How Divorce Can Impact College Financial Aid
Getting a divorce compounds the challenges of funding your child’s college education. The cost of getting a divorce can erode into savings that have been earmarked for college tuition. And, shifting priorities on the part of parents, such as moving and new relationships, can also draw down otherwise available funds. If college funding is not proactively and intelligently addressed, both student and parent debt may increase.
Many college-bound students, whether their parents are divorced or not, turn to federal student aid to help fund their college tuition. Currently, the U.S. Department of Education awards more than $120 billion a year in grants, work-study funds, and loans to more than 13 million students. Federal student aid covers such expenses as tuition and fees, room and board, books and supplies, and transportation.
What determines a student’s eligibility for federal financial aid?
The Expected Family Contribution (EFC) is used to determine a student’s eligibility for federal student aid. It is a formula applied to the parents’ income and assets, plus the student’s income and assets. The information that a family reports on the Free Application for Federal Student Aid (FAFSA) is used to calculate the Expected Family Contribution. Most academic financial aid offices require parents to re-apply for financial aid by completing the FAFSA every year after their student is enrolled in school.
The Expected Family Contribution determines the combined amount that parents and student are expected to contribute towards college costs. The lower the Expected Family Contribution, the higher the financial need for federal financial aid.
How does divorce affect the Expected Family Contribution?
When parents are divorced, the custodial parent fills out the Free Application for Federal Student Aid (FAFSA). The non-custodial parent’s information is not requested for the FAFSA. The custodial parent is primarily determined by whose house the student sleeps in most often. Secondary criteria may include which parent provided the most financial support in the previous 12 months.
Strategies for increasing the amount of financial aid
If the goal is qualifying for financial aid, following are some strategies you may want to consider. Because attorney Christina Sherman holds a Masters of Laws in Taxation, our office can provide additional strategies.
- The custodial parent should be the parent with the lowest Expected Family Contribution. The student will need to spend >50% of the year with the parent with lower income. Even if away at school, the student can spend one night more with the custodial parent than the other.
- The student is expected to contribute 50% of their income above the “Student Income Protection Allowance” ($6420 for 2017-18) for college. Since grandparent 529 distributions are considered untaxed income to the student in the year after they are used (and are assessed at 50%) they could be held until the student’s junior year.
- If a custodial parent remarries, he or she must report the couple’s combined income and assets, so a parent may want to consider waiting to remarry until their student graduates.
If you are divorced or considering divorce and want to discuss strategies for increasing the amount of financial aid your student is eligible for, please contact our office for a free consultation.
Attorney Christina Sherman is a Marin County CA family law attorney and Certified Family Law Specialist, specializing in divorce, child custody and support, marital contracts and other family law issues.
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