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Who Pays for College after a Divorce?

When parents divorce, there are many financial, as well as emotional, issues to consider. When a household is split in two, whether both parents work or not, there is a direct impact on their finances. There are now two households, including more than one mortgage and/or rent payment, double utilities, and extra expenses for things like food and insurance. There may also be a great deal of debt payments divided as part of the settlement. So who is going to pay for the extras, like college expenses for the children?
As you might expect, children of divorce often get less financial support from their parents for college expenses. This is no reflection on the desire of their parents to help them. They just can’t afford the additional expense.
If no consideration is given as to how college expenses will be paid when a divorce or separation agreement is drafted, the custodial parent may not get any help from his or her former spouse. If the child remains a dependent, the custodial parent may still be able to collect child support until a specified age, but these payments generally do not take into account the large sums required to finance a college education.
Fortunately, about half of the states have provisions for support orders to help cover college expenses. Such provisions vary by state, but they generally take into account the same considerations as those considered for child support, such as the financial resources of both parents, the child’s own financial contribution, the cost and location of acceptable schools, whether room and board will be required, and the availability of financial aid to the child. Most likely, the custodial parent will be required to seek a support modification order to obtain such support payments from the noncustodial parent, because the specific issues will not be known until the child starts to apply for admission to various colleges and seeks various scholarships, grants, and loans. Even if these expenses are far into the future for your client at the time of the divorce or legal separation, it is important to make the client aware of the process for obtaining a support order.
If you happen to reside in one of the remaining states that do not have provisions for support to cover college expenses, there are still steps that you can take to include higher educational expenses. One option is to include a requirement in the divorce decree or settlement agreement for the noncustodial parent and/or the custodial parent to contribute a certain dollar amount at regular intervals into a specified cash account, educational IRA, or 529 plan. Another option is to prepare a separate agreement, approved by the court, to cover such expenses. The agreement should include what types of institutions will qualify (how about beauty school or a certificate program?), the percentage expected to be paid by each parent and each child, how to handle any financial aid, what expenses are to be covered by each parent, where the child will reside if within commuting distance, and any conditions for payment (such as grade point average, number of hours enrolled, number of year to be paid, or a cap on the dollar amount covered). Also, keep in mind the tax benefits of the Hope Credit, the Lifetime Learning Credit, and the educational expenses deductions to the parent claiming the tax exemption. These tax benefits only go to one parent, so the other parent’s share of the expenses may need to be adjusted accordingly, depending on the disparity of the parents’ income and earning potential.
It is wise to consider college expense payments at the time of the divorce or separation agreement. Your client may be unhappy if they have to go back to court later to work out this type of agreement. Also, in the absence of an agreement, the noncustodial parent may use their higher income and ability to pay as a means to get the child to move in with them prior to college in exchange for payment of college expenses or other financial incentives. Further, it is far more equitable to consider the payment of these expenses when dividing all other debts and assets of the marriage.