Lisa C. Decker, CDFA
Lisa C. Decker - Miss Money Matters® - is the founder of Divorce Money Matters® www.DivorceMoneyMatters.com, a CDFA™ and a “Save Your Money, Save Your Sanity™” Divorce Guide. Lisa has been interviewed by CNN, Good Morning America, NY Times, Business Week, ForbesWomen.com, Marie Claire, and Oprah magazines, Lisa is an expert in divorce financial matters, and a discreet problem-solver who guides her clients to “Divorce Your Spouse, Not Your Money™.” Lisa is also a Breast Cancer Survivor, a mother to three daughters and an active volunteer in her community. Ms. Decker can be reached at: Lisa(at)DivorceMoneyMatters.com 866-722-7226
This is the second and final post in our series on helping parents understand the Financial Aid process for divorced parents. Part one can be found here.
Thank you so much for asking me to answer your readers questions about college financial aid and how it is affected by divorce. I’m Lisa C. Decker, a Certified Divorce Financial Analyst and I have a Teleseminar Series called Divorce Speak. During one of my calls I had the pleasure of interviewing Kevin Worthley, a CFP and fellow CDFA from Rhode Island, who has a lot of specialized knowledge on this matter. Here is a condensed snippet from my interview with Kevin that I hope sheds some light on this very complex matter. Kevin can be reached directly atkevin(a)retirementplanningco
With regards to Student Income, it’s good to know that it is generally sheltered by a provision that allows the student to earn up to about $4,000 in summer jobs or wherever so their income will not assessed. However for Student Assets, these are assessed up to 25% as being available for college. These include savings accounts, gifts from grandma/grandpa and other similar stuff that the student has saved up for college in their own name under their social security number or in a bank account.
While public schools require these declarations generally, you have to take note that private schools are a bit more detailed in considering these data, look a lot closer at, and consider the family finances quite differently.
Many times schools, particularly the private ones, will ask for a copy of the divorce decree that specifies whether or not the non-custodial parent is responsible for any college expenses. Suppose the student who’s applying for financial aid is living with his mother as his custodial parent (and the parent is filling out the form for the student), only the mother in this case needs to put down her financial aid information on the FAFSA form. Generally, the colleges are only concerned with the parent who’s living with the student at that time. In the case of a single parent, only this parent lists their financial aid information on the FAFSA form.
Last two things you need to know is one, just because they say that all you have to pay is, say $10,000 in the EFC, that doesn’t mean that that’s the only thing you’ll have to pay. Most only give 70-80% of the need. You’ll have to fork over the rest. The other thing is that most financial aid for most families (unless you’re in the lower income bracket) is going to be student loans. You or your child will have to pay it back in the future.
The schools will also look at who is the student living with, and who’s providing more than 50% of the child’s total support during the course of the year. Basically, if the child is residing in the home and is a legally adopted child of one of the parents then, that parent is the custodial parent and that household is the student’s household. For example, the biological mom has a boyfriend that lives with her and her son in the household but they’re not married – as far as the college is concerned, that boyfriend doesn’t exist because they’re not legally married. On the other hand, if the mom remarries, the stepfather (even if he hasn’t adopted the son) is still part of the household and his income and assets would be part of the financial aid equation.
Going back to the single mom and the student, her information and the student’s go on the FAFSA form. On the private school form, the school may request information about the biological parent (e.g. the father) who is not part of the household – this is the non-custodial parent. In this case, the father may or may not provide his information for some reason (could be he feels it’s not his duty to do so or he may not want to divulge his information). This is a common problem. It’s important for people to understand that even if the non-custodial parent isn’t cooperative with their information, the student will still be able to get financial aid.
Remarriage with additional children brought into the family unit can bring down the EFC for families and help keep costs lower as well.
Another point that people often ask is, “What if the non-custodial parent is claiming the tax exemption for the student?” This has no bearing whatsoever in who fills up the financial form; it’s the custodial parent of the household.
Another key point is it may be worthwhile not putting any provision in the divorce decree that states that a parent would pay X amount toward college (i.e. 50%) especially if the divorce is still amicable and still being settled. The reason being is that, if that private school does ask for the divorce decree and the divorce decree says 50% from the non-custodial parent, it makes it a little bit tougher to negotiate and say that the husband isn’t going to come up with the 50% as the divorce decree requires. It’s basically in the final settlement document. Whereas if it’s not part of the divorce decree, it’s kind of up in the air as to what was promised and wasn’t.
Though it may be good to agree upfront if they can at the time of the divorce to protect their kids and know what they’re dealing with, it could potentially reduce financial aid awards if the agreement is in writing.
Basically, the whole premise of the financial id process is to make yourself look as impoverished as possible to get the most of financial aid on paper. No one’s going to come and appraise your house; no one’s going to come and check whether or not you own a Lexus vs. an old 1990 Chevy. However, anything that documents committed funds say, a divorce decree or bank statement is basically evidence that the school can use to not give this much aid as one may think they deserve.
Well, there you have it. I hope this info. was helpful. For more helpful tips on divorce and money matters and lots of free resources including my FREE Fast 5 Divorce Prep and Planning Kit, please visit my website www.DivorceMoneyMatters.com.
Note, Lisa is offering 50% off her new packages (limited time and quantities). Details available at www.SmartDivorceAdvice.com
Guidelines for a Divorced Parent in Getting Financial Aid [Part 1]
How to Overcome Small-White-Envelope Syndrome
Preparing for College Now From A Teens Perspective
Thinking Smart to Get into College
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