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 Roth IRAs and Financial Aid for College

When applying for college financial aid, the FAFSA (Free Application for Federal Student Aid) does not consider retirement accounts as assets when determining how much a family is expected to pay for college. This applies equally to Roth IRAs owned by parents or kids. However, some academic institutions do take IRAs into consideration, and some may require that the student contribute 20 - 25 percent of his/her assets toward college education costs. Check on the policies of the academic institutions to which you apply.

Questions about IRAs and financial aid are discussed by various sources on the Internet. Following are several useful sources:

Janet Bodnar’s article "Roth IRAs and financial aid", which appears in the “Money Smart Kids” column of Kiplinger magazine, discusses financial aid formulas and how they relate to Roth IRAs.

Joseph Hurley’s article "Using Roth IRA to pay for college expenses", which appears on, discusses the implications of withdrawing the funds actually invested in a Roth vs funds earned by that Roth -- in determining financial aid qualifications. This addresses parentally owned Roth IRAs, but provide some perspective on the advantages of children owning their own Roth IRAs.

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