Harvard announces free tuition for some students — and raises income cutoff for financial aid, says 86% of US families qualify. Here's how assistance programs can impact college savings

Harvard’s new financial aid policy

On Mar. 17, Harvard announced that students who come from families that earn $200,000 or less will not have to pay tuition. And for those whose families earn $100,000 or less, food, housing, health insurance and travel costs will also be covered.

“The financial aid program is designed so that Harvard students can study, train, research, create and fully engage in the Harvard experience with minimal constraints,” Jake Kaufmann, director of financial aid and senior admissions officer at Harvard College, told the Gazette.

Students whose family earns $100,000 or less will also receive a grant for $2,000 in their first year and an additional $2,000 in their last year, intended to support them beyond graduation.

For families earning $200,000 or less, students won’t have to pay tuition, though aid beyond that is based on financial need. The university has also stated that it’s willing to work with families who earn more than $200,000 to offer assistance to students.

The income threshold has increased since the Harvard Financial Aid Initiative was launched in 2004. In 2023, the earnings cutoff for students of families receiving full financial aid was $85,000.

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How these changes can impact you

Even if you or your child qualifies for financial aid, it doesn't mean you won’t have to pay anything to attend Harvard.

Although, according to the university, 55% of Harvard undergraduates received financial aid in the 2023–2024 school year, students (or their families) still ended up paying an average of $15,700. These costs could include textbooks, equipment and other living expenses.

For those who only qualify for tuition assistance, this cost can go up since you will also need to cover housing, food, transportation and other related costs.

Although other schools, like Northwestern University, Duke University and the University of Pennsylvania, offer financial aid packages for families earning under a certain income, you would still need to factor in paying out of pocket for some costs.

Sure, these changes could mean that you may be able to budget and save less for college costs. However, you may not get into colleges that offer significant financial aid. Even if the school you get into does, you may not find out just how much you could receive until later on.

Whether or not you receive financial aid, you’ll still need to set aside some funds for your college education. You can consider aiming to save the average amount families pay for college in an education-focused savings account, like a 529 plan or a prepaid college tuition plan.

Currently, the average cost of college per year — including tuition, books and living expenses — is $38,270..

When deciding between types of savings plans , the 529 plan offers a bit more flexibility. The money you save can be used tax-free towards qualifying expenses or tuition at a qualifying educational institution. A prepaid tuition plan typically only allows you to use the credits you purchase towards future tuition costs at certain schools.

Since college is a huge expense, saving now can help you from having to take out larger loans, whether or not you receive tuition assistance. Even if you don’t use all the funds in a 529 plan, the account owner can change the beneficiary — your sibling, for instance, can use the funds towards their college education.

In some cases, the account owner can ask for a refund for the unused amount in a prepaid tuition plan. Some states, like Florida, may charge a fee for doing so.