College Planning and Mediation: Part II
In our last post, we talked about mediation and planning for college expenses. Today we will look in more detail at the categories that you and your child’s other parent should address in any financial planning meetings about college contributions. These include:
Your Child’s Educational Goals
Does your child have an ultimate career goal in mind? Is the goal realistic given the child’s abilities? What kind of program is your child likely to pursue? A technical or vocational certificate program, an associate’s degree, a full B.A. or B.S. degree? What about graduate school?
All Estimated Costs of the Education
What are the total costs of the programs your child might consider? Are they planning to live at home, or do you need to include a budget for housing? How much might costs increase over time? Is it realistic to consider private colleges or will you cap your costs at, for example, the costs of the main campus of your state university? Keep in mind that if you are not a high income family, financial aid offered by some private schools could end up making their costs closer to the costs of a public school than you think.
Most schools have ample information about financial aid available on their websites. Many include calculators that will help you estimate eligibility for grants, loans, and work study opportunities. If you have unique circumstances, or questions beyond the general information you can find online, contact a financial aid officer at the school for more details.
What do college costs include? Most parents agree that costs include tuition and fees, books, and reasonable room and board expenses. But what about a computer for assignments, transportation funds, and spending money for things like entertainment, vacations, and gifts? What about moving expenses?
Don’t forget precollege costs either. You will need to decide whether or not any agreement to share expenses also applies to things like application fees, test fees, costs of enrichment courses, test prep courses or college credits completed in high school.
Current Savings and Future Savings Plans
If one or both of you has already made contributions to a 529 or similar type of account, you can decide whether or not you want to commit to continuing contributions. You can also agree to set up new accounts and make specified annual contributions. Accounts that are specifically designed for educational savings can offer beneficial tax breaks. Check with your accountant or financial advisor for advice on the best way to save. You may also want to get financial advice about maximizing any educational tax credits or deductions.
Your Child’s Responsibility
Parents can also discuss whether or not the child should be expected to take out loans or hold a part-time job during school, but be aware that courts will not hold children to agreements reached by their parents. Avoid terms that make such thing mandatory. You can, however, make your promises to each other contingent on the occurrence of certain events, including the child complying with certain prerequisites.
If you agree that your child should take out loans, then also consider whether these should be limited to subsidized or unsubsidized federal loans, or whether private loans are also to be considered. Be aware that maximizing loans, and especially exceeding the limits of any federal loans a child qualifies for, can easily result in unmanageable future debt.
If you believe that your child should confer with both of you before submitting applications or before accepting an offer of admission from any school, now is the time to make that clear as well.
Each Parent’s Contribution
Parents often agree to split expenses 50/50, or to make contributions proportionate to each parent’s income. If one parent earns significantly less than the other, the latter may be more fair. Be specific in your agreement. If you plan to make contributions proportionate to income, does this mean gross income or net income? Does it mean the current year’s income, or an average of income over the past few years?
Mechanics of Payment
Specify how you plan to make payments. Will the custodial parent pay the bills in advance and seek reimbursement, or will each parent send money directly to the school or to the child? Does it make sense for one parent to maintain a joint bank account with the student? Will the student have a debit card? What about an emergency credit card?
Parents may have minor or major disagreements about how much financial responsibility they should take on for a child’s higher education. The sooner you can come together with a plan, the better. It’s best to consider decisions about such expenses as part of an overall divorce settlement. That way you can coordinate discussions about educational expenses with those about issues like parenting time and spousal support payments. Your agreement about expenses can then be part of a comprehensive marital settlement agreement.
Courts tend to uphold agreements between parents about college education contributions, but only if the agreements are specific and clear. The wording of an agreement can be critical to its enforcement. To avoid having to rehash the whole issue again later, have an attorney review the terms before you finalize it.
If you and your spouse or former spouse would like to discuss this topic with one of our experienced family mediators now, request an initial consultation and contact us today.