College Financial Aid and Divorce


What is the relationship between divorce and financial aid? Even if your kids are years away from college, it pays off to know the law and set agreements in your divorce to make the most of FASFA and financial aid for college and take advantage of any tax benefits. Thinking ahead and getting legal advice that plans ahead for colelge can save you tens of thousands of dollars when applying to college. Here are some questions that I am frequently asked- the answers might surprise you!

Which parent is responsible for completing the FASFA?

If Parents are separated or divorced, the custodial parent is responsible for filling out the Free Application for Federal Student Aid (FAFSA). The custodial parent for federal student aid purposes is the parent with whom you lived the most during the past 12 months. (The twelve month period is the twelve month period ending on the FAFSA application date, not the previous calendar year.) Note that this is not necessarily the same as the parent who has legal custody. If you did not live with one parent more than the other, the parent who provided you with the most financial support during the past twelve months should fill out the FAFSA. This is probably the parent who claimed you as a dependent on their tax return. If you have not received any support from either parent during the past 12 months, use the most recent calendar year for which you received some support from a parent. These rules are based on section 475(f)(1) of the Higher Education Act of 1965 (20 USC 1087oo(f)(1)). Biological parents who never married are treated the same as parents who are divorced. Note, however, that any child support and/or alimony received from the non-custodial parent must be included on the FAFSA. In FASFA terms, the term “custodial parent” is not synonymous with custody. Usually, the parent with whom the student lived the most during the past 12 months is sufficient, since there are an odd number of days in the year. However, in some cases, a tie-breaker is needed, such as when the divorce was recent or when there are an even number of days in the year (e.g., a leap year). In such circumstances, it is based on whichever parent provided more support. If that is not definitive, then the financial aid administrator at the college will make the decision, and this will usually be based on whichever parent has the greater income. (Some colleges will follow the logic in a multiple support agreement, but they are under no obligation to do so.) Financial aid applications can be somewhat confusing because there are several different criteria applied for different kinds of parenthood: The parent with whom the child lived the most during the past 12 months (the 12 months ending on the FAFSA application date). The parent who provided more financial support to the child during the past 12 months. The parent who provided the most financial support to the child during the most recent calendar year for which either parent provided more support to the child. The parent who provided more than half the child’s support (and will continue to do so). The parent who has legal custody. The parent who claimed the child as a dependent on their tax return. The parent with the greater income.

Is the non-custodial parent required to help pay for college?

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 have their own financial aid questions and may consider the non-custodial parent as a potential source of support, and require a supplemental financial aid form from the non-custodial parent. This affects the awarding of the school’s own aid, but not Federal and state aid with FASFA.

What is a College Support Agreement?

It is best for parents who are in the process of getting divorced to prepare a written college support agreement in addition to a child support agreement. Such an agreement should specify who is responsible for how much of the college expenses, how many semesters of support will be provided, any limits on annual payments, indexing payments to the tuition at a particular college (e.g., a state college), whether there is an age limit (i.e., up to age 24, when the student becomes automatically independent), and any restrictions on colleges the child may attend (e.g., specific colleges and accreditation, 2-year vs. 4-year, public vs. non-profit). The agreement should also specify whether the college support is to be paid directly to the school, to the custodial parent, to the child, or to a combination.

What if the parent with custody and with whom the child is living with has remarried. Does the stepparent have to report his or her income and assets on the FAFSA?

Yes, provided that the parent you’re living with is the one filling out the FAFSA (your custodial parent). If your stepparent is married to them at the time you fill out the FAFSA, they must report their income and assets even if they weren’t married to them in the previous year. The specific statutory citation that supports this is 20 USC 1087oo(f)(3), which is section 475(f)(3) of the Higher Education Act of 1965: Remarried parents If a parent whose income and assets are taken into account under paragraph (1) of this subsection, or if a parent who is a widow or widower and whose income is taken into account under paragraph (2) of this subsection, has remarried, the income of that parent’s spouse shall be included in determining the parent’s adjusted available income only if — (A) the student’s parent and the stepparent are married as of the date of application for the award year concerned; and (B) the student is not an independent student.

What if the custodial parent remarried and signed a prenuptial agreement that absolves the stepparent from financial responsibility for the child’s education. Would the stepparent have to provide financial information on the FAFSA?

Prenuptial agreements are ignored by the federal need analysis process. After all, two individuals (parent and stepparent) cannot make an agreement between them that is binding on a third party (the federal government). The federal government considers the stepparent a source of support regardless of any prenuptial agreements to the contrary. If a stepparent marries the parent, he or she is considered responsible for supporting the parent and children even if he or she is unwilling to do so.

A little planning can go a long way to helping your family meet college expenses. Call for a consultation and plan now for the future.