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.