Student Perspective: Will My Roth IRA Hurt My Financial Aid?
- Richard Dombrowski
- Jul 21, 2025
- 2 min read
If you’re a student with a custodial Roth IRA from summer jobs or side gigs, you’re already ahead financially. But when applying for college financial aid, you might be wondering: Could that Roth IRA hurt your eligibility?
Here’s what you need to know before filling out the FAFSA or CSS Profile.
FAFSA and Student Roth IRAs
The FAFSA is the federal form used to determine aid eligibility at most colleges:
Your Roth IRA balance is not reported as an asset. This is good news because student assets are heavily weighted in the aid formula. The FAFSA excludes your retirement account balances, even if the Roth IRA is in your name.
Withdrawals are reported as income. If you take money out of the Roth IRA—even if the withdrawal is tax-free—it must be reported as untaxed income on the FAFSA for the following year.
Example: If you withdraw $5,000 in 2025, you’ll report it on the 2026–2027 FAFSA, which could reduce your financial aid eligibility.
CSS Profile and Student Roth IRAs
Some private schools use the CSS Profile, which is more detailed than the FAFSA:
Roth IRA balances may be considered student assets, which are assessed more heavily than parent assets.
Distributions are counted as student income, just like on the FAFSA.
What This Means for You
If you’re applying only to FAFSA schools, your Roth IRA balance is safe—unless you take a distribution. If you’re applying to CSS Profile schools, the account itself may still count against you.
Smart Student Strategies
Avoid withdrawing from your Roth IRA while in school. Keeping funds in the account protects financial aid eligibility and allows your money to grow tax-free.
Use other resources like scholarships, grants, and 529 plans before touching retirement savings.
Keep records of your earned income to support Roth IRA contributions.
Want to get the most from your early savings without hurting your aid eligibility? We help students and families make smart decisions around college and long-term finances.
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