Financial Aid: Impacts of Divorce
The financial aid process can be extremely confusing for all families, sometimes exponentially so for divorced households. While there are several opportunities related to families of divorce navigating the financial aid process, I'll take a look at one below.
It's been known that how you complete financial aid forms significantly impacts the amount of money you receive (or don't) from schools. What you may not be aware of is that families of divorce sometimes have options when it comes to who will be the custodial parent listed on these forms.
When it comes to the FAFSA, the only information required will be that of the parent deemed to be custodial. Essentially, as long as you can make a case that the student is living with the parent at least half of the time they can be considered custodial.
More and more private schools are also requesting the CSS Profile, a financial aid form which digs deeper than the FAFSA. These schools often request information from both the custodial parent AND the non-custodial parent. As a result, with two households considered, the amount of need determined by a school (which directly correlates with the amount of financial aid received by a family) is impacted.
Let's look below for an example. We'll assume that the parents are divorced and the student lives with Parent 1 more than 50% of the time.
Parent 1 - Earns $80,000 - Assets of $140,000 (Custodial)
Parent 2 - Earns $180,000 - Assets of $200,000 (Non-custodial)
For schools that are requesting non-custodial information, they will see the $80,000 in earnings and $140,000 in assets of Parent 1 AND the $180,000 in earnings and $200,000 in assets of Parent 2. It makes sense that the inclusion of Parent 2's financial information into the equation could result in less financial aid being extended to the student.
While most schools are now requiring the non-custodial portion of the CSS Profile to be completed, there are several well-regarded schools that still do not. Because of this, which schools families of divorce are applying to can make a significant impact on how much they ultimately receive in financial aid and thus have to pay out of pocket (or finance) for college.
You can find a full list of updated schools that require the CSS Profile here. This also lists if the schools require the non-custodial profile.
To illustrate this, here's an example again using Parent 1 and Parent 2.
If the student applies to the University of Virginia, a school that DOESN'T require non-custodial information, their Estimated Family Contribution (EFC) is likely to be in the range of 25,000. If the student were to apply to the University of Richmond, a school that DOES require non-custodial information, their EFC is likely to be in the range of 80,000.
As a result, the above family would have a remaining cost of roughly $30,000 at the University of Virginia versus being required to potentially full-pay at the University of Richmond, roughly $60,000.
Nothing against the University of Richmond, but do you think it would be worth $30,000 more per year for this family?
This is just an illustration to give you an example of the impact applying to one school over another could have for a family of divorce. CSS Profile EFCs are determined using many factors school-to-school, so I don't want to make their determination out to be a simple or uniform process.
Again, you can find the list of schools that require the CSS Profile and the non-custodial profile in the link above. With the help of admissions specialist I have put together a list of schools that are more well-regarded and do not require the non-custodial profile. This is useful information for families of divorce that are putting a college list together.
I offer a service that provides families with their expected EFC, how this is determined specific to their family and what options they potentially have to reduce the number, potentially increasing their financial aid eligibility. This is useful for all families, but you can see how it can be especially useful for families of divorce.
You can call (727-372-9685) or email (financialaidcoach@gmail.com) me to discuss this service or others that I offer.