The implications of divorce on college funding

By:  Lori T. Williams, Esq.

Jeffrey Taylor, Certified College Planning Specialist

Part 2 of my series on Family Law features Certified College Planning Specialist, Jeffrey Taylor, who shares how divorce impacts college funding.  Click here to read Part 1 in the series:  Family Law Overview.

Taylor has many single moms as clients, and knows this situation well.  “Divorce can cause you to forfeit money you would otherwise be entitled to if you aren’t planning properly before, during, and after the divorce,” says Taylor.  How assets will be or are distributed, income levels of the parents, and the amount of alimony and child support paid all play into the equation of whether and how much funding will be available for college.  To help divorced parents obtain college funding for their children, Taylor offers these strategies:

Know what type of information your college of choice requires:

Research needs to be done in advance because different colleges ask for different information.  Some colleges want to see a divorce decree before determining if they will offer the student any money for college.  “How the divorce decree was written can positively or negatively impact the student’s ability to receive financial aid.  Parents who are contemplating divorce or in the midst of one are wise to seek counsel from a certified college planner before finalizing their divorce decree, so they don’t miss any essential college planning opportunities,” says Taylor.  Taylor runs profiles on all the schools his client’s students are interested in and makes recommendations based on the family’s income and assets and the school’s criteria for funding.

Do not let your child fill out the Financial Aid Forms:

Parents should fill out the FAFSA forms with their children, and a college planning advisor, because otherwise relevant information may be left off or unknowingly misstated.  “Incorrect or incomplete FAFSA forms can result in financial aid being denied,” says Taylor.

Don’t inadvertently disqualify yourself for financial aid:

“If parents are going through a divorce, they may want to make sure that alimony ends prior to their child starting college or that it doesn’t start until after college ends.  Otherwise, it could reduce financial aid by 47% for every year that alimony is received,” according to Taylor.

Another mistake parents sometimes make is taking retirement distributions during college years.  “This also has the potential for reducing financial aid by 47%, because accessible assets will be used to determine whether or not merit scholarships or financial aid will be awarded, and how much is awarded,” says Taylor.  “You can be penalized for having money in the wrong place.”   In order to avoid this problem, Taylor performs income and asset valuations for his clients.

Recycle your money, instead of spending it down:

Taylor suggests that parents put money into their retirement account or help their child with the purchase of a home, rather than spend retirement dollars or their savings on college.   Additionally, “if parents take a 529 distribution, this will reduce the amount of financial aid a student may receive,” says Taylor.

For related college planning blogs featuring Taylor, read Searching for Scholarships is a Waste of Time and What parents of high schoolers should be thinking about right now.

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Jeffrey Taylor is a Certified College Planning Specialist, with over 20 years of financial consulting experience. His company, College Funding Resource, LLC, is located in Southfield, MI.  Jeff’s planning experience includes but is not limited to college admissions, student loan debt elimination, out of pocket cost recovery strategies, college aid planning, and various techniques that are designed to reduce or eliminate the high cost of college.  For more information, visit his website.