Settling on college tuition in divorce – who pays?

The subject of college is top of mind for many people given the recent scandals involving celebrities and admissions bribes. And with National College Decision Day on May 1, students and parents are going to be proudly donning their future college t-shirts and buzzing even more about who is going where. With all the excitement surrounding college at this time of year, it’s easy to forget the huge price of admission associated with it. In the case of divorced or divorcing parents, the matter becomes even more complicated.

As forensic accountants, we are involved in numerous divorce cases. We help to uncover financial information that could affect alimony, child support and assets. In the case of college funding, our role generally is to identify sources of funds for payment and who is going to pay, determine income percentage allocations and split it based on percentages.

Even if college is years away for the children, it is recommended that parents who are getting divorced should absolutely work out the agreement about how it will be paid from the start. In some states, parents are required to address how kids’ college will be paid for in their divorce decrees. A divorce settlement agreement should clearly state how college will be paid for, even if your state does not require it or if college is still in the distant future if the parties can agree.

In most states, the age of majority (when the law decides you are an adult) is 18 or 21, which is usually before someone would graduate from a four-year college. After the age of majority, parents are not legally required in many states to fund college tuition. In those states, you can’t require that one party pay for college tuition unless it’s part of a marital settlement agreement, which means that if parents don’t have a plan in place to get the kids in school before they come of age, there are no guarantees of who is going to pay. If divorce proceedings take place after a child is over the age of majority, the court can do nothing to provide money to be spent on college.

An agreement should also address the issue of who is going to have control over funds set aside for tuition. Once it is figured out who will pay, it also needs to be determined where the money will come from, for example, whether or not a 529 is in place and who owns it. Other factors to consider are whether a child will study abroad, take a gap year or live off-campus. 

After the divorce is settled, if one or both parties decide to remarry, it is highly recommended that parents take a good look at how this new union could impact financial aid eligibility for their kids. In the case of remarriage, income could be counted against a new spouse's children's financial aid or vice versa. Colleges generally require financial information from all adults who can reasonably contribute to college costs, and this includes stepparents.

Divorce is never easy for either party, but it’s especially challenging for the whole family when college financials are not worked out ahead of time. Being schooled on your state laws and requirements will help to provide a seamless transaction when it comes time to pay.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.