Trump Accounts and College: Could They Affect Financial Aid?

What parents of college-bound students need to know

Trump Accounts are one of the newest savings vehicles available to families with children. While they are primarily designed to encourage long-term investing and retirement savings, they raise an important question for parents:

Could putting money into a Trump Account affect your child’s eligibility for college financial aid?

The answer could ultimately be favorable—but families need to understand how the accounts work and where FAFSA guidance still needs to catch up.

What Is a Trump Account?

A Trump Account is a new type of traditional Individual Retirement Account (IRA) established for a child. The IRS describes it specifically as a type of traditional IRA under Internal Revenue Code Section 530A.

Parents, guardians and other eligible contributors can fund the account. During the child’s “growth period,” most private and employer contributions are subject to a combined $5,000 annual limit, which will be indexed for inflation after 2027. Certain government and qualified general contributions are outside that limit.

Children born from January 1, 2025 through December 31, 2028 who meet the citizenship and Social Security number requirements can also qualify for the federal government’s one-time $1,000 pilot contribution.

What Happens When the Child Turns 18?

This is where Trump Accounts become particularly interesting for college planning.

The special “growth period” ends on December 31 of the year in which the child turns 17.

Starting January 1 of the calendar year in which the child turns 18, most of the special Trump Account rules end and the rules governing traditional IRAs generally apply.

For example, if a student turns 18 in October 2043, the growth period ends December 31, 2042. Beginning January 1, 2043, months before the student’s actual 18th birthday, the traditional IRA rules generally apply.

That timing could become very important for families completing the FAFSA.

Why This Matters for FAFSA

FAFSA generally requires families to report certain assets, including cash, savings and investments.

However, retirement assets are excluded from FAFSA investments.

The federal 2026–27 FAFSA instructions specifically state that investments do not include retirement plans, including “non-education IRAs.”

That creates an intriguing potential financial-aid advantage for Trump Accounts.

Once the Trump Account is operating under the traditional IRA rules, there is a strong basis for expecting the account balance to receive the same FAFSA asset exclusion generally afforded to IRAs.

Consider a college student with $50,000:

Where the $50,000 is held	FAFSA treatment
Student savings account	Reportable asset
Student brokerage account	Reportable investment
Student-owned UGMA/UTMA	Generally reportable student asset
Parent-owned 529 for the student	Generally reported as parent asset
Traditional IRA	Excluded retirement asset
Trump Account after growth period	Potentially excluded as an IRA

That distinction could be significant.

Could Parents Use a Trump Account to Reduce Reportable College Assets?

Potentially, but families should be careful about making that assumption today.

Suppose parents have money they want to invest for their child’s future. If that money is placed into an ordinary account owned by the student, it can become a reportable student asset for FAFSA purposes.

Money held in an IRA, however, isn’t included as a FAFSA investment asset under current FAFSA instructions.

Because the IRS explicitly defines a Trump Account as a type of traditional IRA, there is a reasonable argument that the account could receive favorable FAFSA treatment.

But there is an important caution.

We Are Still Waiting for Trump Account-Specific FAFSA Guidance

The IRS and Treasury have provided substantial guidance concerning Trump Accounts. The Department of Education’s FAFSA instructions, however, do not yet specifically identify Trump Accounts by name.

Therefore, parents should not assume:

“If I put money into a Trump Account, it definitely won’t count on FAFSA.”

The statutory structure is encouraging because the account is defined as a traditional IRA, and FAFSA excludes non-education IRAs from investments. But until Federal Student Aid issues guidance specifically addressing Section 530A Trump Accounts—including their treatment during the under-18 growth period, i would consider the financial-aid treatment an area to watch.

This is especially important because the account has special rules before the calendar year in which the child turns 18.

Trump Account vs. 529 Plan

For parents saving specifically for college, the Trump Account doesn’t automatically replace the 529 plan.

The two accounts serve different purposes.

