Team Effort
College planning takes on an entirely new dimension in situations where parents are separated, divorced or remarried, says Beth Walker, a financial planner with the Wealth Consulting Group, a Las Vegas-headquartered RIA firm. Walker is also the founder of the Center for College Solutions, a Colorado Springs, Colo.-based consulting firm.
Often with a divorce, “There’s just no margin for error,” Walker says. “It’s already a financial catastrophe.”
Sometimes the children of divorce will be shouldering more of the debt for their own college funding. It depends on whether their parents can remain focused on the best possible outcomes for the student, Walker says, “and if they can get over the emotional tug-of-war.”
Divorcing parents with college-bound kids should consider getting help from a certified divorce planner when deciding how to divvy up income and assets, she says, because the legal community often does it in a way that doesn’t benefit anyone. The CSS Profile requires some assets that aren’t reportable on the FAFSA form (including equity in the family home and family business and nonqualified annuities).
With the FAFSA, “It absolutely matters in terms of which parent takes the lead,” says Walker, author of the book Never Pay Retail For College. If a child evenly splits time between parents with joint custody, the parent with the least income and fewest assets should file the FAFSA, she says. A parent who resides in another state or is largely absent can’t be claimed as a custodial parent, she says, even if a divorce decree notes joint custody.
Walker debunks the common misperception that a parent can’t file a FAFSA if the child is claimed on the ex-spouse’s tax returns. She has also told people in relationships to hold off getting married because a stepparent’s income and assets often must be included on the FAFSA and CSS Profile—regardless of prenuptial agreements.
The formulas used by all schools make it very clear that financial aid decisions are based on household income and assets. So if the custodial parent has already remarried, the income from a new stepparent is likely going to affect a student’s ability to get financial aid, and by that time, there are “not a lot of work-arounds,” says Walker.
Still, she says, it’s best to double check with the college. It may be that a student actually qualifies for more aid after the parent remarries because other dependents might now live in the blended household or are in college. Also bear in mind that a FAFSA school won’t care about the income and assets of a noncustodial parent and that parent’s new spouse.
When parents divorce and have limited resources, “the biggest hit is school choice,” says Walker. But parents with limited knowledge may unintentionally discard what might be a great option for their children, she says. She encourages families to disregard college sticker prices and look on COLLEGEdata.com for the net cost of schools (the average cost after need-based and merit aid is awarded).