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Divorce and Financial Aid


This page answers common questions about the relationship between divorce and financial aid. It discusses which parent is responsible for completing the FAFSA, the obligations of non-custodial parents to pay for college, college support agreements, the obligations of stepparents, and the ability of non-custodial parents to take advantage of the various tax benefits for education.

Completing the FAFSA

If your parents are separated or divorced, the custodial parent is responsible for filling out the Free Application for Federal Student Aid (FAFSA). The custodial parent for federal student aid purposes is the parent with whom you lived the most during the past 12 months. (The twelve month period is the twelve month period ending on the FAFSA application date, not the previous calendar year.) Note that this is not necessarily the same as the parent who has legal custody. If you did not live with one parent more than the other, the parent who provided you with the most financial support during the past twelve months should fill out the FAFSA. This is probably the parent who claimed you as a dependent on their tax return. If you have not received any support from either parent during the past 12 months, use the most recent calendar year for which you received some support from a parent. These rules are based on section 475(f)(1) of the Higher Education Act of 1965 (20 USC 1087oo(f)(1)).

Biological parents who never married are treated the same as parents who are divorced.

Note, however, that any child support and/or alimony received from the non-custodial parent must be included on the FAFSA.

Please note that the discussion given above applies even if the parents each have equal 50% custody. The term "custodial parent" is not synonymous with custody. Usually the parent with whom the student lived the most during the past 12 months is sufficient, since there are an odd number of days in the year. However, in some cases a tie-breaker is needed, such as when the divorce was recent or when there are an even number of days in the year (e.g., a leap year). In such circumstances it is based on whichever parent provided more support. If that is not definitive, then the financial aid administrator at the college will make the decision, and this will usually be based on whichever parent has the greater income. (Some colleges will follow the logic in a multiple support agreement, but they are under no obligation to do so.)

Financial aid applications can be somewhat confusing because there are several different criteria applied for different kinds of parenthood:

  1. The parent with whom the child lived the most during the past 12 months (the 12 months ending on the FAFSA application date).
  2. The parent who provided more financial support to the child during the past 12 months.
  3. The parent who provided the most financial support to the child during the most recent calendar year for which either parent provided more support to the child.
  4. The parent who provided more than half the child's support (and will continue to do so).
  5. The parent who has legal custody.
  6. The parent who claimed the child as a dependent on their tax return.
  7. The parent with the greater income.
As noted above, criteria 1, 2 and 3 are used for determining the custodial parent, with the first criteria being primary. In a situation where the parents split all costs equally (without even a penny difference), criterion number 7 is often used.

For determining household size (the number of family members), criteria 4 is the most important. However, the student's custodial parent gets to list him or her even if the custodial parent does not provide more than half of the student's support. This leads to the anomalous situation where a student can be counted as belonging to two different households. For example, suppose the non-custodial parent remarries and has college-aged children of his own. If the non-custodial parent provides more than half of the student's support, the non-custodial parent gets to list the student as a member of the non-custodial parent's household even though the custodial parent has also listed the student as a member of the custodial parent's household. (The IRS tax return instructions prevent this kind of double dipping on tax returns, but the FAFSA instructions apparently don't.)

Criteria 4 is also used to determine whether the student has one or more dependents, in the rules for specifying whether the student is an independent student with dependents.

Criteria 5 and 6 are not used in the financial aid formulas, but are sometimes used to give an indication of the right choice when the other criteria are insufficient. Criteria 6 is also sometimes used to substantiate claims made under criteria 4. For example, a financial aid administrator may ask a parent for a copy of their tax return, to see whether they claimed the child as a dependent. Criteria 6 usually implies criteria 4, because the IRS definition of a dependent includes a 50% support test. There IRS definition includes a few exceptions where the parent isn't required to provide more than half the child's support in order to claim the child as a dependent, but in almost every case, if the parent could not claim the child as a dependent (criteria 6), they did not provide more than half the child's support (criteria 4).

Obligation to Help Pay for College

Is the non-custodial parent required to help pay for college?

The Federal government does not consider the income and assets of the non-custodial parent in determining a student's financial need. However, it does consider child support received by the custodial parent.

