When a child of divorced parents decides to attend a college and applies for a financial aid, the parents need to make several quite significant decisions.
It is important to understand that college officials who make decisions regarding granting the financial aid, have no way of knowing who the custodial parent is. Many divorced families that have joint custody arrangements, choose to have the child apply for their financial aid using the parent with the lower income as their custodial parent. However, if that parent is remarried, the schools may consider the new stepparents’ incomes and/or assets in their decision making process. This is done because the step parents are now a part of a student’s household – the same way the colleges would consider both parents’ incomes should they have stayed married.
The schools are taking into a consideration all resources available to that parent who is deemed to be custodial on an application for a financial aid.
College financial aid offices always ask to see the financial statements from the custodial parent. They have their own forms for you to complete; they also will require a copy of your most recent IRS tax return.
If a custodial parent has remarried, the financial aid officers will require the information regarding a new spouse financials as well. Should you refuse to comply, your child’s financial aid application may not be processed. For students who are already in college receiving financial aid, be aware that their aid awards will be reevaluated on an annual basis.
I know of many children who lost their financial aid when the custodial parent remarried and the stepparent’s income increased the overall annual earnings of your family. Submitting your tax return with the status “Married — Filing Separately” does not resolve this problem. Thus, all of these factors need to be taken into consideration prior to submitting the financial aid request for your child.