Massachusetts divorce lawyer Nicole K. Levy reviews the complexities of addressing college expenses in divorce and child support agreements.
Attorney Nicole K. Levy
In my previous blog on college expenses in family law cases, I reviewed the complicated relationship between child support and college expenses in Massachusetts, with a focus on the lack of clarity surrounding how child support is impacted by one or both parents’ payment of college expenses. As detailed in that blog, the child support picture is often unclear in cases involving college expenses. However, ambiguity can also arise out of the need to define and determine what constitutes a “college expense”, what payments should be made by a parent to a child’s college or university, and which parent is obligated to make these payments.
If parents are divorced, there is likely a provision in their separation agreement that outlines their respective obligations. However, more often than not, this language is vague and does not outline clear obligations of the parties, or perhaps even the child’s financial responsibility for college. Common sense tells us that it is important for each provision of a separation agreement be clear, and each term defined, when drafting or interpreting an agreement. Any ambiguity can lead to different interpretations, which means the parties may ultimately be back in court on a contempt or a modification.
Why are College Expenses so Poorly Defined in Massachusetts Child Support Agreements?
Given the need for clarity in final agreements, the lack of clarity surrounding college expenses in Massachusetts child support agreements seems puzzling at first glance. However, this ambiguity is a function of Massachusetts law. In Passemato v. Passemato (1998), the Supreme Judicial Court held:
[A]s a general rule, support orders regarding the future payment of post-high school educational costs are premature and should not be made …
This point was recently amplified by the Appeals Court in its unpublished decision in Kurtin v. Kurtin (2016), in which the Court remarked that orders obligating a party to contribute to a child’s college expenses should not be made “until the child is already attending, or is about to attend, college”. The picture is further obscured by the Massachusetts Child Support Guidelines (2013), which provide that “contribution to college costs is not presumptive” for parents. In summary, Massachusetts judges can (and often do) order parents to contribute to their children’s college costs, but such payments are not mandatory under the law, and should not be ordered by a court “until the child is already attending, or is about to attend, college.”
Needless to say, saving for college requires a great deal of planning, and selecting an appropriate college or university is greatly impacted by the availability of funds for the child. The failure of Massachusetts appellate courts and lawmakers to address such basic, practical issues facing so many families is troubling. Nevertheless, parties and attorneys must make the best of the existing legal framework, warts and all.
Defining College Expenses in Massachusetts Child Support Agreements
Generally speaking, college and/or trade schools have costs associated with the beyond the core “tuition and fees”. There are costs for dorm rooms, meal plans, books, application fees, lab fees and a long list of other expenses that are directly payable to the school. On top of costs paid directly to schools, here are travel expenses, parking costs, supplies, rent and utilities for off-campus housing, and computer and technology costs that students must pay out of pocket to attend their school of choice. Finally, there are ancillary “personal expenses” such as car insurance, cell phone bills and spending money that most students encounter in some form or fashion.
What constitutes a “college expense” that one or both parents should pay on behalf of their children is a subject that depends on the eye of the beholder. One person may think all of the costs above are “college expenses” that a child’s parents should pay in full. Another may believe that a child who chooses to live in a dorm – instead of commuting to school from a parent’s home – should be responsible for his or her room or board costs. Still others feel that only core “tuition and fees” should be covered. Finally, many parents will only contribute to a portion of a child’s tuition, leaving the remaining expenses to student loans.
Saving for college is especially for divorce and separated families.
Whatever your feelings on college, the point is that there are multiple interpretations of what constitutes a college expense. While paying a percentage of tuition may be affordable, paying a percentage of each itemized portion that appears on a tuition bill may require borrowing. One takeaway is this: even if Massachusetts law actively discourages judges from assigning college payment responsibilities to one or both parents, years in advance of college, there is nothing stopping parties from identifying what constitutes a “college expense” in a child support agreement.
Think of it this way: defining “college expenses” in a child support agreement is one less thing for parties to disagree about in the future, when the time finally comes to determine how much each parent should pay for college.
Consent Provisions: Conditioning College Payments on Each Parents’ Participation in College Selection
A defining feature of most cases involving the payment of college expenses is that the children involved are typically adults, in the sense that most high school graduates are 18 or older. Granted, Massachusetts law provides that adult children may not be emancipated for child support purposes until they turn 23, but the fact remains, an 18-year old is an adult. There is nothing forcing an adult child to include his or her parents in the college selection process at all.
