Divorce and Financial Aid for College Students

 Posted on January 26, 2016 in Divorce

Think divorce is a complicated process? Try applying for financial aid to cover the costs of college tuition after a divorce. For parents all across the United States, the rising costs of college tuition are a burden for their family, and many parents rely on the help of financial aid to pay for their child’s college education. The Free Application for Federal Student Aid, known as FAFSA, is complex enough for married couples with children, and can be even more perplexing for co-parents who have been divorced. In some situations, divorce can mean a child may benefit from special rules. In other, more unfortunate cases, divorce may lead to a child receiving a smaller than expected sum of financial aid. Considering the amount of funding your student receives for college depends on FAFSA, completing the application correctly is vital. Here are a few things divorced parents need to be aware of while seeking financial aid for their future college student.

Understand the Terminology

While the state of Illinois recently shifted their child-related terminology away from the word "custody", choosing to use "parental responsibilities" and "parenting time" instead, the FAFSA still asks “who is the custodial parent.” Divorce experts have realized that using the term "custody" leads to conflict between co-parents, who both believe they are parenting their child and one parent should not be considered the "custodial" parent over the other. While the term "custody" is used less frequently in divorce cases, the application for federal financial aid is a little behind the times. When completing the FAFSA, understand that the term "custodial parent" simply means the parent who the child lives with the most often.

Also note that the term "parent" is important while filling out the FAFSA. For the purposes of federal student aid, a student’s parents are not just their biological parents. Any adoptive parents are considered parents, and are treated just like biological parents on the FAFSA. This means that grandparents, aunts, uncles, step parents, and anyone else that may have legally adopted the child needs to be reported on the FAFSA. If a child lives with a legal guardian who has not yet adopted the child, the guardian does not need to list themselves on the FAFSA, but will need to report any financial contributions they make to the child as untaxed income. For blended families, the complexity of the application can make completing it difficult, and experts recommend that families in need of help reach out to financial aid administrators to guide them in determining who to list on the form.

Where the Child Lives is Important

Whichever parent the child has lived with the most in the past year is the parent who should complete the FAFSA form. That does not necessarily mean just the past calendar year, so parents need to count how many days their child has spent with each parent in the past 365 days. If the child has lived with one parent for eight months, and the other for four, the parent the child has spent the majority of time with should be the one completing the application.

This is extremely important to keep in mind, because it allows divorced families to essentially choose which income is considered on the FAFSA. Obviously, if a child lives only with one parent, and the other is out of the picture, the primary parent will have no choice but to list themselves on the FAFSA. In cases where both parents are around, and the child still has a positive relationship with both parents, a little maneuvering may provide more financial aid for your child. Say for example mom has an income of $40,000 annually, and dad has an income of $120,000. If the child chooses to live with mom for the majority of the 365 days leading up to filling out the FAFSA, the mother’s lower income can be listed on the FAFSA, and more financial aid will likely be awarded. This may mean that parents need to request that the court modify their parental agreement, but it may be beneficial if the income difference between both parents is significant.

If the child splits their time evenly between two parents, the parent who provides a larger amount of financial support to the child should fill out the FAFSA. In cases where financial support has also been relatively equal, financial aid administrators at any university your child is applying to can help you decide who should be listed on the application.

Keep in mind, however, that financial aid administrators at universities across the country have seen a variety of situations where parents try to scam the system, and will likely pick up on anything that is not genuine. Say, for example, you mark that your child lives with their lower-income parent an hour away. Then, when your child applies to a college, they list the location of the high-school they are graduating from. If the location of the high-school is hours away from where you list the child is living, administrators will detect that you are being fraudulent. Additionally, they will notice if they go to call the household listed as the mother’s house, and get the father on the phone. Administrators may ask for proof of living arrangements, such as rental agreements and utility bills, and may also ask to see your divorce decree or separation agreement.

Think Carefully About Whose Financial Information You Provide on the Form

Financial aid experts say they see parents making this mistake all the time. They list everyone involved in the child’s life - mom, dad, stepdad, and stepmom - and their incomes on the FAFSA. “You may be over-reporting your income,” says one college funding expert. Families are advised to only report the custodial parent’s income, which will include a stepparent’s income if the parent remarried. The federal government does not require that information on the non-custodial parent be provided, other than asking how much maintenance the non-custodial parent pays. “A family that could have gotten aid from a school may be getting nothing now because it looks like they have more money available than they do.”

Starting in 2014, in addition to listing stepparent information, the FAFSA began requiring that couples who are not remarried but live together must both provide their incomes when completing the FAFSA. They will not be considered a stepparent, but their contributions to the household do need to be listed. “If the parent is living with someone who is paying rent or utilities, that needs to be listed on the FAFSA as other untaxed income,” says one financial aid expert at Augustana College in Illinois.

Tax Returns and FAFSA

Does claiming a child on a tax return impact the FAFSA? While it makes sense that families frequently ask this while applying for financial aid, which parent claims the child on their tax return makes no difference in terms of financial aid awards. The award is going to be based on the information provided by the custodial parent, regardless of which parent claims the child.

Some Forms Have Different Rules

While the majority of United States future college students work with their parents to complete the FAFSA, there many different places to apply for financial aid. Roughly 250 mostly private schools in America use a form known as PROFILE, which handles divorce differently compared to the FAFSA. PROFILE, and various other financial aid applications, ask for financial information on both parents, regardless of who is the custodial parent.

If you believe you are headed for a divorce, you need a skilled Naperville divorce attorney by your side. The qualified team at the Psece Law Group, P.C. is available to assist you today with your divorce. Our attorneys are adept at handling a variety of divorce related cases, and will work to ensure a beneficial outcome for you and your children. Call 630-352-2240 or visit us online to learn more about the services we offer, and to schedule a consultation with one of our team members. Let us ease the stress of your divorce.

Sources:

http://www.cbsnews.com/news/how-does-divorce-affect-college-financial-aid/

https://www.edvisors.com/fafsa/forms/tutorial/divorced-separated/

http://www.usnews.com/education/best-colleges/paying-for-college/articles/2016-01-21/4-tips-for-families-navigating-college-financial-aid-amid-divorce