How divorce may affect kids' financial aid for college

When parents split up, the negotiation process tends to focus heavily on immediate issues like parenting time and child support, and less on long-term concerns like paying for college. But while college may seem a long way off, it is important for parents understand how divorce may affect children's ability to receive financial aid for college, and to plan their divorce settlement in a way that protects their children's access to higher education.

To qualify for federal financial aid such as Pell grants and subsidized loans, students are required to fill out the Free Application for Federal Student Aid, or FAFSA. The FAFSA is used to assess the financial situation of the student and his or her family, and includes questions about the student's family size, parental income and certain other assets owned by his or her family members.

Children of divorced parents are typically only required to provide one parent's financial information on the FAFSA. Depending on the circumstances, this can significantly affect a student's financial aid eligibility in both negative and positive ways.

Financial aid affected by parents - and stepparents

When filling out the FAFSA, a child of divorced parents typically must provide financial information about his or her "custodial" parent, which for these purposes is defined as the parent that the student has lived with the most during the past 12 months. It is important to keep in mind that this is not always the same parent who has legal custody of the child or claims the child as a dependent for income tax purposes.

In some cases, a student may qualify for a better financial aid package as a result of supplying only one parent's financial information instead of both, especially if that parent is less wealthy or has more dependents than the other. However, if the custodial parent has remarried, the student may end up at a disadvantage when applying for financial aid. This is because the stepparent's income and assets must be included on the student's FAFSA - even if the stepparent will not be contributing to his or her educational expenses, and even if there is a prenuptial agreement stating that this is the case.

During divorce, plan carefully for college tuition

By planning ahead for their children's college educational costs during divorce, parents can help ensure that their kids have access to the educational opportunities they deserve - even if one or both parents remarry. One of the best ways to accomplish this task is by including provisions in the divorce settlement agreement that specify what each parent's obligations will be with regard to their children's educational costs.

There are a number of different methods for addressing children's college expenses in a divorce settlement. One option is to specify what percentage of tuition and other costs will be covered by each parent. Another option is to establish an educational trust or escrow account for educational expenses, or to negotiate a lump sum payment for the purpose of paying for college.

For a more thorough discussion of the options, and for assistance crafting a divorce settlement agreement that will protect children's access to higher education, divorcing parents are encouraged to speak with an experienced divorce and family law attorney.