On behalf of Stange Law Firm, PC posted in Child Custody on Monday, August 31, 2015.
Now more than ever, going to college is a financial investment that spans a lifetime. Students who take out loans to finance a college education may be paying those loans back for decades afterward. And for students whose parents can afford to foot the bill for a college education, saving may have started at birth.
Unfortunately, parental divorce can significantly complicate plans to save for college. If you are experiencing divorce and have minor children at home, you may be wondering how the divorce will impact a college savings fund or plan. The good news is that continuing to save for your child’s college education is possible if you pay attention to some important details.
In many divorces, both parents want child custody (for obvious reasons). But few people realize that custody decisions could also have an impact on the child’s access to financial aid when he goes to college. The Free Application for Federal Student Aid (FAFSA) considers the income of both parents if parents are married, but considers only the finances of the custodial parent if parents are divorced. If the custodial parent remarries, the new spouse’s income may also be considered. If the lower-income parent is also the custodial parent, the student could be eligible for more student aid.
Taxes are also an important factor to keep in mind. The parent who has custody of the child the majority of the year can claim dependent tax credits, unless other arrangements have been made. In cases of joint custody, parents may negotiate a yearly credit trade or some other deal. While not directly related to college funding, dependent tax credits are a significant part of the overall financial picture.
Please check back later this week as we continue our discussion.