College is a foundational part of your child’s educational journey to adulthood. How to pay for college though? That’s often daunting and can feel unattainable, especially when getting divorced or separating. Here, we’ll walk through how to pay for college by planning strategically with these six steps.
It is important to think through the entire process from selecting which colleges your child should apply to all the way to pay for all of the college years. The goal is to maximize financial aid offered by the schools, whether merit or need-based aid, minimize your out-of-pocket costs, and reduce the need for student loans as much as possible.
What to consider when separated or divorced and thinking about college:
1. Determine who is the “Custodial Parent:” The person who is listed within your divorce agreement is not automatically or necessarily the custodial parent for financial aid purposes. Also, the custodial parent is not necessarily the person who claims the child as a dependent on their tax return. It is through careful advance planning that it is possible to ensure that financial aid can be maximized by allowing the lower-income parent to be the custodial parent for financial aid purposes. It is especially helpful if that lower-income parent resides within the child’s school district.
2. Strategically apply to schools that will not require financial information from both parents to maximize Need-Based Aid: Now that we know who the custodial parent is, some colleges, will only require information from the custodial parent and not from the non-custodial parent. (Even with 50-50 joint custody, it is still possible to determine who the “custodial parent” is for financial aid purposes.) Some colleges, though, require financial information from all parents (this includes step-parents from remarriages too!) when applying for financial aid. When considering which colleges to apply to, it is important to determine what financial information will need to be shared with the colleges and universities, which financial aid forms are required (FAFSA and possibly CSS Profile), and to apply accordingly based on your specific financial and academic goals.
3. Find schools that offer Merit Aid: Before your child finalizes which colleges to apply to, in addition, to reach, on target and safety schools, make sure that your child also includes some financial safety schools on their “college list”! With research, it is possible to determine which schools will likely offer your child merit aid and which schools are also likely to offer need-based aid. The ideal goal is to find a college that is affordable. Finding the schools that will offer merit aid, usually comes with the realization that both parent and child need to be flexible as to which schools to apply to. The schools that may not currently be on your radar may be the schools that offer a great academic, social and financial fit for your child even if it is not a school seen on all of the bumper stickers in your town.
4. Correctly complete financial aid forms: First, if newly separated or divorced and not remarried, make sure that the parents are living apart for more than 6 months. This is a requirement to file the FAFSA with just the custodial parent’s financial information. Additionally, so many times errors are made on the FAFSA form and CSS Profile leading to unnecessarily increased college costs. Typos occur, parent and student information get mixed up, an extra “0” is accidentally added, small business information may be wrong and the custodial parent may be incorrect; among other things.
5. Consider if there is a change in household income (from the tax return used): For financial aid purposes, your tax return from two years prior to college entrance is reviewed. This means that students who will enter college in the Fall of 2023, will use their parent’s 2021 tax return information for their financial aid forms. (However, assets in the bank should be current as of the date of filing.) Since two-year-old tax data is used, it is possible for life to have changed considerably for the household. There may have been a separation or divorce, a parent may have lost a job, there may be a serious medical illness, or worse. With these life changes not yet being reflected in your current tax return, it is possible to receive more financial aid than initially offered by the colleges. The key is to present a strong case. This can be done anytime during the child’s college career.
6. Communication is key: The last major area to discuss as a method for saving money on the cost of college is the dreaded “C” word. Communication. It is so very important that we try to communicate both with our former spouse and with our child in terms of goals and expectations. When possible, I always recommend to clients that they discuss amongst themselves and with their child the amount that has been saved for college; what type of college they hope that the child will attend whether public, private, out of state, or local; if there is a financial cap regarding yearly cost; and any other major considerations. The goal is for everyone to be on the same page and work towards a common goal. Otherwise, there may be lots of resentment and heartache when a final decision needs to be made that could potentially cost hundreds of thousands of dollars.
I speak from personal experience: As the founder of College Financial Prep, and a divorced mom myself, I know firsthand how hard it is to manage the challenges that come with “Divorce and College” and how it goes way beyond the emotional struggle of watching our children grow up, though that, of course, is real too!
The good news: With careful advance planning, it is possible to spend the least amount of money necessary to ensure, both, your child’s success and happiness while allowing you to maintain your bank account and not go into debt. I know that we all want the absolute best for our children, especially, when preparing for college. The key is to be informed, strategic, and detail-oriented so that you can maximize savings on the cost of college. If you’re unsure how to proceed, don’t potentially lose thousands and thousands of dollars. College Financial Prep was created to guide families through the maze of college financial aid.
Don’t hesitate to connect with us if you have questions: collegefinancialprep.com/contact