It’s All About the Kids: How Divorce Affects Children’s Financial Aid for College

By:      Robert B. George, Esquire

Not surprisingly, prospective as well as returning college students often find themselves unable to pay for their college education, as a result of which many students  need to seek assistance through financial aid.

Many students will apply for financial aid by filing a Free Application for Federal Student Aid, also known as a FAFSA.  Unless considered to be independent of their parents, most students entering college, or returning to college, will be considered a dependent of their parents, which will require that their parents’ income be entered into the FAFSA to determine how much money the parents must contribute and, in turn, how much financial aid the student may be eligible to receive. But what happens when prospective or returning students’ parents are divorced?

The Higher Education Act, passed in 1985, regulates the administration of federal student financial aid programs. In particular, Section 475(f) of the Act addresses the computation of parental income in the case of divorce and remarriage.

In that regard, when a student’s parents are still married, both parents’ incomes must be included. However, when parents divorce, only one parent’s income need be included. Specifically, only the income of the parent with whom the student primarily lives in the 12-month period before filing the form must be included. If the student shares equal time with both parents, then the income of the parent who provided the child with the most support must be listed.

Depending on the circumstances, this treatment could help or hurt your child’s chances for getting financial aid. For example, let’s take a student who lives with her father 75 percent of the time, and her father earns $75,000 per year. The student’s mother, on the other hand, makes $275,000 per year. In this case, the student would list her father’s income on the FAFSA. Since her father’s income is much lower relative to her mother’s, the student would get more financial aid than if she lived the majority of the time with her mother. But if, conversely, the student actually lived with her mother 75 percent of the time, she would have to list her mother’s income, which would result in the student’s being eligible for much less financial aid.

The federal government does not consider the income and assets of the non-custodial parent in determining a student’s financial need. However, it does consider child support received by the custodial parent.  Many private colleges, on the other hand, do consider the non-custodial parent as a potential source of financial support, and require a supplemental financial aid form from the non-custodial parent. This treatment affects the awarding of the school’s own aid, but not federal and state aid.

It may be advisable for parents who are in the process of divorce to prepare a written college support agreement in addition to a child support agreement. Such an agreement should, for example, specify who is responsible for how much of the college expenses, how many semesters of support will be provided, possible limits on annual payments, and whether there is an age limit, or restrictions on colleges the child may attend. For example, one could specify that the non-custodial parent will provide 50% of the tuition at the state college, or the college where the child enrolls, whichever is less expensive.

It also makes sense to base the college support requirement on the expected family contribution figure. Such an agreement should also specify what constitutes college costs (i.e., just tuition and required fees, or also room and board, transportation, health insurance, textbooks and other educational expenses), and whether there are any requirements that the child must satisfy to receive continued support, such as achieving a minimum GPA.

The agreement should also indicate whether the college support is to be paid directly to the school, to the custodial parent, to the child, or to a combination thereof. Often the percentage of college costs is divided proportionately between the parents according to income after subtracting non-discretionary expenses such as taxes, basic living expenses and health care. This is the same as the “income shares formula” used by most states for child support.

If you are divorced or divorcing and are concerned about financial aid for your child(ren)’s college education, or interested in fashioning an agreement with your soon-to-be ex-spouse regarding your respective obligations for college tuition and related expenses, it is important that you consult with an experienced divorce and family law attorney.

The attorneys at the Law Firm of DiOrio & Sereni, LLP are experienced and available to help you. Contact Robert B. George, Esquire at 610-565-5700, or send him an e-mail at [email protected].

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