Q. My husband and I are in the process of finalizing our divorce agreement in mediation. We have agreed on everything but have three children who will eventually all be in college at the same time. My husband’s parents are incredibly generous and we are sure they will help with costs but understand there are some drawbacks to what we might otherwise qualify for in financial aid if they help. We are having trouble drafting the language about college right now. The mediator told us because our kids are 12, 10 and 9, we don’t have to decide anything now. I don’t understand why we shouldn’t address this now if we are in agreement.
Am I wrong to want to get this done? Will we lose out on financial aid if my husband’s parents do help?
The case law in Massachusetts says a judge cannot enter orders with regard to payment for college until the child is on the verge of going to college. Because your children are not yet juniors or seniors in high school, it is premature to get too caught up with how college is being funded. That being said, there have been some very recent changes to the FASFA which were part of the recent federal pandemic relief package passed in December relevant to your situation.
Historically, if a grandparent wanted to help a child pay for college, the money would be treated as the child’s untaxed income and assessed at up to 50% by the FASFA formula. That will no longer be the case. Now the FASFA form will ignore the money being given to a child to pay for college from sources other than the parents making it easier for your in-laws to assist.
There is a different issue. Because your in-laws are obviously not a party to your divorce, and your children are not theirs, you can’t bind them to paying for anything. So any drafting you may wish to do cannot involve grandparents.
Right now, it is also unclear where your child will go to college. Some of the existing FASFA changes may impact College Board which has created the CSS Profile used by many to determine how much institutional aid will be provided to future students. FASFA has more of an impact on state schools and for private schools to determine federal and state aid eligibility. Thus far College Board has not determined what changes it may make.
The change in legislation has also done away with the break you would have otherwise received on account of having multiple children in college at the same time. This, of course will have a negative impact on your situation in coming years.
As with all new legislation there will be kinks that get worked out over time. Your best bet is to include generic language for reviewing college financing when it is time for college. Meanwhile, promote the children’s relationship with grandma and grandpa in hopes they remains generous at college time.