College Funding Questions to Resolve During Your Divorce

College Funding Questions to Resolve During Your Divorce

By: M. Scott Gordon

If you are thinking about filing for divorce or are in the midst of a divorce and you have children, you may be wondering how college expense obligations will be shared between you and your spouse. According to a recent article from U.S. News & World Report, questions about paying for college often become contentious ones during a divorce. Yet it is extremely important for parents who are divorcing to contend with matters of college savings accounts, tax implications, and other college expense issues when it comes to their children.

In addition, given that the recent changes to the Illinois Marriage and Dissolution of Marriage Act (IMDMA), which took effect on January 1, 2016 and have implications for college expenses, now is as good a time as any to discuss the looming questions surrounding support for college tuition and other costs during divorce.

Big Picture Issues Concerning College Funding

When you and your spouse have been putting money into a college savings account for years, the continuation of that college fund—as well as questions about how college expenses will be determined for your child—can become hotly debated topics. Here are three major questions when it comes to divorce and college expenses:

  • Decide who will own any college savings account. If you and your spouse jointly opened a 529 savings account (a college expense account with certain tax advantages), then you will have to decide which of you will now assume control of that account, if you should “freeze” the account for now or simply split it between you. What are the implications of each? If you or your spouse becomes the owner of the account, then only the owner can make decisions about how its funds will be used (within reason). Another consideration in awarding account ownership is that it can have serious implications for your child’s financial aid eligibility. In short, if the custodial parent is the lesser earner of the two parents, then the child will qualify for more financial aid (the FAFSA form asks just for the custodial parent’s income and assets). Hence, if the noncustodial parent is indeed the higher wage earner, it may be in the best for the child if the noncustodial parent takes sole ownership of the 529 savings account.
  • Decide who will claim the child on taxes (dependency exemption) each year. If your child is a full-time college student, the IRS’s dependent exemption can make a big difference for the parent claiming the child. That parent is also the one who is eligible for college credits from the IRS.
  • Decide who will have the primary allocation parental time of the child (formerly, the primary residential parent or custody). As we mentioned previously, this can play a big role in a child’s financial aid future. Indeed, given that the FAFSA only takes into account the custodial parent’s earnings and assets, the cost of college expenses can vary greatly if the custodial parent earns substantially less than the noncustodial parent.

Changes to Illinois Family Law Regarding College Expenses

In addition to big picture questions about college expenses and divorce, families in Chicago should also be aware of changes to the IMDMA that took effect in 2016. Under Section 513 of the IMDMA, both parents are required to contribute to their child’s college expenses. The revised language makes clear what counts as college expenses and the length of the support obligation. 

These matters can be extremely complicated, and it is important to have a dedicated Chicago college expense family lawyer on your side. If you have questions about college expenses during and after divorce, do not hesitate to reach out to one of our experienced advocates. Contact Gordon & Perlut, LLC to learn more about how we can help.