College Financial Planning When You’re Divorced

The Calm Guide to College Funding: How Thoughtful Coparenting Eases Financial Separation

When you’re a parent going through a separation, the sheer volume of things to manage can feel like a heavy blanket draped over your life. Between establishing two households, juggling new schedules, and figuring out the emotional terrain, it’s easy to feel overwhelmed. Then, a new layer of anxiety settles in: college. For parents of teenagers, this looming financial decision can quickly become a new battleground, and your child—who is already processing significant life changes—ends up stuck right in the middle.

The truth is, your feelings are valid. This is hard, complicated, and often financially stressful. But here’s the good news: with a thoughtful, professional approach to coparenting and some strategic planning, you can tackle this challenge effectively. The goal isn’t to create more drama; it’s to build a cooperative path that secures your child’s future while protecting their emotional well-being. Putting the child’s best interest first isn’t just a legal necessity; it’s a strategy for successful financial aid planning. This entire framework is informed by the insights of college funding expert and guest, Brad Baldridge, who works with families to create a clear financial roadmap during this complex transition.

The Child’s Well-being is the FAFSA Bottom Line

When children enter their high school years, the conversation about college starts, and their concern about how it will be paid for begins even earlier than you might think. Financial uncertainty is heavy, and it absolutely affects their relationships with both parents. A child’s child development during the teenage years is already complex, and adding parental conflict about their future can be deeply destabilizing.

This is where compassionate Coparenting comes into play. Even if your relationship is low-contact or strictly business, you still have an opportunity—and a serious obligation—to work together on the financial aid process. Think of it as a shared business project where the return on investment is your child’s hope and future clarity.

For all families, college financial planning has three main components: what the parents do alone (saving, figuring out willingness to pay), what the student does alone (applications, essays), and what everyone does together (test planning, choosing schools). For Coparents, however, there is an extra, critical layer of complexity: deciding who will file the financial aid forms and how the bill will ultimately be split.

Understanding the New FAFSA Rule: A Planning Opportunity

If your child is headed to college soon, you need to be aware of significant changes to the Free Application for Federal Student Aid (FAFSA). In the past, the parent who filed the FAFSA was simply the one the student lived with the most in the previous 12 months (the “custodial parent”).

The new rule changes this entirely. The FAFSA now asks for the financial information of the parent who provided the most financial support to the student in the prior tax year.

This change creates a major planning opportunity—and a moment when Coparental cooperation can yield significant results.

Why? Because the FAFSA uses the filer’s income and assets to calculate the Student Aid Index (SAI), which determines how much aid the student qualifies for. Strategically choosing the parent with the lower Adjusted Gross Income (AGI) to be the filer can significantly increase the student’s eligibility for need-based aid. While aid won’t typically make up for the overall financial hit of a separation (two households cost more than one), it can definitely make college more affordable.

How Asset and Income Rules Play to Your Advantage

A large part of maximizing financial aid is knowing which financial resources the FAFSA counts, and which ones it ignores.

1. The AGI Test and the Pell Grant

The federal Pell Grant is “free money” – it doesn’t have to be paid back. Under the new rules, there is an AGI Test: if a family’s income falls below a certain threshold (around $40,000 to $70,000, depending on family size), they may automatically qualify for the maximum Pell Grant.

In a separation or post-divorce situation, having one income can make it much easier to fall under these AGI limits. If a parent passes this test, the FAFSA doesn’t even look at their assets, no matter how substantial they are.

2. Assets That Don’t Count

This is a vital distinction for Coparents dividing their marital estate:

• Retirement Accounts: 401(k)s, IRAs, and other retirement assets are generally not reported on the FAFSA.
• Primary Residence: The equity in the primary family home is not counted.

3. Assets That Do Count—and How to Manage Them

• Investments and Savings: Money in the bank, mutual funds, stocks, bonds, and business ownership (even small businesses) are counted.
• 529 College Savings Plans: These are counted as a parental asset.

For parents who can communicate and share a mutual goal, a strategic division of assets can be a coparenting high-water mark. For example, if one parent’s income is high enough that they will need to report assets, it may be beneficial for the other parent (the non-filer) to own the 529 plan, effectively shielding that money from the FAFSA calculation. This is only possible when a high degree of mutual trust exists, as the account owner has total control over the funds. If trust is an issue, any agreements about the 529 funds’ intended purpose must be clearly detailed in the final divorce decree.

4. Child Support is No Longer Income

Another major positive change: Child support payments are now considered an asset, not income, for the FAFSA formula. This is excellent news for recipients, as it means the funds they rely on to raise the child will no longer be penalized by reducing their financial aid eligibility.

The Power of Appeals and Early Planning

This entire process relies on one foundational principle of responsible child development and finance: early planning. Because the FAFSA uses the tax data from two years prior (the “prior-prior year”), you need to be thinking about financial aid when your child is a high school sophomore. Financial decisions made today (or two years ago) directly impact a student’s aid eligibility.

But even if you feel like you are behind, there is a mechanism for hope: the financial aid appeal.

If a major change in circumstance has occurred since the tax year used by the FAFSA—such as job loss, or significantly for this audience, a separation or divorce—you can appeal the financial aid package. The college financial aid office is set up to hear these appeals and may override the old data to use more current information, potentially leading to more aid. It is always worth the shot.

Finally, remember that parenting doesn’t neatly end at 18. Details like who can claim the child as a tax dependent (and thus who gets the valuable college tax deductions) and who is responsible for post-majority healthcare need to be intentionally addressed in the Coparenting agreement, not just assumed. The calmer you can be today, the clearer and more secure the future will be for your child.

Don’t let uncertainty derail your child’s academic future. Take the first step toward a collaborative financial plan by consulting with a financial expert who understands the complexities of coparenting and the new FAFSA rules.

Ready to build your collaborative financial plan?