Clark Howard Is Right: A $200k Earner Should Ditch Roth To Unlock Free College Tuition

A Pennsylvania father earning around $200,000 wrote to Clark Howard with a specific plan: temporarily switch from Roth to traditional retirement contributions during his son’s college years to keep his reported income below the threshold where elite schools offer free or heavily reduced tuition. Howard’s answer was unambiguous.

"Yes, in your situation, just as the one recently about health insurance, completely right that what a traditional 401(k) or a traditional IRA or both, what they do is they bring down your income enough, in many cases, below thresholds where other benefits accrue to you that you would lose if you were listening to the man from Roth, which is who I am, and just doing that automatically. There can be exceptions."

Howard is right. The numbers explain why.

Why $200,000 Has Become a Magic Number in College Admissions

A cluster of elite universities has converged on $200,000 household income as the cutoff for free or near-free tuition. Harvard, MIT, and Penn have expanded their aid policies to eliminate tuition for families at or below that level. Yale announced in January 2026 that it would cover tuition entirely for families earning below $200,000, beginning in fall 2026. At schools where annual tuition exceeds $60,000, crossing that threshold means avoiding more than $240,000 in costs over four years.

The income figure most of these programs examine is Adjusted Gross Income (AGI), the number on your tax return after subtracting pre-tax retirement contributions, among other items. That is the lever Steve is pulling, and it is a legitimate one.

The Math That Makes This a Real Decision

For 2026, the IRS allows workers to contribute up to $24,500 to a traditional 401(k) and up to $7,500 to a traditional IRA. Maxing both reduces reported income by $32,000. For someone earning right at $200,000, that moves AGI to roughly $168,000 before the standard deduction, comfortably below the threshold most of these programs use.

The tuition benefit is binary. A family that qualifies receives free or near-free tuition; a family that misses the cutoff by even a small amount loses a four-year benefit worth six figures. Choosing Roth over traditional in the wrong years can cost a family dearly.

At $200,000 gross income, a married couple filing jointly sits in the 22% bracket, with income above roughly $100,800 taxed at that rate and income above $211,400 reaching the 24% bracket. Choosing traditional over Roth means deferring taxes on those contributions rather than paying them now. If Steve retires at a lower income than his peak earning years, he will pay less tax on those dollars than he would today. Even if the tax math ends up roughly neutral in retirement, the strategy still wins because of the six-figure tuition benefit it unlocks.

Steve also noted that FAFSA uses prior-prior year income, meaning the application filed during a student’s senior year of high school reflects income from two years earlier. He is implementing the strategy while his son is in the middle of high school and plans to continue through the middle of college. That is a window of roughly five to six years of tax returns influencing aid calculations.

The FAFSA vs. CSS Profile Distinction That Can Break This Strategy

Under the updated FAFSA formula, contributions to workplace retirement plans are no longer added back to the Student Aid Index calculation, the number schools use to determine how much aid a family receives. That favorable rule is what Steve is working with.

The CSS Profile, used by roughly 265 private colleges and universities to award institutional aid, treats retirement contributions differently. Many of those schools add pre-tax contributions back into their income calculation, which would partially or fully neutralize the strategy. A family targeting a school that relies heavily on the CSS Profile should verify how that school treats retirement contributions before assuming the same income reduction will apply.

The schools with the most generous income-based tuition programs, including Harvard, Yale, and MIT, use their own aid formulas. Families should confirm directly with each school’s financial aid office how AGI is defined for their specific program.

Three Features That Make This Strategy Work, and Two That Break It

Steve’s situation has three features that make the strategy effective: his income sits close enough to a meaningful threshold that retirement contributions alone can move him below it; he is targeting schools with explicit income-based free tuition policies where the payoff is large and binary; and he maxes all tax-advantaged accounts regardless, so the only question is account type.

Two profiles where this strategy fails:

1. A family earning $250,000 or more, where maxing traditional accounts cannot bridge the gap to the $200,000 threshold. Contribution limits cap out at $32,000 for most workers, and non-wage income such as capital gains, rental income, or business distributions still appears in AGI regardless of retirement account choices.
2. A family whose target school uses the CSS Profile and adds retirement contributions back to income. The AGI reduction on the tax return does not translate to a reduction in the aid formula, so the strategy provides no tuition benefit while simply deferring taxes.

How to Find Out If This Applies to You

Pull your most recent tax return and find your AGI. Compare it to the income threshold at each school your child is seriously considering. If maxing traditional 401(k) and IRA contributions gets you below the threshold at a school with meaningful tuition benefits, the potential tuition savings are worth discussing with a financial advisor or tax professional.

Contact the financial aid office at each target school and ask two questions: what income figure is used to determine tuition eligibility, and whether pre-tax retirement contributions are added back into that figure.

The window is narrow. FAFSA uses prior-prior year income, so families with a high school sophomore or junior have the most to gain by beginning this planning now. Howard’s broader Roth preference remains sound for most earners, but Steve’s question surfaces a real exception: when a pre-tax contribution can unlock a six-figure benefit, the tax deferral becomes a college financing decision, not just a retirement one.

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