Congratulations! Your child is going off to college in the fall. Unfortunately, that first huge tuition bill will be due in the beginning of August and for most people, it’s complete sticker shock! Since I am not a fan of having to come up with large sums of money, I found ways after my own divorce to help make paying for college a little easier on my monthly cash flow. Read more to find out what I did to help ease the pain of paying for college.
Tuition Payment Plans
My oldest daughter was headed off to college only a few months after our divorce was final. Luckily we had addressed all the college issues in our divorce agreement, but figuring out how to come up with the money was still a challenge.
One of the first things I did was to enroll in a tuition payment plan through TMS, Tuition Management Systems, a company that offered a monthly payment plan through the school my daughter was attending. Not all colleges and universities use TMS, but most do and it’s up to each school whether they offer a 10 or 12-month plan and on what day the payment is due. There’s only a small enrollment fee, no added finance charges and the plan can easily be set up on line and automatically debited each month from your checking account.
The advantage to using a plan like this, is that is far easier to come up with a smaller monthly payment than a lump sum figure of $20,000. It is also less stressful and anytime you can reduce financial stress, you should take advantage of it.
My ex-husband and I established a joint checking account solely for the purpose of paying tuition and once we figured out what we owed, after backing out the merit award and the Stafford Loan, TMS automatically pulled the remaining amount due from the account.
As long as we kept depositing the required amount into the checking account, our daughter’s tuition was paid for, stress-free.
The Stafford Loan
Everybody should fill out a FAFSA whether you are looking for financial aid or not. In fact, some schools require you to fill it out before they will award grants or scholarships. Some families will not qualify for needs-based financial aid, but everyone qualifies for the non-subsidized Stafford Loan.
Using the Stafford Loan to help fund the annual tuition bill ($5500 the first year), can help ‘close the gap’ between award money and your own money. I always tell my clients going through a divorce that they should apply for the Stafford Loan not only because it helps with the financing, but since the loan is in the name of the student, it gives your child some ‘skin in the game’. It is unrealistic to think that students should not bear any of the financial responsibility these days, especially in a divorce.
The unsubsidized Stafford Loan does accrue interest as soon as you use the money, meaning it’s not deferred until after graduation, like the subsidized Stafford. But, you and your ex-spouse could agree to make the interest payments for your child during the four years, so that when they graduate they will only have $27,000 in student loan debt. Depending upon your child’s future career and expected earnings, this may be a reasonable amount of debt to have.
Taking Advantage of Head of Household Filing Status and Education Tax Credits
Although this is not a direct way to help pay for college, it can have an impact on your cash available for tuition. After my divorce, I was able to file as Head of Household and to also take advantage of certain education tax benefits, which in turn, gave me a tax refund that I used to make an interest payment on the Stafford Loan. You could also use the refund to help pay for textbooks or to make the required housing deposit in April for the next school year.
Head of Household
There are many blogs out there addressing tax filing status, including my own, ‘Divorce & Financial Aid – Which Parent Should fill out The FAFSA’, so I will not go into great detail here, but the custodial parent will typically file as HOH. Not only will you receive a bigger tax break than filing as Single, but since only the custodial parent can file as HOH, you may qualify for more financial aid if you earn less than your child’s other parent.
Depending on your adjusted gross income, you may qualify for certain education tax credits which in turn, may decrease your taxable income or reduce your tax liability and increase the likelihood of receiving a tax refund. Working with your accountant to maximize your tax benefits is a great way to raise cash to help pay for any expense related to college. It does not work for everyone, but being creative (legally) and finding other ways to come up with cash is an empowering experience, and a great way to take control of your financial future.
It literally ‘pays’ to be informed.
be informed, be empowered, take control. Don’t let divorce blow your finances off course…let me help you calm the waters, with Solutions For Divorce.
diane@solutionsfordivorce.com 978-833-6144
Every divorce is unique and laws and practices vary from state to state. Be sure to consult with your attorney, financial professional, accountant and other professionals in your state to understand what applies to you and what is best for you and your family. Taking information out of context generally has negative consequences. This article is not meant to provide legal or financial advice.
