Happy New Year! If you’re separated or considering divorce, is 2020 the year you’d like to start planning for your children’s college educations?
If so, and you haven’t yet decided on the specifics of college planning, read on to find out what to focus on and what to do next.
College is expensive, to say the least. So, in general, it’s never too early to start planning and saving. But for divorcing parents, the question becomes who pays for what? And how much?
In New Jersey, divorced parents are generally obligated to financially support their children until each child becomes “emancipated.” For a child who attends college full-time, he or she becomes “emancipated” upon completing full-time attendance at college or reaching age 23 – whichever occurs first.
So, chances are, you’re both going to have an obligation to contribute something toward your kids’ college costs. How can you get started?
First, you can start a college 529 account on your own. Sit down with your financial advisor and determine how much to contribute, either directly or through a payroll deduction.
Then, when it comes time to allocate the college contributions between you and your ex when your child starts college, you would have already saved up for your share.
Your divorce agreement should be drafted to clearly set forth your rights and obligations for you and your ex with respect to your child’s college education. The key is to come up with a plan you can both agree on. This also helps take the pressure off your child by having predefined responsibilities for each of you, including your child.
Therefore, if you and your ex agree you’d like the kids to attend college, the following decisions should be made as soon as possible, either between you directly or with the help of your lawyers:
- Decide when you will discuss with each other and with your child the colleges in which he or she is interested in applying (generally by May of junior year of high school);
- Are there specific criteria for those schools, such as cost or geographical area?
- When will visits to colleges be scheduled? (for instance, spring of your child’s junior year);
- Will your child apply for financial aid, including scholarships, grants, work-study, and Federal, i.e. Stafford loans?
- If so, which parent will complete the FAFSA form each year?
- Who will be responsible for repaying any Stafford loans – you and your spouse, or your child?
- Did you and your spouse establish a college 529 account during the marriage? If so, will those funds be applied first before allocating remaining college costs?
- After applying all financial aid awards, scholarship awards, Stafford loans, and existing college 529 or other savings accounts, how will the balance of college costs be paid and apportioned? For example, will they be paid in proportion to each parent’s incomes (e.g., the parent who earns 75% of the combined parental income might pay 75% of the expenses); or will you and your ex take out parent PLUS loans? Will your child contribute from his or her earnings? Another option is to set a maximum contribution for you and your ex toward out-of-pocket college costs, for example, $25,000 per year (with any additional costs paid by your child with or without student loans);
- How will you define which expenses will be considered “college costs” to be apportioned? Generally, college costs often include:
- SAT/ACT prep courses or tutoring;
- College application fees;
- Tuition (how will study abroad be addressed?);
- Room and board (how will off-campus housing be addressed?)
- Books, school supplies, and computer or laptop and printer;
- School internet access and/or printing costs;
- Registration and lab and other fees charged by the institution;
- Reasonable dormitory setup costs; and
- Fraternity or sorority expenses.
- If you and your spouse are unable to reach an agreement on allocation of college costs by the end of your child’s junior year in high school, for instance, will you attend private mediation before either of you files a motion with the court?
Planning out such details can save you much time and lawyer fees in the divorce. By the same token, you can have the peace of mind of knowing you’re well equipped and prepared when it comes to your child’s college education.
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