Students whose parents are divorced or separated can end up shouldering more of the financial burden of their college educations. Sadly, what many of them and their families don’t realize is that they don’t have to.

Parents who get their financial houses in order, correctly fill out financial aid applications and encourage their children to shop for the right schools (the ones that aren’t a strain on their pocketbooks and also the ones that best play to their children’s academic strengths and career interests) will ultimately save themselves and their children unnecessary stress and debt.

From a financial point of view, it may even make sense for parents to get divorced sooner rather than later. “If you’re going to get divorced anyway, do it while they’re going to college,” says Paula Bishop, a Bellevue, Wash.-based CPA who has spent 20 years advising families on financial aid for college. Bishop has been finding lately that about half the 200 families she works with each year are divorced. Depending on the circumstances, a student in that situation may get a very good deal from a “FAFSA” school.

The majority of schools use the FAFSA (Free Application for Federal Student Aid) to determine need-based aid and other help. It requires the income only of the custodial parent (the person the child lives with for more of the year, regardless of the divorce decree). There is also a form known as the CSS Profile, distributed by the College Board for students applying for financial aid, and this is also used by many private schools and several flagship state universities. The CSS Profile generally includes a noncustodial parent’s income in its calculations. There are a few exceptions, and colleges that exclude this data are listed on the CSS Profile website.

One California family Bishop worked with “won the lottery,” she says, because the child, who lives with his stay-at-home mother, has been able to attend UCLA for free. Had his parents not separated or if he lived with his father (who earns $250,000 a year), he’d be required to pay the annual sticker price of $35,000 at the university, which uses the FAFSA. Nor would he have received need-based financial aid, says Bishop, had he applied to a school using the CSS Profile.

According to Bishop, one factor contributing to this student’s generous aid award (which includes a California grant, a Pell Grant and other aid) is that the mother didn’t have to include child support or alimony on her tax return because the divorce proceedings are still in progress. “Separated and divorced are equal in colleges’ eyes,” Bishop adds, as long as parents have been separated at least six months.

Under the new federal tax law, alimony payments in divorce agreements executed after December 31, 2018, will no longer be deductible for payers but they’ll be tax-free for recipients. As a result, some payers will negotiate lower alimony payments, she says. Although this can be difficult for families, the advantage of that development is that students who reside with the recipients may qualify for more aid.

Although alimony for new divorces will now fall in the non-taxable income bucket (like child support), Bishop thinks colleges will take it into consideration. She suspects that next year’s FAFSA and CSS Profile forms will include an entry for alimony sums a custodial parent has received (those sums currently appear on parents’ tax returns). “It’s money that’s coming into the family and I can’t believe [the schools] would ignore it,” she says.

She encourages the lower-earning parent to file for “head of household” status as soon as possible after separating or divorcing because it’s easier. “You don’t have to strip out an ex-spouse from tax returns,” she says, “and it makes you look like you’re the custodial parent” when the child is listed as a dependent.

First « 1 2 3 4 » Next