Not a no cost upgrade, but I think they were trying to say Apple already uses it in other models so it wouldn't have to be developed specifically for this phone. Having said that I don't think they will do it on the SE, and I really don't see myself needing more than 64GB, and I think I could get by with 32. I always go over what I think I need, but have never filled up a phone. I had 64GB 6, 128GB 6S, and now a 64GB SE, and only have 14.62GB used (most in storage is Pocket Casts at 1.15GB, then messages at 698MB). I use OneDrive for all my pictures and music, so I don't need the memory on the phone, but having a little buffer is nice for trips where you can't upload pictures or you want to have music to listen to offline. I think 32GB would still give me that buffer.
I understand that a lot of people are not like me, and for those that do need 256GB I think Apple would still want to steer them to their flagship phones.