How will Trump Accounts affect students’ financial aid? Families await federal guidance

THE FEDERALLY BACKED TRUMP ACCOUNTS, filled with $1,000 seed deposits for eligible newborns and contributions for some older children, may affect how much financial aid students qualify for through need-based scholarships once they enter college. 

Trump Accounts are tax-advantaged investment accounts designed to help children under age 18 build long-term wealth. Family members, employers, nonprofits and government entities can contribute thousands to the money-growing investment accounts.

Though they are intended to serve as retirement accounts, the funds can be used early for higher education expenses, to purchase a first home or start a business. The money would be taxed but not face an additional tax penalty if withdrawn for those reasons. 

Trump Accounts were created under the One Big Beautiful Bill Act — the 2025 federal budget law that included massive cuts to social services — and launched in July. However, the U.S. Department of Education has not issued guidance on how income from the accounts will be reported on the Free Application for Federal Student Aid, or FAFSA.

That lack of clarity doesn’t only concern families with babies born between 2025 and 2028 who qualify for the seed deposit from the federal government. Companies and government entities have been donating money to some older children via Trump Accounts, and families have to consider whether to utilize it. 

Brad Gerstner, the chair of Invest America, the initiative formed alongside Trump Accounts, said at a late August press conference that the accounts will not affect financial aid. He said that is clear based on the legislation that formed the program, though some advocacy groups question whether that’s the case. 

“The issue is there isn’t clarity,” said Magin Misael Sanchez, a higher education senior policy analyst at UnidosUS, a Latino civil rights and advocacy organization.

Think of them like IRAs

According to legislation, to Gerstner’s point, Trump Accounts should be treated as individual retirement accounts, or IRAs. That means the accounts are exempt from affecting financial aid eligibility. 

However, if students decide to withdraw some of that money, which is allowed under the program’s rules, the funds would be considered student income. 

Generally, a student’s assets affect the federal need-based financial aid they qualify for. 

“In theory, student assets typically weigh a lot more in that calculation; it would have a bigger impact,” Sanchez said. “It comes down to how it gets identified as part of that FSA (Federal Student Aid) calculation.” 

Some advocates have called on the U.S. Department of Education to clarify how Trump Accounts will be reported on financial aid applications and whether the student aid calculation will change in its forthcoming guidance.

Though colleges and universities haven’t had to deal with them much yet, families must decide if they’ll claim the Trump Accounts for their children’s futures. 

“It’s hard to make a decision when you don’t know,” Sanchez said. “I think, in part, this department’s distracted … and not necessarily focusing on this clarity that families need when they’re making decisions on how they’re going to save for their students.”

The program launched in July with more than 7 million accounts created by families. Since Oct. 1, the U.S. Treasury Department reportedly has begun to automatically create Trump Accounts for eligible children who did not have an account. 

Families must still claim the account by signing up online for relatives and employers to contribute — and for kids to access the funds at 18. 

This story originally appeared in EdSource.