Back-to-school time is upon us for children of all ages. As many college students and parents in Kentucky can attest, affording the ever-rising cost of a college education is of a great concern to them. While some families may have savings accounts to cover at least part of their child's college education, others will be applying for student financial aid in order to pay for college tuition, school books and living expenses. Readers of this blog may wonder, then, how does divorce and child custody affect a student's financial aid application?
Parents of young children who are battling over child custody may initially be thinking of their child's immediate needs. However, it is also important to keep a child's future needs in mind as well. For example, child custody decisions can have an effect on the child's application for financial aid, should the child decide to pursue higher education. This is because the Free Application for Federal Student Aid (FAFSA) utilizes the income of the custodial parent to determine whether the child will be eligible to receive financial aid. Moreover, if the custodial parent enters into a subsequent marriage, his or her new partner's finances will also factor into the eligibility of the child for financial aid under FAFSA.
For parents who set up a 529 savings accounts to help pay for their child's higher education, should the parents divorce, this account will need to go through the property division process. Parents will have to determine who will retain control over the 529 savings account. Other options are either freezing the account or dividing it into two. However, if the account is allocated solely to one spouse after a divorce, that spouse retains sole control over how the assets in the account are spent. Therefore, it may be beneficial for parents to agree upon how the assets in the account will be used.
Keeping in mind their child's future educational goals is important for parents in Kentucky who are seeking a divorce. Child custody and property decisions made at the time of divorce can affect a child's future financial prospects. Therefore, it is important for parents to make decisions regarding child custody that best benefit their child both at the time of divorce and beyond.