March 3, 2014
By Geoff Williams
Figuring out how to split childcare costs when you’re divorcing is not easy, but it can be like remedial math compared to deciding who pays what for your children’s college education.
There are countless issues that can come up, but if you’re divorced and have visions of your children someday showing you their college diploma, here are three things you need to know:
1. Negotiate now
Many couples go into great detail about custody schedules in their divorce decrees, but skip over college. It’s best to detail everything from the start, says Jonathan Marks, a divorce attorney in St. Louis. While you may still need to revisit the issue as the kids get older and your finances change, at least you have a baseline.
Julie Gill, a Toronto-based family mediator and certified divorce financial analyst, never discussed college when she got divorced 11 years ago. She regrets that now as her 15-year-old daughter and a 17-year-old son are getting close to applying and she has almost no relationship with her ex.
“Our lawyers didn’t feel the need to inform us that we should address it, and we didn’t know any better. After all, it was a very long time away,” Gill says.
She believes she will foot most of the bill for secondary education because there is no binding legal agreement that would make their father contribute.
“You can’t get blood from a stone and enforcing Dad to contribute would likely cost me more in legal fees, time and emotional stress than it’s worth,” Gill says.
2. Secure your college fund
If you have money saved for college, make sure the money can’t be utilized for anything else but your child’s education.
David Kolakowski, 51, owner of a software company in Mendham, New Jersey, officially ended his 20-year marriage in 2012. During the acrimonious divorce proceedings, they had $75,000 in three different accounts, all earmarked originally for their son’s and daughter’s college education, but not in 529 plans that are tax-free accounts for college-only expenses.
“I don’t know why we didn’t put them in one,” Kolakowski says.
Because the funds were available for any purpose, he says that his ex took out $20,000 to pay her divorce attorney. Later, the courts made Kolakowski remove another $25,000 to pay legal fees for both parties.
“If I could go back and do it again, I would have asked my attorney to please lock down some of these assets and take them off the table, and make it clear that these funds are for the kids’ college education,” Kolakowski says.
Kolakowski also recommends that parents do everything possible to avoid a contentious, expensive divorce. The only bright side for Kolakowski is that after his divorce, being a software guru, he created ExExpense.com, a financial tool for divorced couples.
3. Strategize about who fills out aid forms
For divorced families, the Free Application for Federal Student Aid (FAFSA), which colleges use to determine aid, only details the income of the parent the child lives with the most, and will include the income of a stepparent if there is one.
“Assuming that a student is living with both parents equally, the parent with the lower income should fill out the FAFSA,” says Steven Roy Goodman, an educational consultant and admissions strategist in Washington, D.C.
Sometimes, though, the scales tip toward one parent. Lynette Hart, 47, a marketing executive from Columbus, Ohio, isn’t sure whether she or her ex of 13 years makes more money. But she filled out the FAFSA forms for her two daughters, 18 and 20, because she has more time with them. Her daughters both go to in-state public colleges and ended up getting some student aid.
“It was basically like doing my taxes twice, who wouldn’t want to do that?” Hart jokes about filling out all the forms.
Hart pays for the girls’ expenses out of a 529 account she started 10 years ago. When he can, her ex deposits his share back into the account.
The divorce decree insisted on a fifty-fifty split, and while it’s close, Hart says that it never quite works out exactly equally. Unexpected purchases will always come up, or there are costs one parent thinks are unnecessary. She advises striving for good enough rather than perfect.
For instance, her last tuition payment due was $4,200. Her ex was only able to fund $1,900 instead of $2,100. At the beginning of the school year, when it came time to furnish their daughters’ rooms with a futon and other bedding, Hart paid. Her ex didn’t.
She says she could make a bigger deal out being on the losing end of the financial split, but it would be more hassle than it would be worth. “He’s very generous to our daughters and typically follows through on his word,” Hart says. “If not, it would be a different story.”