Your Child's Financial Aid and Your Divorce

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All parents face challenges when a child approaches college age, but divorced parents face extra challenges: the end of child support, possible changes to parenting time, and, of course, financial aid. Few families can manage the expense of college without some financial aid. Families with divorced parents may be especially likely to need it, given the financial stress that divorce places on a family. Incomes and savings that formerly supported one household are now being used to support two. But the complications of financial aid and divorce can feel daunting.

Students in the United States apply for financial aid using the Free Application for Federal Student Aid, better known as FAFSA. Gathering the information needed to complete the form can be challenging when a student lives in only one household. When there are two homes to consider, it can be harder not only to assemble needed financial information, but to even determine what information is needed.

How Divorce Complicates Financial Aid

When both parents live together (even if separated or divorced), FAFSA considers both their incomes. But when a child lives in two households, or in the household of only one parent after separation or divorce, FAFSA considers the income of the custodial parent. Who is the custodial parent? The answer may be different from what your divorce decree or separation agreement states, especially if you have joint legal custody.

For purposes of the FAFSA, a child's "parent" is the parent with whom they lived for most of the twelve months prior to the date the FAFSA is filed. If they spent an equal amount of time in the home of both parents, the parent whose information should be given on the form is the parent who provided the child with more financial support within the previous twelve months (or during the most recent year in which the child actually received support from a parent).

If the parent whose information must be supplied on the FAFSA has remarried, the student filling out the application must provide information regarding the stepparent as well. There is one exception to this: there is a question on the form which asks about the highest education level of each parent. In that instance, the child should supply information about their legal parents, not their stepparent.

You and your child will also need to provide some information about your divorce, such as your date of divorce or separation. And while FAFSA does not require you to submit a copy of your divorce agreement or decree, your child's college might ask for it.

If you are the custodial parent, you will need to be careful about how you and your child report support. If you receive child support for your child, you will need to report that on the FAFSA. If you receive spousal maintenance, that amount is included in your taxable income as reported on your income tax forms. Be sure not to report it again, separately, on the FAFSA. By doing so, you would be reporting it twice, artificially (and incorrectly) inflating your reported income, and likely reducing your child's aid award.

Protecting Your Child's Financial Aid in Your Divorce

If you are in the process of divorce, there are measures you and your spouse can take that will maximize your child's chances of receiving financial aid. Perhaps the most important is planning your parenting time with an eye toward who will be the "custodial parent" for FAFSA purposes.

Let's say you and your spouse want to split parenting time 50/50. You earn $125,000 per year, and your spouse earns $50,000 per year. In that scenario, since your child would spend equal time with each of you, the parent whose income would be considered for the FAFSA would be the one who provided more financial support—almost certainly you.

However, if you split parenting time 51%-49%, with your lower-earning, soon-to-be-ex having the (slightly) greater share, they would be the parent for FAFSA purposes, and their much lower income would be considered. Your child might receive a better financial aid package, and the reality of your parenting time would not be significantly affected.

Something else you can do to maximize your child's financial aid, whether or not you are already divorced, is filling out the FAFSA as soon as possible. Ideally, review the application before your child is a high school senior so you'll know in advance what information will be needed to hit the ground running. In past years, the earliest possible date to apply for FAFSA for a college freshman was January 1 of the year the child would begin college in the fall; as of 2016, the deadline was moved to October 1 of the year before. Some financial aid is awarded on a first-come, first-served basis, so it's ideal to file the FAFSA as soon as you can. 

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