In my previous blog, I touched upon the idea of a parent’s right to “consent” in a child’s choice of higher education in Mandel v. Mandel (2009), where the Appeals Court noted that parent who takes no interest in the college selection process waives the right to later complain about not being involved in the college selection process. Mandel reflected the Appeals Court’s view in an earlier case, Hamilton v. Pappalardo (1997), in which the Court noted that one factor that courts should consider when determining a parent’s obligation to contribute college is “ the extent to which [a party] unjustifiably may have been excluded from the [college] decision-making process.” Implicit in these cases is the notion that a parent should generally have some input in the college selection process if a court is going to order that parent to pay.
This issue recently arose in the Appeals Court’s unpublished opinion in Saly v. Saly (2016). In Saly, the child attended one college, then transferred to another school after a brief leave of absence. Her father argued that he had not explicitly consented to the second school, and since the parties’ agreement required that the choice of college be made jointly, he was not obligated to contribute to the expense.
The probate and family court judge in Saly disagreed with the father’s view, noting that the father was aware of his daughter’s intentions to transfer, was informed by the mother about the transfer, and had communicated to both the mother and this child about the cost and registration. The judge noted that there was simply no evidence of his objection to the transfer. The father’s core argument – that he had not agreed to the transfer because he never specifically said, “I agree” – was deemed unpersuasive. The judge found that if father objected to the transfer, he needed to say it at the time.
Like most issues surrounding college expenses in Massachusetts, the issue of parental “consent” is poorly defined. Hamilton and Mandel talk about whether a parent was “unjustifiably excluded” from the college selection process, but do not require a parent to “consent” to a college choice. In Saly, however, something much closer to consent was required because the parties’ agreement stated that the “choice of college or university shall be made jointly [by the husband and the wife], with due regard to the child’s wishes, welfare, needs and aptitudes.”
Saly reflects how parties can shape future disagreements over college costs by entering agreements that specifically define how college decisions should be made, even if the exact amount that each party will contribute to college is left undefined. In Saly, the parties’ agreement required the college decision to be “made jointly” by the parties. As a result, the father very nearly avoided having to contribute to the child’s new school on the grounds he had not explicitly agreed to the transfer. Had the agreement included more open ended language about college selection, the father would have been limited to the common law rule, which holds that one parent’s unjustifiable exclusion from the selection process is one of several factors affecting the apportionment of college expenses.
Another take away from these cases is how important it is for parents to understand when discussions of college and higher education begin to manifest. Some children begin making college plans the moment they enter high school. Others will wait until their senior year to seriously consider one college versus another. An agreement can formally define when the selection process will begin (i.e. “the parties agree to discuss the selection and payment for college prior to the conclusion of the child’s junior year in high school”). If the timing is undefined, each parent must be mindful of including the other parent in college discussions to avoid a future argument over whether the other parent was unjustifiably excluded from the discussion.
Clearly, the ultimate cost of college is largely driven by the choice of school. Whatever percentage a parent ends up being required to pay, it is crucial for parents to take an active interest in which college their child attends early in the process. Sitting back and refusing to participate will not absolve a parent from the obligation of contributing to college costs. Indeed, if a child is considering a school that is drastically out of a party’s price range, this should be clearly addressed and communicated to the other parent, in writing, well in advance of the final selection.
Paying for College: the Various Ways that Massachusetts Parents Divide College Costs
After specifying what constitutes a college expense, defining when the college selection process will begin, and determining what level of parental agreement will be required, parties are left with the million-dollar question: how much will each parent pay? As noted above, Massachusetts law disfavors judgment orders that fix a parent’s obligation to pay for college years in advance of a child’s attendance. For parents of teenagers, however, the apportionment of college is a pressing issue.
(Before proceeding further, it is important to note that college payment provisions are often ambiguous by design. In family law, it is not always possible to draft a perfect agreement. Instead, agreements are the product of compromise. There are a variety of reasons why one or both parties would want to avoid a clear order delineating who must pay what for college. Indeed, there are sometimes strategic goals that call for attorneys to make certain provision of an agreement intentionally ambiguous.)
Whether parents are getting divorced during their children’s teenage years, or one or both parties has/have filed a complaint for modification to update a decade-old agreement, vague language needs to be molded into something concrete as the reality of college expenses creep closer.
There are multiple ways to divide up college expenses, however, the underlying issues will always be the (1.) the bottom line cost of attendance, (2.) parties’ income, assets and ability to contribute to college without borrowing, (3.) each party’s ability to contribute or qualify for a loan, and (4.) how much debt the child will be burdened with for his or her share of the cost.
Clearly, one simple way to divide college expenses is to simply say both parties will “share in the payment” of all “college expenses”. However, even this is ambiguous. Does this mean share equally? Does this include contributions from the child? What if one party earns substantially more than the other? What if one party is paying child support?
