College financial aid is difficult enough to navigate, but it’s even murkier when parents are divorced, separated, unmarried, or remarried. This is the situation for an increasing number of students and parents, who are often paying more for college because they don’t understand how the rules apply to them.
Basic financial aid literacy should be the goal of all college-bound families. You can register for our free, downloadable Pocket Guide to College Financial Aid to get you started. This 10-page guide includes a full explanation of terms, forms, formulas, sources and types of aid, accessing aid, and more.
Here’s what students and their divorced, separated, unmarried, or remarried parents need to know, starting with a quick explanation of financial aid:
Almost all colleges and universities require that students fill out the FAFSA (Free Application for Federal Student Aid), www.fafsa.gov, in order to qualify for any need-based, and sometimes merit-based financial aid. The formula behind the FAFSA spits out a number called “EFC,” or Expected Family Contribution. The EFC is the minimum amount of money your family is expected to contribute towards college costs each year. (Learn more about EFC)
Your EFC determines your eligibility for federal (and often state) grants and loans. Most colleges use EFC to determine your eligibility for need-based college grants (often the largest source of free money). Your complete financial aid package consists of your EFC, and any scholarships, grants, loans, and work-study you are awarded. (Learn more about how colleges build financial aid packages.)
All students are required to report their income and asset information on the FAFSA. And, unless you are an “Independent” student, the FAFSA also requires income and asset information from your parent(s) (either biological or legally adoptive). To be “Independent” for financial aid purposes you must be either:
- At least 24 years old
- Enrolling in graduate school
- In Active Duty or a Veteran in the US Armed Forces
- Providing more than half the financial support for your child(ren) or other dependents
- Orphaned since the age of 13 or are in foster care
- An Emancipated Minor as determined by a court
If you do not meet any of these requirements, you are considered a “Dependent” student and are required to report your parents’ financial information. However, the parents’ status as married, divorced, separated, unmarried, or remarried affects whose information is required. And the FAFSA definitions of marriage, divorce, and separation are not the same as legal definitions.
This can be very confusing, but it becomes clearer if you just look at living arrangements and/or support. The chart below summarizes which parent’s financial information must be reported on the FAFSA.
(NOTE: Legal guardians, foster parents, grandparents, widowed step-parents, or other relatives, do not have to provide financial information unless they have legally adopted the student.)
|Parents’ Marital Status||Parents’ Living Arrangements||Information Required (Biological, same-sex, or adoptive parents)|
|Married, Unmarried, Separated, Divorced||Living in the same household||Both parents must provide financial information|
|Married, Unmarried, Separated, Divorced||Living in separate households
(Different floors of the same house or temporary housing such as a hotel room do not count as separate residences)
|The CUSTODIAL PARENT must provide financial information (see more information below)|
|Custodial Parent is Remarried||Parent and Step-Parent Living in the same household||The CUSTODIAL PARENT and the step-parent must provide financial information (see more information below)|
Who is the Custodial Parent?
The “Custodial Parent” for FAFSA purposes is not the same as the parent who has legal custody.
- The custodial parent is the one the child has lived with the most during the previous 12 months.
- If the number of days and nights with each parent is equal or the divorce occurred less than a year ago, the custodial parent is the parent who provided more financial support during the previous 12 months. (Financial support includes child support payments, but also money paid toward food, clothing, housing, medical and dental care, car payments, educational expenses, etc.)
Choosing the parent with the lower income for the parental financial section on the FAFSA creates the best chance of qualifying for maximum financial aid. But, the student needs to live with that parent at least one more day of the year or receive slightly more financial support from that parent to list them as their custodial parent.
More on Step-Parents
The income of a step-parent married to the custodial parent must be reported on the FAFSA, regardless of any prenuptial agreements to the contrary, or unwillingness of the step-parent to help pay for the student’s education.
If the custodial parent is remarried as of the date the FAFSA is filed, the student should answer questions about both the parent and step-parent, in the same way, you would report a biological or adoptive parent living in the same household. This is true even if the marriage hadn’t occurred during the year for which income is considered (prior-prior year). For example, if the custodial parent married in 2018 before the student files the 2018-19 FAFSA, the step-parent must still report 2016 income.
If the custodial parent dies, the step-parent’s information is no longer reported on the FAFSA, even if the student continues to live with the step-parent (unless the step-parent has legally adopted the student). In this situation, financial support provided to the student must be reported as untaxed student income on the FAFSA, unless the support is part of a legal child support agreement.
