Be Careful Defining College Contribution Obligations in Your Divorce Agreement

Posted by on Jun 28, 2016 in Alimony & Child Support, Blog | Comments Off on Be Careful Defining College Contribution Obligations in Your Divorce Agreement

Be Careful Defining College Contribution Obligations in Your Divorce Agreement

Be Careful Defining College Contribution Obligations in Your Divorce Agreement

Divorced parents in New Jersey more often than not will be faced with a situation where they will be required to contribute in some fashion to their child’s college expenses. When faced with a dispute in this regard, the Family Court turns to the New Jersey Supreme Court case of Newburgh v. Arrigo to determine whether a parent should contribute to a child’s college costs and the extent of the contribution.

In light of this, it is common place for a divorce agreement to contain language recognizing that the divorcing parents shall address these issues in the future when a child is ready to start looking at colleges. Some agreements state that these college support issues will be reviewed, perhaps by a court application. Some agreements state that the parents will contribute in a non-specific percentage or in a manner commensurate with the income levels of the parties. All of this language is general and non-specific. But, what about a divorce agreement that contains specific language as to a specific contribution figure?

In a recently decided Appellate Division case, Avelino-Catabran v. Catabran, the parties were divorced in 2002 and have two children. As it pertains to college expenses, their divorce agreement specifically provided that the children had an obligation to apply for financial aid and that the net college expenses thereafter would be shared equally between the parties. When it came time to address college expenses and child support for the parties’ eldest daughter, one of the parent’s balked at contributing equally to the college expenses. They also sought to minimize the net expenses by taking the position that a parent acquired Direct PLUS loan should be the responsibility of the child.

The Court wrote that "where parties to a divorce have reached an agreement regarding children attending college and how those college expenses should be divided, and no showing has been made that the agreement should be vacated or modified, the Family Part need not apply all twelve factors pertinent to college expenses as identified in Newburgh; rather, the court should enforce the agreement as written." In short, rather than examining the current financial state of the parties, instead the parties divorce agreement said that college expenses should be shared equally so it was ultimately determined that the college expenses should be shared equally.

This case is also notable for its decision concerning the interplay between a child’s obligation to seek financial aid versus a parent seeking a loan to fund college expenses. Typically, the college contribution section of a divorce agreement contains language requiring a child to seek financial aid to offset expenses. Typically, the parent is left to contribute to the net college expenses (i.e. after financial aid). Often times a parent will obtain their own loan to finance their required contribution. One popular program is a Direct PLUS Loan.

In Avelino, one parent took the position that the Direct PLUS loan taken out by the other parent should be the child’s obligation as part of their financial aid requirement and not subject to division and contribution by the parents. The Court rejected this argument noting that the Direct PLUS loans are not available to the student and are specifically designed for parents.

There are two important points to take away from this decision. First, do not commit to contributing a specific percentage to your child’s future college education unless you fully expect to be in a position to honor that commitment, whether or not you can afford to do so. Second, do not plan on "passing along" your parent PLUS loan to your child as part of their financial aid repayment obligation.

All of the attorneys at Domers & Bonamassa are well versed and have years of experience addressing family law issues, no matter how complicated. Contact us today at (856) 596-2888 for a private consultation. We appear in the following counties: Burlington, Camden, Gloucester, Cumberland, Salem, Mercer, Ocean, Atlantic and Cape May. Our practice areas include: divorce, custody, parenting time, child support, alimony, domestic violence, college expenses, equitable distribution, name changes, step parent adoptions, paternity issues, child abuse and neglect, prenuptial agreements, mediation and arbitration.

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