Many private colleges do consider the non-custodial parent as a potential source of support, and require a supplemental financial aid form from the non-custodial parent. This affects the awarding of the school's own aid, but not Federal and state aid.

College Support Agreements

It is best for parents who are in the process of getting divorced to prepare a written college support agreement in addition to a child support agreement. Such an agreement should specify who is responsible for how much of the college expenses, how many semesters of support will be provided, any limits on annual payments, indexing payments to the tuition at a particular college (e.g., a state college), whether there is an age limit (i.e., up to age 24, when the student becomes automatically independent), and any restrictions on colleges the child may attend (e.g., specific colleges and accreditation, 2-year vs. 4-year, public vs. non-profit). (Although it is common for college support agreements to specify that the child must attend a state college, it is better to index the support requirement against the state college tuition while allowing the child the flexibility to choose another college. For example, one could specify that the non-custodial parent will provide 50% of the tuition at the state college or the college where the child enrolls, whichever is less. It is also common to base the college support requirement on the expected family contribution figure.) The agreement should also specify what constitutes college costs (i.e., just tuition and required fees, or also room and board, transportation, health insurance, textbooks and other educational expenses) and whether there are any requirements the child must satisfy to receive continued support, such as achieving a minimum GPA and taking a minimum number of credit hours. The agreement should also specify whether the college support is to be paid directly to the school, to the custodial parent, to the child, or to a combination. Often the percentage of college costs is divided proportionately between the parents according to income after subtracting non-discretionary expenses such as taxes, basic living expenses and health care. This is the same as the "income shares formula" used by most states for child support.

Section 529 prepaid tuition plans and section 529 college savings plans are especially popular vehicles for funding the college education of children of divorced parents, as they permit the non-custodial parent to limit their financial obligation by prepaying for a set percentage of college costs.

Although child support requirements terminate in most states at when the child reaches the age of majority (usually age 18 or 21), there is often an exception for children who are enrolled in a postsecondary educational institution or have special needs. Even if child support has terminated, the non-custodial parent might still be required to provide college support.

Note that college support agreements might not be binding on the estate of a deceased non-custodial parent in some states (e.g., Massachusetts).

Studies have found that children who have kept in contact with the non-custodial parent are more likely to receive greater support. Fathers with joint legal custody provide more college support than fathers without custody, and fathers with visitation rights provide more college support than those without visitation rights.

Obligations of Stepparents

My parents are divorced, and the parent I'm living with has remarried. Does my stepparent have to report his or her income and assets on the FAFSA?

Yes, provided that the parent you're living with is the one filling out the FAFSA (your custodial parent). If your stepparent is married to them at the time you fill out the FAFSA, they must report their income and assets even if they weren't married to them in the previous year.

The specific statutory citation that supports this is 20 USC 1087oo(f)(3), which is section 475(f)(3) of the Higher Education Act of 1965:

Remarried parents

If a parent whose income and assets are taken into account under paragraph (1) of this subsection, or if a parent who is a widow or widower and whose income is taken into account under paragraph (2) of this subsection, has remarried, the income of that parent's spouse shall be included in determining the parent's adjusted available income only if --

(A) the student's parent and the stepparent are married as of the date of application for the award year concerned; and

(B) the student is not an independent student.

My custodial parent remarried and signed a prenuptial agreement that absolves the stepparent from financial responsibility for my education. Why does my stepparent have to provide financial information on the FAFSA?

Prenuptial agreements are ignored by the federal need analysis process. After all, two individuals (parent and stepparent) cannot make an agreement between them that is binding on a third party (the federal government). The federal government considers the stepparent a source of support regardless of any prenuptial agreements to the contrary. If a stepparent marries the parent, he or she is considered responsible for supporting the parent and children even if he or she is unwilling to do so.

College Support and Income Taxes

Can a non-custodial parent who is paying college tuition directly to a college take advantage of education tax benefits such as the Hope Scholarship?

The non-custodial parent can only take advantage of the education tax benefits when he or she claims the child as a dependent. If the non-custodial parent does not claim the child as a dependent on his or her income tax returns, but the custodial parent does, the custodial parent can claim an education tax credit based on the tuition paid by the non-custodial parent.


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