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You'd think that bringing two salaries and two sets of savings under one roof would be a good thing -- but that windfall could mean losing out on college financial aid.
Here's why: If you're the parent who fills out the federal financial-aid form, known as the FAFSA, you have to include your spouse's income and assets as part of the household, even if he or she has no plans to kick in for the college bills. The other biological parent's income is not counted, at least on the federal application. Many private colleges, however, require financial information for both sets of parents.
How do you know which parent should fill out the form? That would be whoever had primary physical custody of the child for the previous tax year (not necessarily the parent who claims the dependency exemption). If your child lived with you even for a few more days than with your ex, you fill out the form. Neither a divorce decree nor a prenup gets you off the hook.
Physical, not legal, custody is the key here, however, "and you can certainly plan physical custody," says Deborah Fox, of Fox College Funding, in San Diego. If the other parent makes significantly less money than your household, and your divorce agreement gives you the flexibility to do so, have the child spend a few more days at that parent's house in the year before applying for aid.
Note that the more children you claim as members of your household, the less you will be expected to contribute to college costs. In this case, support is the determining factor. If you provide more than half of the support for your children or stepchildren, whether they all live with you or not, you get to list them as members of your household.
ALSO SEE: Blended Family Finances
POSTED BY: FAA_IL (July 15, 2008 11:30 AM)
...What if the student lives with Mom and Stepdad (who's combined income may be $200,000 plus). They have a nice home, bills are paid, health insurance and the student has the benefit of this combined income, nice neighborhood, good schools (all the perks)and lives there the majority of the time (the school year less Daddy's weekend visits) why should the taxpayer pay for her College education?
Title IV and State funding is finite, it is not there for all (unfortunately)and contrary to popular belief, it is the primary responsibility of the FAMILY not the Taxpayers to fund their children's education. Let the families who can use your well-published tax "loopholes" save money and cash in some of their home equity and retirement to pay for their children's education. The growing majority of "working poor" do not have these options. Indicating on the FAFSA that you "live" with the "poorer" parent a few more days of the year is not ethical...
POSTED BY: karen (July 19, 2008 05:55 PM)
WSJ reported that those hurt the most in fin'l aid were the ones making $60K thru $83K. How true! That was us! Oldest girl got an UNsubsidized loan for the 1st time, no Pell grant, & because no Pell Grant she did not get her SMART grant (again). And curiously, the younger child's entrance to college did not give me this supposed great reduction. In fact, I am being asked to pay more for BOTH kids! The packages were also more loan-heavy!!! But hey, we aren't in one of the charmed, special "categories".....
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