College tuition, student loans and divorce can be a messy mix. Planning out how to pay for college costs can get even 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 figure out how each parent can help pay for college.
Know your state’s divorce laws
Review what your divorce agreement says about college
Plan with your ex to pay for college
Understand how to file a FAFSA if you’re divorced
Take advantage of educational tax credits
If you’re wondering what states require parents to pay for college, keep in mind that divorce laws vary widely by state. That includes rules regarding paying for college.
“Depending on the state where the family lives, this may be tough,” said Carol Meerschaert, a 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 forms of support such as scholarships or federal student aid. The amount each parent is expected to contribute and other details are then determined by the judge and outlined in a court order.
Most states allow parents who are divorcing to work out a voluntary college support agreement. 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 a certain amount per month or per year, per child” toward a college account, said 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 added.
If, for instance, your ex won’t pay for college, review your divorce decree and college support agreement to see how it outlines his contributions to education costs.
One of the trickiest aspects of paying for college with an ex is navigating a tumultuous relationship.
“Don’t underestimate these factors when it comes to asking a parent to pay hundreds of thousands of dollars for college educations,” Meerschaert said.
If possible, exes should try to communicate and put past differences aside to work together. There are a variety of ways to divide college costs and responsibilities, from jointly funding a 529 college savings account to agreeing on who should cosign your child’s private student loans.
But divorcees also need to be realistic about each parent’s ability and willingness to pay for educational costs. A divorce means splitting up households and increasing the family’s costs, Markham pointed out. And remarriage requires you to take new spouses, stepchildren or other dependents into consideration, too.
Overall, “there is less expendable income to go around,” Markham said.
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 the paying parent should know in advance that they will be shouldering costs alone and so they can plan accordingly.
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, said 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 said. “If the custodial parent gets remarried, the new spouse’s information goes on the FAFSA as well.”
The FAFSA’s custodial parent definition is simple: it is whoever the student lived with for the majority of the past 12 months. If the student split their time equally between two homes, the custodial parent is the one who provided primary financial support.
The non-custodial parent will not have to submit information for the FAFSA. This parent can still contribute to college costs, but their income and assets won’t be included in calculating the Expected Family Contribution. This can help the student qualify for need-based 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 said, so that the parent’s income isn’t included on the FAFSA.
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 said. Only one parent in a divorce can claim a child.
Additionally, the parent who claims the college student as a dependent doesn’t have to be the same person listed as the custodial parent on the FAFSA.
“Think of FAFSA rules, IRS regulations and divorce laws as a Venn diagram — sometimes they intersect, other times they don’t,” Orsolini said.
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 said. It could be the difference of as much as $10,000 throughout college, he estimated.
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 on your best ways to pay for college.
Andrew Pentis contributed to this report.
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of October 1, 2020.
2 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
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3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of January 4, 2021. Information and rates are subject to change without notice.
4 Important Disclosures for SoFi.
5 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 01/26/2021 student loan refinancing rates range from 1.92% APR – 5.25% Variable APR with AutoPay and 2.95% – APR – 8.28% Fixed APR with AutoPay.