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Planning for Your Children’s College Expenses During Divorce

Financing a college education is tricky, but maybe more so for divorced parents. If your child requires student aid, divorce may affect your child’s eligibility. To get federal aid, students must fill out paperwork through FAFSA (Free Application for Federal Student Aid). Students are required to put in at least one of their parent’s information. For divorced families, children need to put in their custodial parent’s information. The custodial parent is the parent with whom the child lived with the most during the year. If the child shared equal time with both parents, then the parent who provided the most support for the child during the year should complete the form. It is not definitive typically if it is completed by the parent earning higher income.

If you have created a 529 college savings plans for your children, the parent named custodian factors in to financial aid awards. If the person named as custodian on the 529 college savings plan is different from the custodial parent or not the minor child, the account may be counted differently and can reduce federal aid eligibility.

Remarriage could also impact college-bound children. FAFSA may impute your new spouse’s income onto your children—even if your spouse is not contributing toward your children’s college education expenses. Meaning, if you are a custodial parent for your children for FAFSA purposes and you get remarried, not only will FAFSA look to your finances, but FAFSA will also consider your spouse’s finances.

When divorcing with minor children (even if your children are years away from college), you may want to consider the following:

  1. Which parent should be designated as the custodial parent for the minor child because parental income affects college-aged kids;
  2. Who is named as custodian of the child’s 529 college savings plan;
  3. Remarriage after divorce when you have college-bound children; and
  4. Including a college-expense provision in your divorce decree that memorializes you and the other parent’s obligations toward post-secondary education, which could be sharing costs, or not contributing until your child exhausts all possible loans, scholarships, or savings plans.

It is never too early to plan for college. A divorce proceeding, where you are already discussing child-related expenses of minor children, is a good time to also begin talks regarding planning for your children’s college expenses. Divorce is as good a time as any to discuss college-expenses as you consider other child-related expenses.