The vast majority of parents want their children to attend college. Not uncommonly, a parent will reinforce their objective by verbally offering up great personal sacrifices just to be sure that their children have every opportunity to go to the best college money or talent can buy. The “I would scrub floors to pay for Harvard” line, is proof that at least one parent would do anything, relinquish anything, to pay for junior’s education, yet this sacrificial statement evokes more drama than substance; in effect, it is really a call to the other parent to join together in pledging support for a child’s college degree. Thus the question to be answered by all parents—separated or divorced parents, married or unmarried—is: How will the child’s college education be funded? In short, who will pay and how much?
In the Commonwealth of Massachusetts we are hearing more and more lawyers and even some judges propose a one-third, one-third, and one-third split of costs. In this paradigm, each parent is responsible for one-third of the child’s education and the remaining one-third is the child’s liability.
The formula, undefined, brings up more questions than it answers. Let us consider a few:
- Does the “One-Third” Formula apply to funding only public school education? Or does the formula apply equally to the cost of a private school education? In short, should the same formula be used for any college, at any cost?
- If we assume the formula is generic to any school, then the following example would be worth considering: With tuition costs of $60,000/year, at the end of a four-year bachelor’s degree, the child (alone) will be responsible for payment of $80,000 of college loans. But what if the child pursues a degree in the arts or in teaching or in any field that does not produce high entry-level salaries? Is starting life with this kind of debt realistic? Is it even doable?
- And, too, what about each parent’s ability to pay $80,000 in after-tax dollars? Does each parent have to have an equivalent earning capacity or have similar sources of financing after support is paid by one and received by the other? Does each parent have to have an equivalent ability to repay debt after support payments terminate?
- Would the division of assets have to change to accommodate the use of the “One-Third” Formula? Does each parent’s future prospects for income and assets have to be equivalent? Is there any consideration of present and future differences in ability to save now and pay later, or is the playing field simply leveled with each and every parent having the same financial responsibility for junior’s or many juniors’ education?
What we learn upon closer consideration is that a simplistic division of liability inherent in the “One-Third” for all Formula negates differences in each individual’s—parents and child’s—ability to finance the debt. It also overlooks differences in the long-term earning power of the child’s specific education. Not all college degrees will produce the same monetary return. This is certainly not an argument for all degree candidates to base their selection of career choice on financial return. However, it is a serious question that parents might want to consider when assessing each party’s ability to repay a debt obligation that may be unmanageable or become so in the future.
Families with younger children have more choices. In this case, parents have more years to accumulate funds for their children’s college education. Hopefully they have the luxury of being able to designate gifts, set aside savings, and add children’s earnings to the pool of funding for future schooling. Herein the key: time and clever planning may well change an untenable commitment into a workable plan.
In mediation couples are typically faced with reaching agreement on funding their children’s education. Even families with very young children should at the least agree on a realistic date to begin saving for each child’s postsecondary schooling:
Consider some options:
- Establish a savings pledge to be initiated after each child enters school; timing should ideally be after parents are “free” from the high expense of daycare and preschool education.
- An agreement to limit parents’ legal liability funding a public school college education, thereby giving each parent the option to contribute more to a higher cost institution if they (or their child) choose, without the pressure of being legally bound to do so.
- Set aside joint assets for funding all or part of the anticipated college educational costs.
- Devise a formula that will take into account each parent’s ability to pay, without it being a blanket commitment to make equal contributions regardless of each one’s resources and liabilities.
There are obviously more questions to be asked than answers given. In each family the circumstances vary. Not surprisingly the differences speak of the need to individualize the solution and devise appropriate strategies. A simplistic formula may well work for one family and be detrimental to others. Mediation offers the opportunity to explore the differences inherent in each family’s objectives and ability to actualize their goals.