Episode 30 Transcript: Saving for College

In today’s mini episode, we are going to be talking about saving for college and planning for college as part of your divorce process.

Many parents who are going through the divorce process want to speak about how they will cover the costs of college for their children in their divorce agreement, and I want to run through a couple of the ways that you can approach that.

One of the ways is to agree on a certain percentage of responsibility that each parent will have when their kid goes to college for the costs of the child’s college. I don’t mean just the tuition costs, but all of the costs that are associated with that kid attending college. And this is sort of maximum level of generality. So, you say, “Well, parent A will cover 35% of the costs, and parent B will cover 65% of the costs.” And then you have some options. You can say 35% and 65% of whatever the costs may be, including tuition and room and board, and administrative, and application fees, and trips to visit the college, and trips between home and school, books, etcetera. You know, there can be a very long list.

Or you could say that we’ll share in these percentages up to this amount, but beyond that, our child will be responsible for getting financial aid or figuring something else out.

Another approach people take is to say, “We’ll be responsible in these percentages up to the cost of a public university at the time our child is attending school.” So, if your kid is three right now, it may be hard for you to know what a reasonable number for college will be in 15 years. Instead, you might say, okay, listen, our public university system is reasonable today, and I trust that it will be reasonable in 15 years’ time, so we will say that we, I and my co-parent, do not have an unlimited obligation for college, we will share it up to the cost of – and you can identify the public university – for a student to attend X university when our child is attending college. And there’s often a distinction that people have to make a decision about, which is to say the cost of that university, if it’s public, for an in-state student versus for an out-state student.

Those are different ways that you can, when it comes to planning for college, assign responsibility between the parents for that, often, very large expense.

Another thing that I see people do is commit to a savings plan for the years before their child is attending college. So, that’s a bit of a departure from a more traditional legal approach. Oftentimes, parents will say, “We agree to either save X% of our income per month or per year for our child’s college expenses.” And on top of that, they may agree to contribute that income to a 529 account or another investment vehicle of their choice. Or the parents may say, “We agree to commit to save $X per month or per year,” and it’s not really in relation to what they’re earning, it’s just an absolute dollar amount.

So, you can actually take either or both of those approaches. You could say we will share responsibility 60-40% for college up to the cost of an out-of-state student attending X public university that we’ve identified as having reasonable cost of attendance. And in the intervening years, we are each committing to contribute X-hundred dollars per month or per year to an investment vehicle of our choosing or to X 529 account, which is basically just to ensure that you’ll be where you need to be or close enough by the time your kid goes to college. Those are two of the more common approaches that people take to planning for how to share the expense of college for their kids through their divorce agreement.

The last thing I want to flag for you, which is really not legal at all, but I’ve just seen clients get a lot of benefit for this is to seek out a college financial planner, somebody who specializes in the financial planning that parents can engage in, in the years before their kid applies to college so as to maximize their child’s eligibility for grants and loans. That is something that, whatever you say in your agreement, or if you say nothing in your agreement, is worth many multiples of whatever you will spend on it. So, I strongly encourage all of my clients to take advantage of that kind of a resource.

So, that is it for our mini-episode on college planning in divorce agreements. I hope this was helpful for you.


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