529 college savings plan theme with textbooks and piggy bankDivorce planning for parents with a child in or on route to college includes navigating some potentially difficult issues to ensure the best possible financial aid benefits.

According to a recent article by Andrea Williams on USNews.com, there are three specific areas that can affect the child’s ability to receive adequate financial aid funding.


If you and your spouse opened a joint 529 college savings plan, you must decide who will take ownership of the plan after the divorce.

“If one parent becomes the sole owner, he or she will be the only person who can make decisions regarding the use of account funds, so it is important that parents come to a mutual agreement,” says Williams. Divorce mediation can be a huge help in reaching a consensus on this issue.

College aid specialists often recommend that the plan be owned by the non-custodial parent because this person’s income and assets do not need to be included on the FAFSA form when requesting financial aid. If the custodial parent owns the 529 plan, that asset will have to be reported.

Only one person can “control” the plan, but experts say that the non-owning parent should be designated as an authorized user who can see the assets but cannot move them around. The non-owning parent should also be named the “successor owner” on the death of the owner parent.


The parent who claims the child as a dependent on their annual taxes will receive the available tax reduction as well as any college credits given by the IRS that year. It’s important to take a good look at potential financial implications before making this decision.

For example, a parent who makes too high a salary is not eligible for certain IRS credits so it might make more sense for the lower-earning parent to claim the child and be eligible for financial refunds. Check with the IRS for specific salary thresholds.


The child custody decision can have an effect on how much financial aid a child can receive. Williams states that “it is the custodial parent’s finances that are used to determine financial aid eligibility – unless the noncustodial parent still resides in the same household. Additionally, if the custodial parent remarries, the new spouse’s finances will be considered also.”

Colleges can also ask for additional financial aid forms and these generally do not require the non-custodial parent’s financial information. So if the potential non-custodial parent makes $40,000 per year and the custodial parent makes $250,000, the child has a better chance at financial aid if the lower-earning parent has custody.

These are very tough, complicated decisions that often cannot be made without the help of a separate party such as a family mediator or collaborative law expert.

If you are a divorcing parent with a child in college, contact me to learn how I can help you make the best possible decisions for the child’s college education.


Erin BirtIllinois attorney Erin Birt is a skilled legal professional with over ten years of experience in trial and divorce law serving clients in many DuPage County cities including Wheaton, Glen Ellyn, Naperville, Warrenville and Winfield.

She opened the Law Firm of Erin Birt, P.C. in 2010 to offer her clients alternative divorce resolution services, specialized collaborative divorce options and family law expertise. She and her expert team continually develop creative outcomes such as divorce mediation and family law mediation that work for all parties involved, particularly children.

Ms. Birt holds a J.D. from DePaul College of Law and is a member of the Collaborative Practice Professionals of Illinois, the Collaborative Law Institute of Illinois, the International Academy of Collaborative Professionals and the DuPage County Bar Association. She is a past board member and presenter for the Mediation Council of Illinois.

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