College Savings? Is There a 529 Plan in Your Divorce Agreement?

Saving for your child’s education is a daunting prospect for any parent. For a divorced parent, it may be even more complex as you struggle to balance the marital income across two households. Divorce will also affect your child’s prospect for financial aid, and this adds another layer to the complexity of your child’s choice of school.

As with financial planning for college, the earlier you begin the better. If you can save from the time your child enters kindergarten, your child may have enough money in a savings plan to fund their entire education.

If you divorce, when your children are young, creating a school savings plan at that time and placing the funding mechanism in your divorce settlement, will create the habit of saving for the child and prevent disputes from developing between parents over how such a plan should be set up and who should pay.

Because most students will be adults when they begin college, most child custody and support arrangements will have effectively expired. If you have not set aside the savings necessary by that point, you will have to agree to either pay the costs out-of-pocket or rely on financial aid. Both of those options are uncertain.

The financial aid application form is very complex and you should be certain you understand how certain answers will affect your potential for aid. Emotionally, this entire process can be difficult as you attempt to negotiate with your child’s other parent and with your child as they struggle to pick a school that meets their educational aspirations and that they can afford.

School loans and debts are a troubling situation for many people and a couple can afford a savings plan, they can do themselves and their children a great favor by taking care of this issue during their divorce proceedings. That is something that would truly be in their Childs best interest.