Managing College Costs During Divorce
If you have college-aged children, the process of divorce can be further complicated by changes in your financial aid eligibility and that of your ex-spouse. The family law attorneys of Rodier Family Law suggest ways of preparing for and better managing college costs during divorce.
Whether you are a parent of a newly blended family, or a parent of a single college-age child and going through a divorce for the first time, the process will likely influence the way you structure your finances to pay for your child’s college education. In addition to addressing the changing state of your joint college funds, you will need to prepare for changes to your financial aid packages and qualifications.
If you are in the process of going through a divorce, the first step you should take in addressing college payments is determining which parent will become sole account holder of your joint college savings fund, or whether the account should remain intact. Once one parent takes on the responsibility of these funds, the other parent will only be able to view the account and cannot take action. So, determining who will take responsibility for it is an important decision that should be discussed.
College savings funds should in many cases be assumed by the noncustodial parent. Because the noncustodial parent’s assets do not need to be included on the Free Application for Federal Student Aid (FAFSA), transferring control of a college savings account to that parent may increase the child’s chance of receiving federal aid. The parent who claims the child as dependent will receive a tax deduction, but will also be the only parent allowed to receive IRS college tax credits, provided they fall into an eligible income bracket.
If you are a divorced parent who has remarried and who maintains custody of your child, keep in mind that when you fill out the FAFSA, your new spouse’s income will be a factor of consideration. Furthermore, many colleges and universities also require that parents submit additional financial aid forms which may request financial information about both custodial and noncustodial parents. In cases of families that include two previously divorced parents, this could result in the submission of up to four separate sets of financial forms.
In addition to a potential increase in the number of forms you must submit, the questions you are required to answer on the FAFSA may prove more complicated to answer. For example, strictly for the purposes of the FAFSA, the “custodial” parent is deemed to be the parent who spends the most days out of the year with their child, rather than being based off court ordered custody arrangements. If you have custody of your child and do not wish to involve your non-custodial ex-spouse in the financial aid process, your child may be limited in the number of schools they can apply for.
In families with remarried parents, determining which parent is the ‘custodial parent,’ ‘parent 1’ and ‘parent 2’ also becomes complicated. Keep in mind, however, that you only need to provide the information required of you. If you choose to share more, you could be inadvertently inflating your income.
Regardless of the structure or size of your family, planning financially for your child to attend college can be made more challenging due to an impending or past divorce. Plan for this by beginning the necessary paperwork as early as possible. By the fall of your child’s last year of high school, you should have a financial plan in place that outlines how you will ensure that college bills are paid. If you are in the process of divorcing and you have concerns about determining what portion of college costs each parent will assume, you may consider determining it within your divorce settlement. If you take time to plan and do the necessary research, you will have more time as college grows closer to help your child prepare for the changes ahead.
For more information on including college payments in your divorce settlement, or to speak to an experienced attorney regarding divorce, contact the family law attorneys at Rodier Family Law today.