College tuition, student loans and divorce can be a messy mix. Planning out how to pay for college costs can get trickier when you’re working with an ex.
But many divorced parents make it work each year for the benefit of their children attending college. From FAFSA forms to divorce agreements, here are some tips for exes to work together and navigate the world of college costs and financing.
Outline college payment in the divorce agreement
Most states allow parents who are divorcing to work out a voluntary college support agreement, according to legal resource Lawyers.com. This is a contract in which the divorcees agree on responsibility for college costs and details of payment.
“Often, the parents either commit to each save $X per month or per year, per child” toward a college account, says Jessica Markham, a Maryland-based attorney specializing in family law. Alternatively, “they will commit to funding college at a certain rate,” such as agreeing to pay the cost of an in-state public college, she adds.
Divorcing parents should enter these agreements carefully, however. They want to be able to honor those commitments later without hardship. “Most parties will be wary of committing themselves far out in the future for a figure they may not be able to afford,” Markham says.
Review state divorce laws about financial support for college
Divorce laws vary widely by state, and this includes rules regarding paying for college.
“Depending on the state where the family lives, this may be tough,” says Carol Meerschaert, editor-in-chief of HBAdvantage Magazine and divorcee who helped her three children attend college.
“I got divorced in Maine so there is no law to support putting paying for college in a divorce decree. In Maine, once the child is 18 they are on their own.”
Some state laws might require a divorced parent to financially support a child in college even when there is no college support agreement in place. In Utah and Washington, for example, laws allow courts to order a non-custodial parent to pay, reports Lawyers.com.
In these cases, the judge weighs factors like the non-custodial parent’s ability to pay. The judge might also consider the child’s academic goals and access to other financial support. The amount each parent is expected to contribute and other details are then determined by the judge and outlined in a court order.
Plan together for college costs
One of the trickiest aspects of paying for college with an ex is navigating a relationship that comes with a lot of baggage. “Don’t underestimate these factors when it comes to asking a parent to pay hundreds of thousands of dollars for college educations,” Meerschaert says.
If possible, exes should try to communicate and put past differences aside in an effort to work together. There are a variety of ways to divide college costs and responsibilities, from jointly funding a 529 to agreeing that one parent will take sole responsibility.
But divorcees will need to be realistic about what each can afford. Their discussions should cover each parent’s ability and willingness to pay for educational costs.
“When a couple is divorcing, they have typically taken their household income and added the extra expense of an additional household, in many cases doubling their expenses,” Markham says.
Remarriage can also add stepchildren to the dependents for whom a divorcee is helping provide. Overall, “there is less expendable income to go around,” Markham adds.
Unfortunately, in some cases an ex might be unable or unwilling to contribute to college costs. It can be difficult to figure out costs alone, but it’s better for the paying parent to know he or she will be shouldering costs alone and plan accordingly.
Understand FAFSA for student loans and divorce
When it comes to student loans and divorce, one of the most important aspects is filing the FAFSA correctly and advantageously.
Simply deciding whether you or your ex is responsible for filing the FAFSA can be confusing, says Joe Orsolini, a certified financial planner and founder of College Aid Planners.
“If parents are divorced, it [is] the custodial parent that completes the FAFSA,” he says. “If the custodial parent gets remarried, the new spouse’s information goes on the FAFSA as well.”
The non-custodial parent will not have to submit information for the FAFSA. He or she can still contribute to college costs, but that parent’s income won’t affect their child’s eligibility for federal aid. This can help the student qualify for more aid, especially if the non-custodial parent earns more.
There’s an exception to this rule, however. Divorced or separated parents will both need to be listed if they still live together in the same household. “This leads to a lot of last minute scrambling to get one parent out of the house” at times, Orsolini says, so that parent’s income isn’t counted on the FAFSA.
Take advantage of educational tax credits
Divorced parents can also be strategic about how they claim a child on their taxes. “There are tax credits for paying college tuition, but you must claim the student to receive them,” Orsolini says. Only one parent in a divorce can claim a child.
The person listed as the custodial parent on the FAFSA doesn’t necessarily have to claim the child as their dependent on IRS forms, however. “Think of FAFSA rules, IRS regulations, and divorce laws as a Venn diagram — sometimes they intersect, other times they don’t,” Orsolini says.
Parents should keep in mind that these tax credit benefits phase out and disappear at higher income levels. “Divorced parents should be mindful of these limits, otherwise they leave money on the table,” Orsolini says. It could be the difference of as much as $10,000 throughout college, he estimates.
When it comes to college funding, divorce and student loans, it can feel like a confusing whirlwind. Do your research, consult an expert when necessary, and work together to decide on the best course of action for your family. It could mean big savings for you and your child.
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