Atlanta Financial Blog

Figuring Out the College Fund After Divorce

Cathy C. Miller, MBA, CFP®, CRPS®, CDFA™
September 11, 2018

 

A college education has come to be thought of as something every child in America is entitled to, and something that every parent wants to provide. Seeing your child go to college is almost as much a part of the “American Dream” as owning your own home. But with college costs rising far faster than general inflation, a four-year education at a pricey private school can easily exceed a quarter of a million dollars.  And even four years at an in-state public school can easily exceed $100,000 per child.

With these soaring costs, sending the average 2.4 children to college can strain the resources of families even when they have planned ahead and saved wisely. But when families face divorce, assumptions about the kind of college education they can and should provide their children often need to be re-examined.

The first step is to determine how much of your family resources, post-divorce, can be devoted to college education. If paying for that college your child has fallen in love with will come at the expense of your ability to retire, stop right there!  There are other options for college, but there aren’t any “work-study” or “scholarship programs” to fund your retirement. Don’t make the mistake of over-promising or shielding your child from economic realities. The decision on what college to attend could be the first of many life decisions your child will face during his or her life. Lay out your budget clearly, and then learn how to do a “cost-benefit” analysis. If there is a gap between what they want and what they/you can afford, help them identify ways to cover that gap – work- study programs, grants, scholarships, student loans or part-time work. It’s an approach they can use for all the other life decisions they will face as they mature.

If you and your ex-spouse aren’t on the same page about how to approach this decision, the process will be more difficult, but the obstacles aren’t insurmountable. Don’t let your ex-spouse’s financial decisions or resources sway you from the budget and plan that works for you. And, be sure you understand what your budget and resources can handle. Have a financial advisor with experience in college planning analyze your situation and needs. With expert guidance, you can learn how to navigate alternative funding vehicles like student loans and how to navigate tax consequences of various strategies. Then your advisor can develop a customized plan for your student’s college journey that won’t break the bank.

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