As parents and their children rush to complete college applications, many also wonder how they will afford to pay for college. When parents are divorced, the financing of college may be allocated in the decree, but it does not answer the ultimate question of what the divorced parents can afford. Colleges offer a variety of financial aid alternatives, and divorced parents should know how to best take advantage.
First, students with strong academic records – grades and standardized test scores – can qualify for merit-based scholarships at most colleges and universities. Some colleges will even give free tuition if the applicant has a certain grade point average and ACT score. As an example, at the University of Alabama, a student with at least a 3.5 GPA and a 32 composite on the ACT qualifies automatically for free tuition. Parents should look at a wide range of schools to see what merit packages might reduce the cost of college.
Second, students can qualify for financial aid, either through federal programs or institutional programs, or some combination of both. To determine eligibility, a parent must complete the Free Application for Federal Student Aid (FAFSA). For divorced parents, who completes the FAFSA becomes a critical issue.
FAFSA actually works in an odd way that favors lower income divorced parents. If a married couple wants federal aid, both parents must complete the application and the combined household income must be reported. However, if parents are divorced, the custodial parent must complete the FAFSA and only that parent’s income will be considered for financial aid. If the custodial parent has a much lower income than the non-custodial parent, the child ends up the ultimate winner because the child will qualify for significant financial aid.
Divorced parents savvy enough to know how FAFSA works may try to game the system, but they need to be careful. In order to avoid committing fraud, the parent claiming custodial status must actually be able to demonstrate that – whether through the divorce decree or proof of living arrangements, or both. Divorced parents can agree to shift custody arrangements to help the child get financial aid, but the shift must be genuine.
Another issue to consider: divorced parents that remarry must report household income, including that of the new spouse. As a result, remarriage could hinder getting financial aid. However, a divorced parent that cohabits with a new partner need not report that person’s income.
Parents should use all legal means to help position themselves for financial aid for college where those parents need that assistance.
If you have questions about divorce and financing higher education, contact us – we can help.