Once you’ve seen the video, click the link below to see how the rules regarding divorce and financial aid played out for a California family that did not approach the college search strategically. And then read the rest of this lesson to learn what you need to know about financial aid for divorced and separated couples.
If you are divorced or separated, the financial aid formulas may treat your child differently. Your child might even enjoy a financial advantage that other students don’t have.
How divorce and separation will impact your chances for financial aid will depend on which aid applications you must complete – the FAFSA and the CSS/Financial Aid PROFILE.
How the FAFSA Treats Divorce or Separation
In cases of divorce or separation, chances are you’ll only need to complete the FAFSA because most colleges and universities just require this federal form. This could be a plus for your child.
Here’s why: The FAFSA only asks for the financial information of the custodial parent.
Unusual Definition of a Custodial Parent
If you know you are not the custodial parent, don’t be so sure.
You might be the custodial parent even if you don’t claim your child on a tax return or pay child support. Here’s why: The higher-ed world relies on an unusual definition of custodial.
For financial-aid purposes, the custodial parent is the one with whom the child lived the majority of the 12-month period dating from the day the FAFSA is filed.
Let’s say the FAFSA’s submission date was Oct. 1, 2017. The parent who completed the FAFSA would have been the one who took care of the child for more than six months going back to Feb. 1, 2016.
Let’s use an example to see how this custodial rule can play out:
The mom is a financial advisor who makes a hefty salary and the ex-husband is a high school teacher.
If the family wants to reduce their college costs, it would make sense for the teen to live with the lower wage earner long enough for the parent to be considered the custodial parent. That would mean at least six months and a day.
If the dad was the custodial parent in this case, the mother’s income and assets would not be divulged. With only the lower-income parent filing the FAFSA, the student would be more likely to qualify for more financial aid.
Colleges can’t track where a child lives so parents are on the honor system.
Separation and Divorce
Separated parents don’t have to be legally separated to be treated the same as divorce couples, but they can’t be living in the same residence.
FAFSA and Remarriages
So what happens if the custodial parent remarries?
The custodial parent would have to include the income from the new spouse on the FAFSA. And it won’t matter if the married couple signed a pre-nuptial agreement stipulating that the new spouse would have no financial obligation to help pay for college.
If a new spouse is supporting his/her own children or was only recently married, the family could try appealing to a school.
FAFSA Take Away:
- The FAFSA divorce and separation rules can be a huge plus for families when one parent earns significantly less than the other.
- The rules can also benefit families because the income and assets from one ex-spouse will never be counted.
How the CSS/Financial Aid PROFILE Treats Divorce
If your child applies to schools that also require filing the PROFILE, the rules will vary by school. Institutions using this extra aid application are mostly expensive private schools.
Here is the list of all participating PROFILE schools.
PROFILE schools that want the non-custodial parents to share financial information will require them to complete what’s called the Noncustodial PROFILE.
When considering PROFILE schools, you should check out which schools do and don’t require the Noncustodial PROFILE. In this screen shot, the red arrow is pointing to the Noncustodial PROFILE column.
Many PROFILE schools will only consider the income and assets of the two biological parents. Some, however, may consider the financial wherewithal of new spouses too. In other cases, a school may ignore the noncustodial parents information.
In the video above, Paula Bishop mentioned a wealthy parent who completed the Noncustodial PROFILE, but that parent’s income was not considered by the school. That’s yet another scenario.
How a PROFILE school handles the divorce issue can depend upon how much a school likes an applicant.
Mixed Financial Aid Results
When a school requires the FAFSA and the PROFILE, it is possible that you could qualify for financial aid from the federal and state governments but be denied institutional need-based aid from the school.
PROFILE schools will use the FAFSA to determine your child’s eligibility for federal and state financial aid. The institutions, however, will rely on the PROFILE to determine if your child will qualify for their own in-house aid. In contrast, most colleges and universities rely on the FAFSA to determine which students are eligible for their in-house aid.
1. The only way that you will know how a school handles divorce is to call and ask the financial aid office.
2. Some students will qualify for more financial aid if they apply to schools where the noncustodial parent does not have to submit financial information.
3. Schools that rely exclusively on the FAFSA may have their own in-house form for a divorced parent. Ask a school what form, if any, that it uses in cases of divorce and separation.
3. At FAFSA schools, students can potentially be eligible for more financial aid when parents are divorced or separated.