“is there value to applying to a top school, just so for the rest of your life you will know if you had what it took to get admitted?”
Possibly yes.
I think it is OK if and only if the kid is applying to one of the few top schools that do meaningful amounts of big dollar merit scholarships. And where the clear understanding is that to attend, the top school has to come in at/under the clearly communicated budget. Getting admitted and being unable to pay is the same as being rejected – you ain’t going there.
For most of these type scholarships (Tulane, Vandy, Emory, USC, etc.) there is usually a separate application and essays that the kid has to do. So the kid has to put in some extra work/skin in the game. And it is a more positive way to get the kid involved in and thinking about and taking ownership of the money side of the equation.
If the kid isn’t willing to research and apply for those type of schollies, well then there’s no need to be talking about those schools as possibilities. Getting that kind of schollie from one of those schools is TOUGH, but some kids do get them. So there’s no reason not to try as a stretch option.
If the school just isn’t a financial possibility under any circumstances, then don’t apply.