Another academic year is drawing to a close, and many high school seniors now have their sights set on starting college in the fall. Meanwhile, for younger students, the college search process is just beginning. Wherever you are as a parent on this spectrum, you’re probably facing a variety of uncertainties and unknowns. Students wonder about curriculums, possible majors and campus life; you’re undoubtedly grappling with much more practical issues, like “How much will tuition cost?” and “Can we afford it?”
When you’re divorced, or in the process of divorcing, the questions are multiplied –and they’re usually more complicated to answer. Let me tackle a few of the most common concerns:
Do divorced parents have any obligation to pay for their children’s college education?
In general terms, child support payments stop when children reach the “age of emancipation,” which in most states, is between age 18 and 21. That means, unless ordered by the courts, there is typically no legal obligation to pay college tuition.
The courts can order a parent to pay for their child’s education –but that depends on the state in which the divorce occurs. Most states allow courts to order the non-custodial parent to help pay for college. But a few do not, except in those cases where the parents had a previous agreement (as below).
Can support for college be included in a divorce settlement agreement?
Yes! The best way to secure funds for college tuition is to include the obligation in your divorce settlement agreement. (This would be in addition to any other alimony and/or child support agreements.) You can: 1) have the funds put into an escrow or trust account to make sure they are available when needed, or 2) get an up-front lump sum payment.
What is included in a college support agreement?
A college support agreement typically includes details such as what percentage of college expenses each parent is responsible for, limits on payments, restrictions on which college the child should attend, exactly what expenses will be covered, etc. As you can imagine, each one of these details usually involves negotiation.
For example, since the true cost of college includes everything from tuition, room and board, and books to extracurricular activities and a perhaps even a monthly allowance, figuring out who’s going to pay for what can be quite complex.
Limits to payments can be problematic, too, and may involve intricate stipulations. In New York, for instance, many divorcing parents agree to limit their contribution to what is commonly referred to as the “SUNY Cap.” This cap limits a parent’s obligation to a percentage of the cost of a State University of New York (SUNY) school. In other words, regardless of where the child attends college, if the SUNY Cap is applied, the parent is obligated to pay only the amount specified in the cap. (Parents in other states may agree to limits based on tuition at state schools in their area.)
How does custody factor in?
When custody is split, the calculations are even more complicated. Generally, however, the courts want to see that the numbers balance and that one parent is not unfairly burdened with college costs. Factors such as how much each parent earns, the tuition expenses and other child care costs are folded into the equation.
Why might an up-front lump sum payment be preferable to recurring payments?
Particularly if your child(ren) are young, it may be preferable to negotiate a lump sum payment up-front, assuming there are sufficient assets available. When your child(ren) reach college age, you’ll have these funds in-hand to help pay the tuition bills –provided you have put those aside and invested them wisely.
Please be aware that ascertaining the future costs of college can be very difficult, especially if your children are young, and unfortunately, most divorce attorneys don’t have the training or expertise to compute complex projections of future college costs and what the present value of those future costs would be in today’s dollars. A consultation with a divorce financial advisor can help you better understand all the options available and help you plan for a stable financial future for you and your children.
Reminder: Paying for college tuition is a significant undertaking. It requires thoughtful planning to ensure the best possible outcome –for your child and for your financial future.
Hot Tip: Research all the options for financial aid available for higher education, beginning with the Free Application for Federal Student Aid (FAFSA). Never hesitate to make direct phone calls to individual schools to get clarification of their specific requirements for financial aid eligibility –and be sure to check for any school-specific deadlines you may not otherwise be aware of. Please, make these calls early in the college selection process, to avoid your prospective student getting their heart set on a school that won’t make the best financial sense.
Legal Matters: Regardless of which parent claims the child on his/her tax return, the custodial parent is the one who must complete the FAFSA form. So if, for example, your ex-husband makes $500,000 a year in his business, and you, as custodial parent, make a tenth that much working part time from home, your child would likely be eligible for more financial aid if the eligibility is determined based on your income alone. However, if you remarry, your new spouse’s income and assets have to be listed on the FAFSA. Unfortunately, while it may not seem fair, that can lower your child’s eligibility for financial aid.