is $19,000 per recipient, so one person can contribute up to $95,000 per beneficiary, and a married couple can contribute up to $190,000.
The more time the funds have to grow, the more potential tax savings become available. This can also be a great option during peak earning years when you want to fund your education goals but aren’t sure the income will last. Keep in mind that a larger contribution also means more money exposed to market declines.
The tradeoff is that the election uses up your annual exclusion for that beneficiary for the full five-year period. Any additional gifts to the same person during those years would count against your lifetime gift and estate tax exemption. If the donor passes away before the five years are up, a portion of the contribution may be pulled back into their estate. Because superfunding involves a tax filing and can affect your broader estate plan, it’s worth coordinating with your financial planner and tax professional before making a large contribution.
Can You Get a State Tax Deduction for 529 Contributions?
Possibly. Many states offer an income tax deduction or credit for 529 contributions, though some offer none and some limit the benefit to their own plan. This varies widely, so check the specific requirements of your state to see whether this is something you can benefit from.
Do Grandparent-Owned 529 Plans Affect Financial Aid?
Not on the FAFSA. Recent FAFSA changes have opened up a new opportunity to reduce your reportable assets. The FAFSA no longer considers distributions from a grandparent-owned 529 plan as the student’s income for financial aid purposes.
This means that funds used to pay for college from a grandparent-owned 529 plan (or one owned by another relative or anyone other than the parents or the student) are excluded from both the parents’ assets and the student’s income when submitting the FAFSA. Some schools that use the CSS Profile may still ask about these accounts, so check with each school.
How Can High-Income Families Get Merit Aid?
High-income families can get merit aid by targeting schools that award merit scholarships and by applying for outside scholarships, since merit aid doesn’t depend on financial need. Merit-based financial aid is typically awarded to students based on academic achievement or other factors, usually without regard to financial need. For high-income families, encouraging their children to apply to schools where receiving merit-based aid is more likely can be an effective way to reduce the cost of higher education.
Merit-based aid is not offered by all schools, so the first step is to understand which schools actually offer this type of aid, what amount they typically give out, and what percentage of students receive this form of assistance. Priorities also vary widely by school, impacting what areas schools review when determining merit-based aid. Merit-based scholarships can be based on academic grades, athletic ability, or artistic performance. This is an area where thinking broadly and asking lots of questions can be a great help.
In addition to educational institutions themselves, many local and national organizations also offer scholarships to high school seniors heading to college. Many of these are merit-based and may not require a full aid application. Have your child talk with their school guidance counselor to start researching available scholarships they may want to apply for.
Many schools require the FAFSA or the CSS Profile in advance of freshman year to be considered for any aid, so it is a best practice to complete these in advance of freshman year. The advantage of merit aid is that these forms are often not required in future years. As with everything, confirm with the school the filing requirements for future years.
Can You Appeal a Financial Aid Offer?
Yes. If your financial circumstances change from what was reported on the FAFSA or the CSS Profile, you can ask the school’s financial aid office to reconsider its offer.
If your income in the reporting year was unusually high — due to a bonus or stock plan vesting, for example — you may be able to successfully appeal for additional need-based aid that is reflective of your current or average income as opposed to the inflated income level in the reporting year.
If you receive very different aid packages from what you believe to be comparable schools, you could bring this to the attention of the school that offered less aid. Some schools may make an adjustment, especially if they consider the school offering the better aid package to be a competitor.
What If Savings and Aid Aren’t Enough?
When the net cost after need and merit-based aid is more than you have saved, first consider how much you can fund out of your current cash flow. Then weigh the cost or benefit of putting some of your other savings on hold and redirecting the money toward college versus taking out private loans or Parent PLUS loans to fund a portion of the costs.
Keep in mind that borrowing options have changed. Beginning July 1, 2026, Parent PLUS loans are capped at $20,000 per student per year and $65,000 per student in total, no matter how many parents borrow, and new loans can only be repaid under a new tiered standard repayment plan, without access to income-driven repayment. If you already had a Parent PLUS loan, or your student had their own federal student loan, for your student’s current program before that date, you may be able to keep borrowing under the prior limits as long as your student stays continuously enrolled in that program, for up to three academic years or until your student is expected to finish, whichever comes first. For families at high-cost schools, these caps can leave a meaningful gap, which makes saving early and planning ahead more important.
