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How to Handle College Expenses in Texas Divorce

College Expenses

Let’s nail down a general definition. Typical college expenses may include tuition, room and board, dues/fees, transportation/travel, books, medical/dental fees, general living expenses, monthly allowance, and extracurricular activities.

The Current Law

The standard by which Texas family courts make decisions regarding the children of divorcing parents is always and always will be the “best interest of the child.” In other words, the court strives to create an order that best serves the child’s physical, mental, and emotional needs.  Straightforward, right?  Not exactly.

How does that phrase apply as the child grows and needs change?  Most notably, how does that affect the parental obligation to pay for college? As currently stated in the Texas Family Code, parents are only required to make child support payments until their children reach their 18th birthday or graduate from high school.  Therefore, a parent cannot be legally forced to pay college expenses for a child over the age of 18.

The Issue

Considering future earning potential for individuals in possession of a college degree, one would be hard-pressed to deny a college degree is “in the best interest of the child.”  The rub is, the couple’s offspring is over 18 and the word “child” no longer applies to them per the Texas Family Code (except in some narrow circumstances).

Since 2008 and even before, more kids live with their parents well beyond 18 (or later return)—and many stay on the parental payroll for much of their 20’s (particularly if a graduate school enters the picture).  So what do divorcing spouses do with the court’s lack of authority to deal with this and the stark reality that each year the costs associated with college skyrocket?

Be Proactive.  Write It Down.

Texas parents with the ability to pay are often including a “college support agreement” in their divorce decree.  This is a fantastic solution if parents can agree upon it, and many do.

*Please, do yourself and your children a favor—do not trust a verbal agreement, no matter how sincere, how many promises made, or how amicable the divorce.   Get the details down on paper.  As part of the final decree.  Do not leave anything to “decide later.”

More often than you might think, “of course I’ll pay my share for college!” might later become “that was before I had a new family!” or fill in the blank.  When crafting a college support agreement, remember that the cost of attaining a college degree is highly variable.  The difference between a community college, a state institution, or a private out of state college tuition are enormous.  Consider the data below from savingforcollege.com, and remember the usual 5% increase per year when creating your individual plan.

“Based on average tuition and fees for 2014-2015 as reported by The College Board® and assumed to increase 5% annually. The figures above do not include other costs your child will incur as a college student, such as room and board, books, supplies, equipment, and transportation. These additional expenses can increase your child’s cost of attending college by a substantial amount.  *According to The College Board®, the average 2014-2015 tuition increase was 3.7 percent at private colleges, and 2.9 percent at public universities. However, looking back at the last decade, the 10-year historical rate of increase is approximately 5 percent. These figures are substantially higher than the general inflation rate and also higher than the average increase in personal incomes.” 

A Proper College Support Agreement

While Texas has no law authorizing courts to include college expenses, Texas will, as will all states, enforce proper college support agreements along with the final decree.  This part is simple: the parties agree upon the division of and/or amount of payment for future college costs of their children. Because future college expenses are difficult to know—over the last 15 years, the inflation in college tuition and room and board have been astronomical—I highly recommend that a financial planner be part of the team when deciding to put funds in escrow, opting for an upfront lump-sum payment, or what exactly your college support agreement will entail.

Recommended inclusion in a college support agreement is at least–but certainly not limited to—the following basic terms: a definition of what the parties consider qualifies as a “college;” a definition of covered expenses; the term of coverage (for example, 4 years, or when the child reaches a certain age); to whom payments will be made ( directly to the child, to the school, or to the custodial parent); any conditions for the continuation of the agreement (does the child need to maintain a certain number of courses or a particular GPA? Is the child required to contribute to expenses by working in summer?) The more detailed the document, the better.

What Is Fair?

If one parent makes considerably more than the other, retains a bulk of savings or investments, and has compelling future prospects, that comes to play in deciding the amounts that parent should pay, which might certainly be more than half. (* Again, this is why including an experienced financial planner in the equation pays off in the long run.)

Additionally, the standard of living the child would have maintained had the divorce not dissolved is probably applicable, as well as the child’s ability to contribute to the cost of college with financial aid and scholarships.  The child’s academic performance is also a factor in that their general performance provides information to parents on the likelihood that the child would go to college, and also where the child might attend.

Some couples take the college fund out of current assets and agree that if there is any leftover after college, it will be split between them.  This is ideal, as the money is there for sure, and you don’t have to worry about it.  If there is not enough cash to set aside at the time of divorce, or one party refuses to do so, then the parties can agree on how the college expenses will be paid when the time is here (50-50, 60-50, 70-30, etc.).  Another option is for each parent to agree to contribute a certain amount each month, quarter or year to a fund to be used for college.

The seeming minutiae of divorce—like figuring out college expenses that might seem far off if your children are young and you’re focused on more immediate issues now—is always better considered in the original decree, not only for peace of mind but to ensure you do not have to revisit these issues later as they arise.  Because of this, you can be certain: they do!