Practice Pointers When Drafting “Educational Expense” Provisions In Matrimonial Settlement Agreements

By

Charles F. Vuotto, Jr., Esq.

SPECIAL THANKS:  Special thanks is given to Robin Bogan, Esq. for her gracious permission for the authors to review and utilize her Article entitled “Litigating, Negotiating and Drafting College:  Comprehensive Guide for the New Jersey Family Lawyer” by Robin C. Bogan and Erin B. Schneiderman, Esq. 

1.                  Include in your Matrimonial Settlement Agreement (“MSA”) specific provisions requiring discussion and joint decision making among the parties and the child intending to pursue post-high school education with regard to all issues, including, but not limited to, SAT, SAT II, ACT, AP preparatory classes, school visits and costs associated therewith; selection of school and related costs; course of study; supplies and other needs such as computer hardware and software; interruption of schooling for various purposes (including, but not limited to, trips abroad), change in course of study, and other related issues.

2.                  Be careful not to insert limitations on a parent’s obligation that may be viewed as contrary to the child’s best interest and therefore a violation of the State’s public policy.  See Finger v. Zenn, 335 N.J. Super 438, certif. denied, 167 N.J. 633 (2000).

3.                  Include express provisions in your MSA to terminate all child support and related child obligations (including but not limited to educational expenses) upon the death of that party.  See Raynor v. Raynor, 319 N.J. Super 591 (App. Div. 1999); Kiken v. Kiken, 149 N.J. 441 (1997).

4.                  Provide for a reasonable adjustment in an obligor’s direct child support payments upon children entering college, taking into account whether or not the child will live at home or at college and the parties’ respective share of college educational expenses.  Child support and the obligation to contribute to college expenses are two discrete, yet related, obligations imposed upon parents.  See Hudson v. Hudson, 315 N.J. Super. 577 (App. Div. 1998).

5.                  If it is your intention that a pre-determined allocation of college educational expenses between the parties be non-modifiable, expressly state such within the MSA.  See Finckin v. Finckin, 240 N.J. Super. 204 (Ch. Div. 1990).

6.                  Be careful how you refer to the utilization of funds belonging to the children (i.e., Uniform Gift to Minors Act (“UGMA”), trusts or other custodial accounts held for the benefit of the children.  See Katz v. Katz, 310 N.J. Super 25 (App. Div. 1998); Coffey v. Coffey, 286 N.J. Super. 42 (App. Div. 1995).

7.                  Remember to address the parties’ respective obligations, if any, to contribute to the cost of graduate school and for the continuation of child support while the child attends graduate school.  See Ross v. Ross, 167 N.J. Super. 441 (Ch. Div. 1979).

8.                  Provide for an express requirement of the child and custodial parent to provide, on a reasonable periodic basis, the following information of the child attending college:

(a)                College grades and related transcripts;

(b)               Records of the child’s earnings from any employment;

(c)                Records regarding any money held by or on behalf of the child, including, but not limited to, 529 plans, custodial accounts, UGMA accounts, trust funds, etc.;

(d)               Records concerning the child’s personal expenses;

(e)                Records regarding educational expenses, including, but not limited to, tuition, room and board, activity fees, computer hardware and software expenses, admission and matriculation fees, and other costs associated with attending higher education;

(f)                 Records concerning the number of credits taken by the child in each semester;

(g)                Any other information or records regarding the child’s attendance at college; and

(h)                Applications for financial aid and applications to colleges.

9.                  Under appropriate circumstances and where the parties’ finances permit, consider inserting a provision for each party to contribute a reasonable amount to a 529 Plan or similar college savings device.

10.              Specifically define “Educational Expenses”.  An example of a comprehensive definition of “Educational Expenses” is as follows:

tuition, room and board (including rent, utilities, telephone and other normal and reasonable shelter expenses based on “on-campus” costs (this doesn’t preclude off-campus living, which could be higher)), matriculation and registration fees, student fees, testing costs, reasonable travel to and from school, travel to and from schools during the selection process, books and supplies, course-related publications, computer hardware and software, internet access fees, printer, cell phone, lab fees, uniforms and other clothing and equipment needs (as required by the school), sports and social club dues such as sororities and team sports, and any other expenses related to the child’s educational pursuits as required by the school or necessitated by her attendance in class or living arrangements such as study abroad.

11.              Expressly provide that the parents’ agreed upon respective obligations to contribute to post-high school educational expenses only arises after the funds held by or on behalf of the child are first applied.

12.              If it is your client’s intention to limit his or her obligation toward a child’s post-high school educational expenses to the costs associated with a college education at Rutger’s University or another State school, express state such in the MSA and refer to the cases of Nebel v. Nebel, 99 N.J. Super 256 (Ch. Div.), aff’d O.B., 103 N.J. Super. 216, 217 (App. Div. 1968) and Finger v. Zenn, 335 N.J. Super. 438 (App. Div. 2000).  (Caveat:  It is questionable whether such provision will be enforceable since it may constitute a violation of the State’s public policy).

13.              Specifically state whether the law at the time of the execution of the MSA controls or the law at the time the issue becomes ripe controls.

