“Do many people split on the middle?”
A recent post in Road2College's Facebook group Paying for College 101 echos the confusion that many divorced parents experience when the time comes to “divvying up” college expenses with ex-spouses.
This poster's student would be attending a public state college-so far no aid packages had been forthcoming. Fortunately, the parent had reason to expect support for their student from her ex, however with no formal agreement in place, she wasn't sure how to help her daughter determine an agenda.
“How to move through these conversations [about colleges]?” she asked another parents.
The question hit a nerve. Other parental responses laid out a spectrum from impossibly frustrating to remarkably easy arrangements for who'd pay what for higher education, with a number of factors playing a role.
When you're divorced, of course your relationship with your ex (and both your relationships with your child) really make a difference in how easily you decide to save and pay for college together.
Other circumstances though, including state laws regarding who pays what, and guidelines established (or otherwise) inside your divorce agreement also may play a role.
Vicki Vollweiler, president and founder of College Financial Prep observes that paying for college like a divorced parent is usually quite challenging. When the income of your one household splits in two, expenses increase.
Legal expenses may consume savings previously put aside for college tuition and support. Just how do divorced parents pay for college? Good-as-possible communication, as well as an awareness of each parent's role in supporting their student's education are very important.
Plan together with your Ex to Support and Pay for College
Should your son or daughter attend private or public college? Vollweiler observes that divorced parents may have differing expectations for his or her child's education.
One individuals might want your son or daughter to go to the lowest-cost college, while the other wants them to attend the college using the top-ranked program.
Talk with each other and with your child about how exactly much money you've saved for school, Vollweiler advises. How much more money can be reasonably contributed?
What are each of your purpose for the child? And what are your child’s college goals?
Michele Larson, Founder of Knowledge 4 College suggests parents check each school's Net Price Calculator (NPC) to get a reasonable estimate from the expected financial aid from that school.
Know Your State's Divorce Laws
Divorce laws vary from state to state with techniques that may affect your college planning. Parents weighing in around the question posed by the Paying for College 101 member concerning how to divide up affording university like a divorced parent made it very clear the legal obligation of both parents depends on where you live.
According to parents in Texas, Pennsylvania, and Virginia, for example, there isn't any requirement of both mom and dad to pay. This means if your ex is not forthcoming with support and you have nothing written to your divorce agreement, you may not be able to compel these to contribute.
Meanwhile, in Sc, based on Hyde Law practice, P.A., although it was once considered unconstitutional for courts to mandate payment for any child's college expenses, this is no longer the case. This means if you live in Sc and your ex is refusing to pony track of college expenses, you can bring them to the court.
There, a family judge can make a decision about whether or not to mandate payment and just how much based on several factors, including the following: whether or not your child needs the cash to attend, is likely to benefit from college, and make satisfactory grades.
The judge also considers whether the parent under consideration has the ability to assist in paying.
If you live in New York, you may be required to bring about your child's private education. In this case, you may wish to place a cap on what you each will pay within the divorce agreement.
Review What Your Divorce Agreement Says About College
A good divorce agreement might help stop college planning conflicts before they start-or at least establish perimeters for resolving differences. The divorced parents who seemed happiest within their responses towards the Affording university 101 post about divvying up college payments had plans in position, from alternating who would pay semester by semester to co-funding each child's 529 plan a specific amount.
Ideally, your agreement should spell out:
- whether both mom and dad must agree with the option of college.
- whether or not parents paying supporting your children is permitted to counter children's option to attend a private college.
- caps how much each parent must pay. The SUNY Cap provision, for instance, states that even when your student attends a private school, you only have to pay up to the amount you'd need to pay if your little one attended their state University of recent York (SUNY).
Gaps in the agreement and/or within the laws of the state might leave open the chance that certainly one of you, according to your financial ability, will have to pay towards private college, no matter your choice.
Which Parent Should Own the 529 Plan?
Although states have different plans and investment options, in general, a 529 plan has got the benefit of offering tax-free growth. Stacy Francis explains when your son or daughter winds up not needing the funds, distributions as much as the amount of the tax-free scholarship will not be subject to the 10 percent penalty tax. Funds may also be transferred to another child, grandchild, or member of the family.
The owner of the 529 plan controls how the plan is distributed, although, in order to provide accountability towards the non-owning parent, divorce agreements might put limits how the plan's funds may be used.
The College Funding Coach advises that you should transfer the 529 intend to the custodial parent, the main one with whom the child lives in excess of half the entire year. If it is of the non-custodial parent, the distributions count as untaxed salary of the student, that will improve your student's EFC the year after and could affect financial aid eligibility.
How Do Divorced Parents Pay for College? Current FAFSA Guidelines
Road2College outlines current procedures for completing the disposable Application for Federal Student Aid (FAFSA) when you're divorced.
As it stands now, only the income and assets of the custodial parent are included on the FAFSA. For financial aid purposes, the custodial parent may be the parent with whom the student spends probably the most time (183 days or even more) in the past year.
If the custodial parent has remarried, then the custodial stepparent's income and assets should also be included. However, if the custodial parent is living using their new significant other but hasn't remarried, just the custodial parent's income and assets are included.
If you and your ex are separated and do not live together, you are treated as if you are divorced.
“Informally” separated couples still file federal income tax returns as married, but only the custodial parent's information gets reported for financial aid purposes.
If a few lives together, even when they’re divorced or separated, they are still treated as married around the FAFSA.
FAFSA Changes Impacting Divorced Parents
FAFSA rules will be changing beginning with the 2024-25 FAFSA, so parents should be aware of the things they can expect (although guidelines are complicated and subject to revision.)
The biggest change will be that under the new FAFSA, parents who files is the one who offers the most financial support, no matter with whom the kid lives.
Family size will make reference to students, parents, and people claimed as dependents on the filing parent's Federal Income Tax Return (including qualifying children and qualifying relatives).
You will have to factor family size into your decisions about which parent claims the kids as dependents on their own federal tax return because this may affect your children's eligibility for need-based financial aid.
Currently, the FAFSA ignores multiple support agreements. The new FAFSA, contrastingly, may consider multiple support agreements in some cases, such as when both mom and dad provide for their child equally or in alternating years.
Under the new FAFSA, that need considering dependent, children must not provide more than half their own financial support. They ought to be under age 19, or, if a full-time student, under age 24 as of the final day's the tax year. Married children mustn't file a taxes using their spouse.
It is not sure that the FAFSA will treat informally separated parents as divorced.
FAFSA information will still refer to the prior, prior year. What this means is if you are divorced or separated, you will need to start planning 2 yrs prior, rather than twelve months before the FAFSA award year.
Vicki Vollweiler suggests additional changes to think about:
Parents with two or more children in college simultaneously will no longer benefit by having this considered in their Expected Family Contribution (EFC).
The good news is when both mom and dad (married or divorced) are low income, the FAFSA Simplification Act can make it easier to be eligible for a Pell Grants.
Remember that the FAFSA Simplification Act may impact current college students as FAFSA ought to be completed each year the child is in college.
Final Tips
Clarifying goals and getting up-to-date information can help mitigate education planning conflict with your ex.
Divorce attorneys, financial planners/advisors, and certified divorce financial analysts may help you stay up with the way your state's divorce laws and FAFSA filing changes affect your circumstances.