Do Not Ignore College Funding In Your Divorce/Separation Agreement
For some couples, planning for their kid's college education may seem like a distant issue that they would rather forget about. In my Massachusetts divorce practice, I have had people ask "College for our kids is a long ways off. Do we really need to put information about that in the divorce agreement? The short and easy answer is a definite YES! The more complicated issues are of course deciding what exactly the language should say. Sometimes, the language in a typical divorce agreement may not necessarily serve the best interests of parents when it is time to complete the always popular FAFSA form, or the Free Application for Federal Student Aid. Sure, the application is free, but that is about as good as it gets when it comes to college expenses!
Income and your Expected Family Contribution
One important thing to keep in mind is that income for financial aid purposes is not treated the same as income for federal tax purposes. The most significant difference is that although child support received is not taxable income for federal tax purposes, it is counted as income for figuring the "expected family contribution. Thus, the higher your EFC is, the lower your financial aid award is. In Massachusetts, child support is now discretionary during the college years. Thus, couples should really meet with an expert in the college financing field to consider different scenarios. For example, there could be a situation where it is better to not receive child support! So, if you did not have child support, but your ex-spouse gifted you and/or your children money, then gifted money is not considered income and would not adversely affect your EFC. Determining who is going to be the financially responsible party on the FAFSA is also important.
Advance Planning and Communications is the Key
I advise my clients to meet with their former spouse well-before college applications are due and also encourage them to meet with a college financial planner. This process should be started as early as possible, but definitely before the student's junior year of high school. At my firm, we now routinely include language related to these steps in out divorce agreements. Your divorce agreement should also set forth who is financially responsible for other college-related expenses, including the purchase of a lap-top which many schools require and other items such as a printer, travel to /from school, application fees, etc. If your children are young, then locking yourself into paying for all or some of college tuition years down the road is difficult. Situations change, and parent's financial circumstances may be quite different than at the time of divorce. It is common for divorce agreements to set forth the general intent of the parents, however.
Language in Your Divorce Agreement & Avoiding Post-Divorce Litigation
Thus, you should carefully review with your divorce lawyer or mediator what terms to include in your divorce agreement. Getting the right mix of enough detail and flexibility is important. For instance, if both parents feel that kids should have to contribute financially towards their education costs, then put that in your agreement. Parents can also agree to limit their own contributions based upon a benchmark, such as 50% of the cost at a state college or university. Due to the high cost of college, many families simply cannot afford higher-priced private schools. As in most other areas related to divorce, if parents can agree on this issue lots of stress and money can be saved. Courts are limited in their ability to address this issue much before tuition payments are due. A recent case in MA (Cabot v. Cabot, 2002) had a couple battling in court for 7 years after their divorce over college payments. By the time the case was decided, the kids were already out of school!