Divorce forces parents to plan for the future. While all parents inevitably have thoughts or concerns about their child’s future, divorcing parents are thrust into addressing their plans, hopes, and fears much sooner than most.
Suddenly you are trying to forecast what week-by-week schedule will work best for your child for the foreseeable future. You are trying to calculate how your Christmas should go every year from now into perpetuity. You discuss how future extracurricular activities will be paid for. You negotiate how to handle a potential future relocation of a parent; deciding whether to take an out-of-state job offer isn’t nearly as complicated for married parents as it is for divorced parents.
While no one can predict the future, divorcing parents certainly understand the importance of planning for it. Along those lines – what should you do about college expenses? Even if your child is still in diapers it is not too soon for a divorced parent to start talking college expenses.
Child Support and College Expenses
Before we discuss different ways to plan for college expenses, it is important to understand that the North Carolina Child Support Guidelines do not contemplate college expenses. North Carolina law plainly states that any child support obligation will terminate once the child either turns eighteen or graduates from high school, whichever comes later (but not past age twenty). That’s it. Even though the overwhelming majority of children attend college these days, North Carolina law does not allow for the child support obligation to continue beyond high school.
What this means is that you will never find yourself in a North Carolina courtroom obtaining a child support order that requires a parent to pay child support for the child’s college years. The judge simply does not have the power to order a parent to continue to support a child through college.
But, just because the child support guidelines do not address college expenses, that does not mean that it is off the table, necessarily.
Expenses by Agreement
The way to address college tuition and expenses (and even saving for college) is by agreement. Parents can always agree to take on more than the law otherwise requires. You can incorporate a clause into a separation agreement that addressees specifically the terms you have agreed to with regard to how college expenses will be paid and by whom.
Although in many cases negotiating how college will be paid for can be quite difficult. The two most common items that divorcing parents fight about are not surprisingly as follows: children and money. The concept of college expenses for a child encompasses both of these items and as such can be a difficult thing to reach agreement on.
College expenses can be (and usually are) a significant financial burden. Further, divorced parents may fundamentally have very different ideas about college. One parent may think the child should bear the burden of paying for college while the other thinks that the parents should pay for college. Parents may disagree over in-state verses out-of-state colleges, whether the child is permitted to attend a private school, or even argue over whose alma mater the child should attend. Because college truly is a big-ticket item, if you ultimately decide to include college expenses in your separation agreement you’ll want to make sure you address all possible scenarios during your negotiations, including how you plan to save for college.
Keep in mind that it may not be in your best interest to incorporate terms about your child’s college tuition and expenses into an agreement. Later on we discuss the pros and cons of this concept.
Saving for College
You can include terms in your separation agreement that obligate each parent to contribute a certain dollar amount or percentage of income towards saving for the child’s education. If you chose to do this, be sure to include specific terms in your agreement. Simply stating that a parent will “save diligently for the child’s college education” or that the parent will “contribute to a college savings plan” can be problematic and unenforceable.
The more specific the terms are, the better. For instance, “Each parent will contribute 5% of their annual income to John’s NC 529 plan currently located at Bank X.”
Be clear about what type of fund the savings will be invested in – and when it comes to saving for college a low risk option like a 529 plan trumps a riskier investment. Be sure to include language about who will be the custodian on the account, who may access the funds, and what happens in the event of an impermissible withdrawal. The more detail the better.
Who pays for college?
When talking about potential terms to negotiate, this one seems like a no brainer, but there are several ways to tackle this.
Sometime parents will just agree to split college tuition in half with each parent bearing fifty percent of burden. But, if there is significant income disparity between the parents this isn’t a viable option. Nor is it an option if neither parent earns enough to pay out of pocket for such a big-ticket item. In some cases it makes sense to negotiate a pro-rata payment schedule; for instance one parent may pay thirty percent of the tuition and expenses while the other parent pays seventy percent. If you have more than one child, another option may be to assign one child’s college education to one parent and the other parent will bear the cost of the other child’s college education.
How much do you pay?
Before you obligate yourself to pay college tuition and expenses you will want to make sure you give consideration to the wide range of college tuition fees. Tuition and expenses at Columbia University in New York City will differ greatly from tuition at one of North Carolina’s state universities. Similarly, tuition at an out-of-state public university will be much higher than that of an in-state public university. Make sure your agreement includes certain parameters about the cost of tuition.
What are college expenses?
Tuition is just the tip of the iceberg when it comes to paying for college. After you’ve sent the tuition check, you are hit with a myriad of other expenses: room and board, meal plans, books, and spending money. Just as we discussed with the aforementioned terms, the more detail the better. Avoid using language like “reasonable expenses” unless you define what that means. I’ve seen lawyers argue that a new car was a reasonable college-related expense that a parent should be obligated to pay for. What about study abroad? Spring break trips? You see where I’m going.
The bottom line is, when negotiating any terms related to college tuition and expenses, be clear and include as much detail as possible in your agreement. That doesn’t mean you can’t later decide to go above and beyond what you agreed to, but you want there to be parameters to what you are contractually obligated to.
Should I do this?
This is a difficult question. And there is no correct answer. There are pros and cons to whether you should include payment of your child’s college tuition and expenses as part of your separation agreement. Some of the pros include:
- You know and agree on college expectations
- You know what you’ve obligated yourself to and can save accordingly
- Agreement on college expenses resulted in your spouse agreeing to other terms he or she wouldn’t have agreed to otherwise
- There is no gray area or confusion when the first tuition bill arrives
There also cons. The biggest being that you can’t predict the future. You may be in a great financial situation when you execute the agreement, but fast-forward ten years and your financial situation is completely different. Maybe you have more children, maybe you’ve had significant decrease in annual income. Maybe you’ve been diagnosed with a serious illness. I met a man that lost his daughter’s entire college savings plan thanks to the Enron scandal. There simply is no way for you to know what your financial situation is going to be next year, let alone a decade from now.
Along those same lines, you can’t predict your ex-spouse’s financial situation either. Perhaps you were the breadwinner during the marriage but ten years later, when the child is college bound, the other parent is in a much more comfortable financial situation. Do you really want to be the only one obligated to pay the expenses when your former spouse is perfectly capable of sharing in that burden?
You also can’t predict the relationship you will have with your child. What if something happens and your child ceases all communication with you, but there’s still that agreement in place that says you will pay college tuition?
Further, you can always pay those college expenses even if you aren’t obligated to do so by agreement. Simply because you refuse to include terms about paying for college in your agreement doesn’t mean you can’t simply do so when the time comes.
The takeaway here is that while the North Carolina Child Support Guidelines do not obligate a parent to pay for college tuition, expenses, or any support beyond high school, there is a way for a divorcing parent to address this financial burden in advance. Weigh the pros and cons in your situation and if you choose to obligate yourself to pay college expenses, make sure the terms are very clear and that there are parameters in place.