14.              When the MSA provides for the parties to divide future anticipated college expenses based upon their financial circumstances at that time, a provision should be included to take into account (as appropriate), the income of the then current spouse (if any) of the party to the MSA in accordance with Ribner v. Ribner, 290 N.J. Super. 66 (App. Div. 1996).  The MSA should provide that a current spouse’s income and assets are discoverable to the extent that they are utilized to contribute to household expenses and savings and provide financial benefit to the family.  Therefore, the costs that are defrayed from the parent by the financial resources of their new spouse must be considered. 

15.              The life insurance provisions of the MSA should specifically provide, as to the insurance to be maintained for the benefit of the children, the purpose for which the insurance is to be maintained (i.e., to compensate the custodial/dependant spouse for lost payments of direct child support, child related obligations and educational expenses).  See N.J.S.A. 2A:34-23(d).

16.              Research demonstrates that students who work fewer than 20 hours a week receive better grades than students who work more.  Yet more than 50% of working undergraduates work over 20 hours per week.[1]  Thus, when drafting the MSA, the parties may wish to limit the number of hours the child is required to work to ensure that the child’s academic performance is not hindered. 

17.              The parents may wish to infuse a sense of responsibility on the children attending college by requiring that child to work and/or take loans for which that child will be responsible after the conclusion of his or her post-high school educational career.  Such provision should be expressly stated in the MSA.  If necessary, criteria regarding maintaining a minimum per semester credit load and grade point average may be needed in the MSA to continue the parties’ obligations to contribute financially to a child’s post-high school educational career.  See factor number seven of Newburgh v. Arrigo and see the unpublished 2007 case of Robinson v. Bodden.[2]

18.              The MSA should expressly state that any request by the custodial parent or child for financial contribution toward post-high school educational expenses by the non-custodial parent made after the expenses are incurred, should be disallowed.  See Gac v. Gac, 186 N.J. 535 (2006))

19.              When the MSA provides for the determination of the parties’ respective responsibility for post-high school educational expenses at the time those expenses are to be incurred, the agreement should specifically state the procedure to be employed by the parties including, but not limited to, the exchange of financial information such as case information statements, bank and brokerage account records, tax returns and similar financial documentation.  The agreement should also expressly provide for the imputation of earned or unearned income (in accordance with applicable case authority such as Miller v. Miller). 

20.              The MSA should specifically provide for each party to be involved in the financial aid application process including, but not limited to, their participation in the completion of the Free Application for Federal Student Aid (“FAFSA”) form.  Although the custodial parent is the one required to fill out the FAFSA form, some schools may require the non-custodial parent to do so as well.  The custodial parent should be required to advise the non-custodial parent in a timely fashion of the need to complete said form and the non-custodial parent should be required to cooperate in a timely fashion.

21.              The MSA should specifically state the various common financial aid programs administered by the federal and state government to which the custodial parent/child will be required to attempt to seek assistance before obligating parents to contribute.  These financial aid programs include, but may not be limited to, the following:

(a)                Federal PELL Grants;

(b)               Federal Supplemental Educational Opportunity Grant;

(c)                Federal Work Study Programs;

(d)               Federal Perkins Loans;

(e)                Direct Loan Programs such as the Federal Direct Stafford and Federal Direct Plus Loans;

(f)                 Tuition Aid Grants;

(g)                Educational Opportunity Funds;

(h)                New Jersey College Loans to Assist State Students;

(i)                  The Garden State Scholarship Program;

(j)                 Urban Scholars Program;

(k)               Other outside sources of aid such as athletic scholarships, fraternal and civic organizations, ROTC scholarships and various other types of scholarships.  However, please note that a child will not be required to go into debt.  Our Supreme Court stated that a student should not be forced to incur student loans to complete college.  Khalaf v. Khalaf, 58 N.J. 63, 71 (1971).  The court reasoned that student loan debt should not be incurred when a child demonstrates a scholastic aptitude and had it not been for the parents’ separation, college would have been paid for by the parents without dispute.  The child should not be compelled to take out loans to complete college.  Id.  It is unnecessary for a child to go into debt to receive a college education if the child’s parents are affluent.  Welch v. Welch, No. A-2305-85T6, (App. Div. October 15, 1986); and

(l)                  New Jersey Student Tuition Assistance Reward Scholarship (“NJ STARS Program”).

22.              The MSA should specifically state whether it is the child or the parents, or some proportionate allocation between them, who is responsible for the repayment of loans taken for the child’s post-high school educational expenses.

23.              The documents to be exchanged between the parties should include, but not be limited to, documentary evidence from the colleges being considered setting forth all costs, anticipated cost increases; documentary evidence of all financial aid available including federal and private aid; each parties’ case information statement, income tax returns, pay stubs, bank statements, brokerage statements, trust documents, evidence of financial benefits from a new spouse, and information concerning inheritances; report cards, SAT scores, PSAT scores, letters of recommendation from teachers, any other test scores, child’s grade point average, child’s class rank, letters of acceptance, college applications, and awards or achievements; custodial account statements, evidence of value of other assets the child owns, child’s income tax returns, pay stubs, evidence of employment while attending school or on breaks, and inheritance information; financial aid applications, letters awarding aid or rejecting application; letters or e-mails documenting communication between the child and the parent who is being asked to financially contribute and any documentary proof that the parent had the opportunity to be involved in the college selection process; and evidence of prior training that is similar to the course of study the child intends to pursue.