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.

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).

According to Walker, students are more likely to receive merit aid at good (but not elite) private schools when they’re in the top 25% of their classes in GPA and test scores. She also suggests looking at tuition exchanges or reciprocity programs. These enable students to attend a university in another state at a discounted rate or at the other state’s tuition rates. Such programs are available in different regions of the country (one is the Western Undergraduate Exchange).

Parents considering a direct PLUS Loan (a federal student loan available to parents of undergraduates) should think about it early. “It’s a fabulous negotiating tactic in a divorce,” Walker says—if it’s planned carefully. Without careful planning, a client who earned significantly less than her ex-spouse went deep into debt with these loans before recently hiring Walker. “She’s going to take it into retirement,” says Walker, who plans to meet with the client’s now-adult children to see how they can help. “The real tragedy is that it shouldn’t happen.”

Finding The Right Fit

A noncustodial parent need not be a high earner to make a big difference in the expected family contribution (EFC), says Brett Tushingham, a CFP and head of Tushingham Wealth Strategies LLC in Wilmington, N.C.

Let’s assume a FAFSA school and a CSS Profile school sport annual price tags of $60,000 and a family has one dependent child. Plugging in a family’s adjusted gross income of $140,000 into the federal financial aid formula, the FAFSA school may determine the student has an expected family contribution of $30,000 and qualifies for $30,000 in need-based aid, he says. When the noncustodial parent’s $75,000 income is included, it could bump the EFC to $55,000 at the CSS Profile school, reducing need-based aid to $5,000 ($60,000 minus $55,000).

“That’s a potential difference of $100,000 in aid over four years!” he says. But he notes that this hypothetical, simplified example excludes assets and other variable components.

With divorce “a lot of times it comes down to cash flow,” says Tushingham. Yet even if divorce amplifies money woes, aid shouldn’t be the sole factor in school selection. “I don’t let the tail wag the dog, so to speak,” he says. “What good is it if the child goes to a school they’re not comfortable with and they end up transferring and graduating in six years?” To help his clients’ children find the right colleges, he uses online college assessment tests and works with outside college consultants.

Perry De Fontaine, a CPA and president and founder of College Insights, an independent college advisory firm in Freehold and Princeton, N.J., also puts big emphasis on finding the right college fit for families and tells families split by divorce not to rule out private schools. “They don’t just automatically add the noncustodial parents’ income and assets and make it one big pot again,” he says. “They assume that the noncustodial parent has a separate household that they have to maintain.”

“About 75% of the schools in this country are the private colleges with the big, scary sticker prices,” he adds. But that’s where the opportunities are for scholarships. He’s found the cost of attending these schools can sometimes be dramatically less than a public school.

When clients plan to divorce, De Fontaine plugs their tax return figures into college aid calculators to show them what their expected family contributions will look like both in marriage and after a split. Some clients’ contributions were dramatically reduced after their separation or divorce, and he helped them save “tens of thousands of dollars a year in college costs” at schools with generous aid packages, he says.

Families going through divorce need to get educated about their unique opportunities, he says. If a noncustodial parent refuses to provide income and asset information or is totally absent, the student or custodial parent can explain this on the CSS Profile form and in a letter, he adds.

Financial aid awards aren’t written in stone. The 2018-19 FAFSA requires 2016 income and tax information, although parents may have since split. Divorce/separation is one of the most common circumstances families face after filing for aid, says Karen McCarthy, director of policy analysis at the National Association of Student Financial Aid Administrators (NASFAA). She encourages students whose family situations have changed to contact the financial aid offices at the institutions they attend or have been admitted to.

Schools use “professional judgment” to re-determine the level of need after special circumstances arise, and they have a lot of leeway, she says. The schools often determine that students need more aid, she says, but whether they can provide it is less easy to say.

If it’s late in the school year, all campus-based aid funds (federal money allotted to universities for work study and other programs) may have been spent, says McCarthy. On the other hand, she says, “Pell money does not run out.” Pell Grants generally go to students with the most financial need. Schools set their own policies for institutional funds, which come from endowments.

Bishop, the CPA, says families who wish to appeal aid awards after financial circumstances change (something she has helped clients with) must have a good, persuasive argument. She told a client earning $400,000 a year, “They’re going to put your letter on a bulletin board so they can throw darts at it.”

She also tells clients to be realistic when selecting schools. “Even if it’s an academic fit,” she says, “it doesn’t mean it’s a financial fit for the family.”