Is it time for the “divorce college planning meeting” called for in your separation agreement? It may have been some time since you and your former spouse have been in the same room. You have no idea how to move through this tough topic including the college financial aid conversation without stirring old emotions and without argument. Consider adding a neutral third party to the process by way of a divorce mediator who has experience with this specific issue?
This is how we would work through the issue at divorce mediation. We would follow a structured process in a way least likely to offend anyone and still get the job done.
Step 1: At divorce mediation we write down a mission statement as it relates to your student’s post high school experience.
All three parties (parent/parent/student) are well served to write down a mission statement to describe the goals, concerns and expectations of your student’s post high school education. Exchange and discuss three statements and attempt to come to a consensus. When you do, write that mission statement down again for present and future reference. Include, for example whether the student will pursue a certificate program, an associates degree, a full BA or BS degree? Is it likely your child will attend graduate school? What is the position or field that the child is looking to achieve? Is it realistic based on the student’s abilities? Where will the college be located?
Step 2: Next get educated and research the cost of a college education and college financial aid for the particular student.
If you haven't done so before the student is a junior in high school, educate yourselves as to the cost of the post high school education for which you are looking. Think of education as a consumer product. Colleges all provide you an education. Just like cars, they all provide you transportation. However, you have choices, do you buy a Ford Probe or a Lexus? It is up to the consumer as to which bells and whistles are necessary or wanted when it comes to college. As a starting point, many people determine the total cost of your main campus State University. This is readily available on the web. Next, look to the range of costs of private schools and universities for comparison purposes. You have now created some parameters for yourselves to stay within. There is good information on line or speak with a college financial professional.
Step 3: Zero in on the total dollar amount all the parties collectively are able or willing to spend.
What is the amount of total costs for the full duration of the post high school experience that all parties will support, agree is appropriate and valuable? This is critical as it will begin to signal to the child that there is only so much money to work with. It is also a reality check for the child who as an 18 year old does not generally have the capacity to understand what $50,000 is worth, the difficulty in saving that amount and how long it takes to earn that amount or repay loans in that amount (also what concept of “interest” is and what it means to re-pay the loans). Further, be aware many students extend their programs, take time off, take study abroad, and transfer to different schools. If the total amount the parties agree to spend is decided on, then these changes which would otherwise be very frustrating will have less relevance on the total plan.
Step 4: Agree in advance as to the mechanics of the payments.
As this is a four (or five) year commitment discuss the mechanics: Is there to be a 3 way share/ 2 way share? How will each party pay their way? How will the child pay loans, work/study, savings?- Who will receive the bills- Who will make the payment?- Will a joint account be set up? Debit card for student? etc... Each party must consider and plan in advance how they will pay; whether by savings, loans, current income or a combination thereof. Consider how financial aid and scholarships will be apportioned. Remember most financial aid is via loans which must be repaid. Will co-signing of loans be necessary and if so who will cosign?
Step 5: Consider tax credits, deduction and government and school programs.
Consider tax credits-Check with your financial advisor or accountant and determine how to take advantage of tax credits, deductions and tax breaks. The ability to take advantage of these programs may depend on income amounts and who is taking the tax exemption for the child. Now is a good time to see how the family as a whole can best use the help that the government has provided. Check with school financial aid departments for grants, loans, work study opportunities. Ask for more aid every semester or the school will think you are satisfied with the status quo. By following this template and including any facts unique to you family, you have gone a long way to move through this major financial and emotional event in the healthiest mentally and most cost effective financially way possible.
Conclusion: If you and your former spouse are able to go through this process without a third party helping- FANTASTIC. For the rest of you check out divorce mediation, find a mediator with experience and allow yourselves to work cooperatively, save money, limit stress and keep your child happy.