If the step-parent’s financial information is required on a FAFSA for his or her legal child, and the step-parent provides more than half the support for his or her step-child, regardless of where the step-child resides, the step-parent may count the child and step-child as part of their household size on the FAFSA.
Students Living with Neither Parent
If a student lives with someone who has not legally adopted them (legal guardians, foster parents, grandparents, widowed step-parents, or other relatives), the adults’ financial information (including Foster Care payments) is not reported on the FAFSA. However, cash support provided to the student or paid on the student’s behalf must be reported as untaxed student income on the FAFSA. This includes monetary gifts and money paid for housing, food, clothing, car payments, medical and dental care, and college costs.
Death of a Parent
If the custodial parent dies, the non-custodial parent’s financial information must be reported on the FAFSA. If the student has no meaningful contact with and receives no support from the non-custodial parent, the college’s financial aid administrator may make an exception to this rule.
If no legal parent (biological or adoptive) remains, the student is considered independent on the FAFSA.
If a surviving parent dies after the FAFSA has been filed, the student must update her dependency status and report income and assets as an independent student.
If a student’s parents filed a joint return for the tax year applicable to the current FAFSA but have since separated, divorced, remarried, or been widowed, only the custodial parent’s information should be reported on the FAFSA. The student must also submit an IRS tax transcript and W-2 for the custodial parent and speak with the college’s financial aid administrator to be sure any misinformation is corrected. (This is the same procedure for an independent student who has recently separated, divorced, or been widowed.)
Planning to Divorce
It is widely advised that parents planning to divorce should spell out the burdens of college costs, for each child individually, in their divorce settlements. In states where this is required, if the parents cannot reach an agreement together, the court will decide. Consider carefully:
- Where the money will come from (529s, savings, home equity, income, education loans, etc.)
- What are acceptable expenses (tuition, room, board, transportation, supplies, study abroad, club fees, health insurance, etc.)
- Who is responsible for which expenses
- How many semesters of support are acceptable
- What happens in the event of a gap year or the child does not attend or finish college
- Child support payments through college graduation
- Age limits on college attendance
- Requirements the child must satisfy to receive continued support (such as a minimum GPA, or credit hours)
- Restrictions on which colleges the student may attend
- Is the money paid directly to the college or to the student
- Who will take on, co-sign, and/or pay back private student loans
The CSS Profile
In addition to the FAFSA, about 200 colleges, usually the most generous ones, require that students file the CSS Profile, a much more exhaustive look at family finances that usually requires extensive financial information from both parents, and often, that of any step-parents. Depending on the larger family financial picture, it may be a financial aid advantage or disadvantage in applying to schools that require the CSS Profile. Click for a list of schools that require the CSS Profile.
The Financial Aid Office’s Role
The college’s financial aid administrator has the final word on how much financial aid a student will receive. Many colleges use their own formulas to award financial aid and may require an institutional form in addition to the FAFSA (but usually not in addition to the CSS Profile). Even when they require financial information from both parents (and step-parents), they may still take the divorce into account in their financial aid calculations by factoring in the costs of living in separate households. In cases where it cannot be determined who qualifies as the custodial parent, the college financial aid administrator will decide which parent is responsible for completing the FAFSA–usually the parent with the greater income.
- If a couple meets the criteria in their state for a common-law marriage, they should be reported as married on the FAFSA.
- If the state does not consider their situation to be a common-law marriage, they are not considered married on the FAFSA, and a dependent student would follow the rules for divorce to determine which parent’s information to report.
- If a parent is living with, but not married to another person, the non-parent’s information should not be reported on the FAFSA.
A Parent Who Isn’t Willing to Comply
Call the financial aid office to ask about their specific policies under these circumstances. Sometimes college’s will make an exception to what is required if it can be shown that the non-compliant parent has a history of non-support.
How to Report Alimony and Child Support
Alimony received by the custodial parent is considered taxable parent income and would be included on the FAFSA as such. There’s no need to report it again separately.
Child support is reported on the FAFSA as untaxed parent income.
How to Report a 529
529 Accounts Owned by the Custodial Parent
- Reported as a parent asset on the FAFSA
- Distributions are not reported as student income on the FAFSA
529 Accounts Owned by the Non-custodial Parent
- Does not get reported as an asset on the FAFSA
- Distributions are reported as student income on the FAFSA
The CSS Profile will require information about 529 accounts owned by both parents (and grandparents).
Who Gets the Income Tax Benefits
The parent who claims the child as a dependent may be eligible to take advantage of qualified education tax deductions and credits, whether or not he or she is the custodial parent.