As discussed in my earlier college expense blog, some parties will “cap” the total contributions based on the cost of room, board and tuition at UMass Amherst. Still other parents will take this further, entering an agreement that provides that each parent and the child will each be responsible for a third of the college expenses, subject to a cap based on the cost of UMass Amherst. Such formulas can work well – as long as the child attends a state university. If the child attends private college, however, parents often find out that it is simply impossible for children to obtain sufficient student loans to cover the difference in cost.
An even simpler “cap” involves selecting a total dollar amount the parents will be required to contribute. For example, parties might agree that their combined contribution will not exceed $50,000 in a given year. Parties can also cap each parents’ contribution based on their respective incomes. Thus, a parent who earns twice as much as the other parent may be responsible for 2/3 of the college costs, with the lesser-earning parent responsible for 1/3 of the costs, up to a total cap of $50,000. The child would then be responsible for borrowing amounts exceeding $50,000.
Still other parents might obligate the child to contribute to specific costs. For example, some parents may require a child who ops to live on campus (rather than commuting from home) to pay for his or her own room and board using employment income or loans.
The combinations are nearly limitless.
The key component in drafting an agreement, or interpreting an already existing agreement, is to weigh the options that are available, and play out each scenario in a manner that allows for predictability for the parties and the child. Absent a change in circumstance, recalculating contributions each and every year of a child’s higher education is time consuming, costly, and generally unproductive. Parents with children about to attend college must pick a formula and go with it, or a judge will do it for them.
College Savings Funds: a Useful Planning Tool
If a client has young children, I often encourage him or her to start a college fund. Any amount can be helpful, even if the child isn’t particularly young, and I am always surprised by the number of parents I encounter who have a child who is now in high school, an agreement that is silent on college expenses, and no plan for paying for college. As noted above, Massachusetts disfavors orders that commit parents to paying a fixed amount towards college years in advance. One way to mitigate this issue is through the use of college funds, such as 529 accounts.
Language that requires parents to contribute to one or more college funds can be an attractive middle ground for parties who can’t agree on the final apportionment of college, but still want to take some steps to prepare for college. The beauty of college funds is that any amount helps. Even $250 a year from each parent gives a child something to start with once college arrives, and because 529 accounts are often invested in mutual funds, even modest contributions can show significant growth as years of compound interest pile up.
There are many ways to craft language regarding the use of college funds for children. Each party’s contribution to the fund can be applied directly to the saving party’s portion; indeed, I have even seen agreements in which a party who contributes early will be credited for 125% of the value of his or her contributions when college finally arrives. In short, lawyers and parties should think outside of the box when preparing creative ways to incentivize any college savings that a party is willing to make in advance of college.
It is important to define exactly how college contributions will be credited, particularly if the agreement itself does not specifically dictate what each party will be required to pay in the final equation. Attorneys should use detailed language that explains exactly how college fund monies will be credited towards each party’s college contribution, taking into account the various ways that college costs might be divided in the future. Drafting this piece of an agreement must be done carefully and precisely so as to avoid potential conflicts in the future.
College Savings Funds from Before the Divorce: a Potential Complication
College savings funds are a great way for divorced or separated parents to start saving for college, but the picture gets murkier when it comes to college funds that accrued prior to the divorce. A typical disagreement in such cases might arise out of college fund contributions made by a child’s grandparents. Should the mother receive a “credit” for contributions made over the years by maternal grandparents, while the father is credited for paternal contributions? Similarly, control over funds can also be an issue when only one party has access to the account over the course of the marriage.
A recent example of such a conflict is demonstrated in the Appeals Court’s unpublished decision in Lattell v. Lattell (2016). After a long term marriage, the parties were divorced following a trial in 2010. (Because the matter went to trial, they had no separation agreement.) At the time of the divorce, certain college savings accounts had already been designated for the children’s college education. The divorce judgment provided, “these funds shall be the first funds applied to the children’s college costs and expenses after any scholarships or financial aid.” Moreover, the divorce judgment obligated the parties to establish a second college expense accounts for each child totaling $160,000, which were to be used once the existing account was exhausted. However, the parties’ respective responsibilities once the first account and the second account were depleted was not determined.
Both parties contributed their $80,000 share to the newer accounts, but this proved insufficient to cover the full cost of the children’s colleges. Father maintained that once the second account was exhausted, he was absolved of any further responsibility to pay for college. He interpreted the agreement to read that the only requirement was to fund the second account, and not to continue contributing once that account was used up. Mother, on the other hand, noted that the judgment had not capped their obligations, and the remaining costs needed to be shared. The Appeals Court agreed with the mother, noting that the key sentence in the judgment read:
“Those funds [that is, the funds in the newly created accounts] will be invested prudently, and shall be used exclusively for the costs of the children’s college educational expenses, which shall be shared by the parties equally after exhaustion of the UGMA funds already established by the Wife.”