	Trump Account	Parent-Owned 529
Primary purpose	Long-term/retirement wealth	Education
FAFSA asset treatment	Potentially favorable; specific guidance pending	Parent asset for dependent student
Withdrawals before 18	Generally restricted	Allowed for qualified education expenses
College withdrawals	IRA rules apply after growth period	Tax-free for qualified education expenses
Investment flexibility	Restricted during growth period	Depends on plan
Long-term retirement potential	Excellent	Primarily education-focused

A 529 remains a powerful college-savings tool because qualified education withdrawals can be tax-free, although most of the time I don’t recommend 529 plans. (*Certain colleges will reduce the aid package by 25% of the 529 account.)

A Trump Account has a different advantage: its status as an IRA may ultimately make its balance particularly attractive from a FAFSA asset-reporting standpoint.

Don’t Confuse the Account Balance With Withdrawals

There is another distinction parents need to understand:

An account being excluded as a FAFSA asset doesn’t necessarily mean taking money out of the account has no financial or tax consequences.

After the growth period, traditional IRA distribution rules generally apply. Early distributions can be subject to income tax and potentially the 10% additional tax, although an exception to the additional tax exists for certain qualified higher-education expenses.

Therefore, families shouldn’t simply think:

“We’ll hide the money from FAFSA in an IRA and then withdraw it to pay tuition.”

Asset treatment, taxation, withdrawal penalties and FAFSA income calculations are separate issues that need to be considered together.

Higher-Income Families Should Look at This Differently

For some families, none of this will materially change financial aid.

A family with substantial income and assets may already have a Student Aid Index high enough that the student isn’t likely to receive institutional need-based aid.

For those families, the more important questions may be:

Where will the money grow most efficiently?
Which account provides the best tax treatment?
How much flexibility does the student need?
Is the family pursuing merit scholarships rather than need-based aid?
Should college savings and long-term retirement savings for the child be separated?

Financial-aid planning should never be reduced to simply trying to lower the number reported on FAFSA.

What About CSS Profile Colleges?

Parents also need to remember that FAFSA and the CSS Profile are not the same thing.

Many private colleges use the CSS Profile or their own institutional methodology when awarding their own need-based grants.

A strategy that reduces reportable assets on the FAFSA does not automatically produce the same result at every CSS Profile institution.

Families considering expensive private colleges should evaluate both systems.

The Potential College-Planning Opportunity

Trump Accounts could eventually become a valuable part of college financial planning.

Imagine a child who accumulates $30,000, $50,000 or more in a Trump Account by college age.

Beginning January 1 of the year in which that child turns 18, traditional IRA rules generally apply. Meanwhile, FAFSA currently excludes non-education IRAs from reportable investments.

If Federal Student Aid confirms that treatment specifically for Trump Accounts, families could potentially have an account that:

Builds long-term wealth for the child + receives IRA tax treatment + potentially isn’t counted as a FAFSA investment asset.

That combination deserves attention.

The Bottom Line for Parents

Don’t choose a Trump Account solely because you believe it will increase your child’s financial aid.

Instead, consider it as one component of a larger college and financial strategy.

The most important question isn’t simply:

“Should I open a Trump Account?”

It is:

“Where should our family put its next dollar so we’re saving for college, maximizing scholarships and financial aid, minimizing taxes and still building long-term wealth?”

For some families, the answer may be yes.

For others, it could involve a combination of other financial products and Trump Account.

And for families unlikely to qualify for need-based financial aid, the better strategy may be concentrating on colleges where the student is positioned to receive substantial merit scholarships rather than trying to restructure assets simply to influence FAFSA.

A Through Z College Planning

College planning is about more than choosing a college. The right strategy can potentially save a family tens of thousands of dollars or hundreds of thousands of dollars. Give us a call or click to schedule a free no-obligation college consultation.

Important Disclaimer: All admission, scholarship, financial-aid, FAFSA and net-cost projections are estimates based 
on historical trends, publicly available institutional data, recent merit patterns, current federal guidance 
and the student profile provided. Final admissions and financial-aid decisions are made solely by each institution 
and applicable government agencies and may change yearly. Estimated merit aid, grants 
and admission probabilities are not guarantees of admission or financial assistance. 
Actual awards and financial-aid treatment may vary based on varying factors. 
Tax and investment decisions should be reviewed with an appropriate tax or financial professional.