Plan Now for Your Children’s College Education

For many families, the future cost of a college education for their children will overshadow all other childhood expenses. So this is an important conversation for parents whether they are married or divorcing. In the circumstance of divorce mediation, my role is to place the topic front and center for discussion.

In the circumstance of divorce mediation, my role is to place the topic of financing your children’s college education front and center for discussion.

In my view, financial decision-making involving college education costs centers around three topics.

Saving for Future College Expenses

According to U.S. News & World Report, the average cost for tuition and fees alone for the 2020-21 academic year was $41,411 at private colleges and $11,171 for in-state residents at public colleges. This does not include room and board and other expenses, such as travel and books. For a four-year education, the price tag is substantial.

Where resources allow, many families will commit to a savings strategy for college. Many take advantage of 529 college savings plans, which allow for the earnings on savings to be tax-free as long as these funds are used for qualified educational expenses. For families who expect to qualify for financial aid, maintaining a 529 account may result in a small reduction in a future financial aid package.

Divorce mediation involves planning for the future of two separate households, so a college savings plan—when feasible in light of other expenses—will form an important component of the overall parental financial plan.

Parental vs. Student Financial Responsibility

Each family is faced with a decision that revolves around how much of college should be paid for by parents and how much by the child who is attending college. In my experience, there are many factors that may influence these decisions:

1. If the parents attended college, how was it paid for?
2. How much “buy-in” do parents expect from their children for college?
3. Are there savings or other resources (for example, from grandparents) available?
4. Will the child qualify for grants or scholarships, either based on financial need or on merit?
5. Viewpoints on student loan debt. (Note: according to U.S. News & World Report,  the average student loan debt for an undergraduate education is now over $30,000.)

Allocating the Parental Contribution to College Costs

Once parents have determined how much they are willing/able to spend for college education, they must also decide how to split the cost. This may create discomfort, as there can be uncertainty about future resources that makes parents reluctant to commit to future expenses at the time of their divorce. When parents are able to make the commitment, other issues that need to be addressed will include how existing parental savings will factor into this split and how income and resources will affect the split.

Watch for the next post, where I will share alternative methods within mediation for approaching these important decisions about financing a college education.