Although the language is somewhat confusing, the Appeals Court determined that the judgment created two separate obligations: (1.) each party should contribute $80,000 to new college funds and (2.) the parties share equally in college expenses after the first college funds were exhausted. In other words, the father’s $80,000 contribution to the new college funds did not excuse the father from his overarching obligation to share equally in college expenses not covered by college funds. Indeed, the Court simply viewed the newer college funds as saving mechanism that each party would use in furtherance of their general obligation to share equally in all college costs not covered by the existing college funds.
Contrary to the father’s position, having the parties fund the second accounts to secure payment for college expenses did not mean that the trial judge excused the parents from making any further contributions to college. (It should be noted that the judge in the original divorce deviated from the usual rule against ordering college payments years for very young children. Probate and family court judges are most likely to deviate from this rule when faced with parents who (a.) have the means to save for college, but (b.) appear to lack the responsibility or willingness to do the saving.)
A carefully drafted agreement will consider as many situations as possible; it will consider what the expenses are, who should pay, how they should pay, and what, if any funds should be established. If an agreement is already in place, but contains ambiguous or generic language, it is similarly important to begin deciphering the real life obligations of the parties. It is not advisable to wait until the summer before college to review and determine your responsibility.
The Ever Increasing Cost of College: How Skyrocketing College Costs Complicate Family Law Cases
It is no secret that college costs have been exploding in the United States for many years. With the rise in costs has come an explosion in student loans that has not only encompassed children, but many parents forced to execute “Parent Plus” or private loans. Many parents do not understand just how limited federal loans are. For dependent children (i.e. children whose parents receive dependency exemptions), federal student loans max out at $31,000 over four years, with dependent first year undergraduate students able to borrow a maximum of $5,500 for the year.
Now consider this: the cost of one year of full-time, on-campus attendance for a student at UMass Amherst is $28,784 per year. Do the math: a student’s $5,500 federal loan won’t even cover a quarter of his or her first year at UMass Amherst. Parents who require children to contribute 1/3 of the cost of room, board and tuition at UMass should know that federal loans will not cover 1/3 of the cost of UMass.
What the student’s options? Well, they can apply for private student loans, particularly if they only need a small amount of additional funds to cover their costs. However, most 18-year olds lack the credit history to obtain a large private loan without a parent co-signor. The other option is for parents to borrow using federal Parent Plus Loan, which put parents on the hook for any student loans payments their children fail to pay.
The reality is that many middle class Americans can no longer send their children to top-flight state universities, much less private schools. The problems is that too few Americans – including parents, family law attorneys, and even probate and family court judges – understand this reality. Parents in the heat of a divorce often focus on what they may must pay towards college versus the other parent. What they fail to recognize is whether college can be afforded at all.
Here is an example: let’s say that a 55-year old stay-at-home mother who has been out of the workforce for 15 years is about to get divorced. Under the divorce agreement, she will receive 50% of her husband’s 401K and equity from the marital home that have a combined value of $375,000. Perhaps she will receive some alimony, but her judge thinks she can get a job, and she settles for alimony equal to 20% of her husband’s $120K/year salary (i.e. $24K per year in alimony). On the surface, this woman is doing better than many Americans, since at least she has some savings.
Now consider what happens to our hypothetical woman if she agrees to borrow 1/3 of the cost of UMass Amherst ($9,000 per year) via Parent Plus loans for each of her three children, who all attend college. This leaves her with $108,000 in student loans, which she alone is obligated to pay. The interest rate is 6%. Here is this woman’s reality: she will pay nearly $1000 per month in interest for the rest of her life. This is more than half of her alimony order, and will likely be more than half of her Social Security benefits. These loans will be financially devastating to our woman, who will likely be flat broke in less than 20 years.
The media talks a lot about how young Americans are crippled by student loan debt, but at least they are young. At least they have a chance to become employable, increase their earnings and pay off the debt. The point is this: parents who are over 50 must be extremely careful about taking on student loans, since they have far fewer working years to pay off the loan versus their children. There was a day when most hard-working American parents could send their child to a decent college, but that day has passed. Parents must think very carefully before committing to student loans late in life, where the effects of such loans will linger for many years after their children have become emancipated.
About the Author: Nicole K. Levy is a Massachusetts divorce lawyer and Massachusetts family law attorney for Stevenson, Lynch & Owens, located in Hingham, Massachusetts.
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