Parent PLUS trap for existing borrowers: A parent who takes out any new federal loan after July 1, 2026 is put on the Tiered Standard plan for all of their Parent PLUS loans, including older ones and consolidation loans. Tiered Standard does not qualify for Public Service Loan Forgiveness (PSLF), and Parent PLUS loans are not eligible for the Repayment Assistance Plan (RAP). Parents who consolidated by the April 1, 2026 deadline kept access to income-driven repayment.
College Financial Aid Timeline: What to Do and When
| When | What to do |
|---|---|
| Freshman year of high school | Estimate your SAI and review how income and assets are positioned. |
| January, sophomore year | The first income year that counts for aid begins. |
| Junior year | Run net price calculators and build a school list that includes merit-aid schools. |
| Fall of senior year | The FAFSA opens by October 1 and the CSS Profile typically opens around October 1. File early. |
| Spring of senior year | Compare aid offers and appeal if circumstances changed or offers differ. |
| Each year of college | Refile the FAFSA (and CSS Profile if required). The last income year that counts ends in December of sophomore year of college. |
Frequently Asked Questions
Do high-income families qualify for financial aid?
Sometimes. Need-based aid is less likely at higher incomes, but families earning well into six figures may still qualify at high-cost schools. Merit aid and federal unsubsidized loans are available regardless of income.
Is there an income limit for filing the FAFSA?
No. Anyone can file, and many schools require it for merit aid and their own grants.
Does a 529 plan hurt financial aid?
Usually only modestly. On the FAFSA, a parent-owned 529 is counted as a parent asset at a low rate, and a grandparent-owned 529 is no longer counted. Schools that use the CSS Profile may treat 529 plans differently.
Which year’s income does the FAFSA use?
The FAFSA uses income from two years before the school year. For example, the 2027–28 FAFSA uses 2025 income.
Do I have to file the FAFSA every year?
Yes, if you want to be considered for need-based aid or federal loans. Requirements for keeping merit aid vary by school.
Does home equity count on the FAFSA?
No. Equity in your primary residence isn’t counted on the FAFSA, but many schools that use the CSS Profile do consider it.
Do retirement accounts count on the FAFSA?
No. Balances in 401(k)s, IRAs, and other retirement accounts aren’t counted as assets, though some contributions made during the income years aid forms use may be added back as untaxed income.
How much can parents borrow with Parent PLUS loans?
For loans made on or after July 1, 2026, Parent PLUS borrowing is capped at $20,000 per student per year and $65,000 per student in total, with an exception for some families already borrowing for a student’s current program.
Get Help Building Your College Funding Plan
Navigating the financial side of the college landscape for high-income families requires careful planning. While it may feel like financial aid is out of reach, many opportunities exist for both need- and merit-based assistance. High-income families can make college more affordable by filling out the necessary forms, researching scholarships, and maximizing tax planning and saving strategies.
If your child is in ninth or tenth grade, the first income year that counts for aid may already be here or close. Every family’s financial situation is unique, especially when it comes to planning for college, so if you’re looking for personalized college planning support, please reach out to our team.
Disclaimer:
This material is provided for educational and informational purposes only and is not investment, tax, legal, or financial advice. It does not consider any individual’s investment objectives, strategies, tax situation, or time horizon, and it is not an offer to sell or a solicitation to buy any security. Financial aid rules, tax laws, and school policies change frequently and vary by institution; figures cited are as of October 2026. Investing in a 529 plan involves risk, including the possible loss of principal. Before investing, review the plan’s offering documents for its investment objectives, risks, fees, and expenses, and consider whether your home state offers tax benefits only for its own plan. Please review your personal situation with your tax and/or financial advisor before acting.
Views expressed are subject to change based on market and other conditions. Any projections, market outlooks, estimates, or other forward-looking views are based on assumptions, are not indicative of future performance, and actual results may differ materially. Information is obtained from third-party sources believed to be accurate, but Milestone makes no representation as to its accuracy, completeness, or timeliness and accepts no liability for decisions based on it. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal.
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