Er, isn't your comment simply telling me I'm correct. To paraphrase: "The cut-off exists, but some people who don't meet the cut-off don't think they can afford it." Starting from $0, you can pay half of the cost of an Ivy League education based purely on government loans alone. Throw in private education loans (a bad idea, but available), student work, and family contributions and it can be done.
But how much do these people you know (or their families) earn? The $60,000 (it was $40,000 until last year or the year before) cut-off is intended to attract those from lower-middle class and poor families. It is not intended to allow a hassle- and pressure-free funding source for the upper fifth in income. Admittedly, any "bright line" policy fails at the fringes; those families who make $65,000 are probably no better equipped to send a child to Harvard. However, the $60,000 policy certainly instills more confidence than a vague and ambiguous "we help those with difficult financial situations," or something similar. I would hope and expect that for a student on the very fringes, scholarships and government grants would take up much of the slack. On the flip-side, I would hope that any family in a situation on the very fringes would examine how they might qualify - a simple IRA, 401(k), or 529 investment would drop AGI down to the range necessary to qualify their children.
If your family makes $100,000 per year, then you don't qualify. If you truly want to attend any of those schools, it can be done; conversely, doing so may be a bad choice financially because it will require enormous sacrifice on the part of the student and his or her family. Moving to a smaller house, investing money each year from birth, forgoing many luxuries, and so on is not necessarily the sort of situation many middle and upper-middle class families are excited about. A family pulling $100,000 can certainly send a child to Harvard, but it will require some serious sacrifices (and planning ahead).
Conversely, the federal government already provides plenty of excellent opportunities for families in those situations. 529 plans allow for completely sheltered investment, which for someone in the upper two fifths of the income is the functional equivalent of a 25%-35% match on money before we even consider any returns on the invested money. Further, the government offers a well-designed federally-subsidized student loan system that will cover the instant costs and allow for a wide range of repayment options based on income after graduation.
Bottom line: three fifths of the United States is sub-$60,000 (the cut is $55,000 for the middle quintile). There is some overlap in the fourth quintile, which runs to $88,000, and that is the only group that really gets caught. It's likely that many in that group won't qualify for grants and it's entirely possible that the family is unable to sock away enough through a 529 to make it work. A person in this position COULD attend an Ivy if they really wanted, but it would require a hefty sacrifice on both the student's part and that of his or her family. If there's any room for criticism in this argument, it's that such schools could effectively cover all ranges if they upped their cut-off to $80,000. Of course, the Harvard policy is specifically intended to pull those from the bottom tier of US income, not to make things affordable for the middle class. It's not billed as an "anyone can come here" so much as a "we want financial diversity in the form of lower income students and this is how we will accomplish that goal."
For someone in the upper quintile, though, there's not much sympathy. 529 plans will support the funding and subsidized loans are available to take up any of the slack for those in the lower range of that quintile. $300 a month (actually $400, but sheltered from tax) invested per month will provide ~$100,000 at age 18, assuming any moderate investment strategy. Not enough to pay for Harvard, mind you, but enough to make Harvard cost the same as any state school. $450 per month would cover the entire cost (note that these are 2009 dollars - properly invested you should be able to beat inflation which makes the 2009 dollars acceptable for comparison's sake). Could a family making $100,000 afford $450 a month? Certainly. In fact, they could probably afford substantially more than that to compensate for the earlier years when things might have been "leaner." That family may not like the sacrifice in standard of living required, but it can certainly be done.
Every person you know who "couldn't afford" Cornell could have paid; they simply couldn't justify the expense. I don't blame them one bit and I would make the same choice every single time, but I also don't complain that it's bullshit.