I’ve Been Ordered to Contribute to Our Child’s Out-of-Pocket College Costs—How Do I Maximize Their Financial Aid?

Under New Jersey law, parents can be ordered to contribute to a child’s out-of-pocket college costs or expenses for a child enrolled full time in a college or university. Given that out-of-pocket expenses can be extremely steep depending upon the specific college or university the child attends, many parents want to know how they can maximize their child’s financial aid in order to lower out-of-pocket costs that must be paid. An article in NerdWallet discusses some of the best ways to maximize financial aid eligibility for a college student. We want to say more about those strategies and to discuss how they can benefit newly divorced parents who will be contributing to college expenses.

Understand How Financial Aid Works

The first step in maximizing your child’s financial aid award is to understand how financial aid works and what types of awards are available. In short, colleges tend to provide both merit-based and need-based aid. Merit-based aid is awarded to students who excel in a particular area for which the merit-based award is designed. For example, a student may receive a merit-based award for having a particularly high grade point average, but a student also can receive a merit-based aid designed for artistically gifted students or those who excel in athletics.

While parents likely cannot do much to maximize merit-based aid aside from supporting their children’s academic and extracurricular pursuits, parents can make financial choices that can maximize need-based aid.

Apply for Need-Based Aid On Time

To maximize financial aid, you will need to make sure that your child has submitted all required financial aid paperwork—and that you have filled out any portions required by you—on time. Most colleges use the Free Application for Federal Student Aid (FAFSA), but some colleges also have additional financial aid applications that they use for providing private need-based aid and scholarships. The FAFSA will give your expected family contribution (or EFC), which is the amount that your family is expected to be able to pay.

There are ways to reduce your EFC, making your child eligible for other forms of need-based aid.

Lowering Your Expected Family Contribution

The EFC is determined by a number of different factors like the size of your family and the number of children who are in college, but your income and assets also play a significant role. Accordingly, by reducing income and assets that can be counted toward the EFC, you may be able to reduce the EFC and maximize your child’s eligibility for need-based financial aid. The following are some ways to reduce countable income and assets:

  • Contribute more money to your retirement accounts since retirement assets are not included when determining a student’s eligibility for need-based aid;
  • Use any taxable accounts you have to reduce your debt, including your mortgage since any equity in your home will not be considered when determining the EFC;
  • Avoid large capital gains if possible;
  • Avoid opening custodial accounts for your kids since a student’s assets “are counted more heavily for financial aid purposes” than the parents’ assets (rather than opening a custodial account, consider a 529 college savings plan, which will be included in the EFC calculation at a lower rate than a custodial account); and
  • Plan to have grandparents (or other relatives who want to help with college expenses) contribute that money once your child’s financial aid eligibility has been determined.

Seek Advice from a Family Law Attorney in New Jersey

If you have questions about college expenses after divorce, a New Jersey child support attorney can help. Contact Brian McFadden-DiNicola at bmcfaddendinicola@hoaglandlongo.com or call 732-545-4717 today.