With the costs of college ballooning out of control, determining which of the divorced parents will pay for what percentage of a child or the children’s college has evolved into high stakes litigation that is on par with questions such as equitable distribution and alimony. With the federal tax law changes regarding deductability and taxability of alimony and the year end rush to finalize agreements, I experienced settlement discussions abruptly end last week because of this very issue. This question has been addressed many times but New Jersey’s judiciary and was most recently considered in the unpublished appellate decision of Landre v. Landre, A- 5080-16T1.
The defendant-wife in Landre had filed a post-judgement motion to enforce a Matrimonial Settlement Agreement (MSA) that required the plaintiff-husband to contribute to their oldest child’s college expenses based on a pro-rata calculation of the parties’ income percentage for contributing. The trial court granted the motion, and plaintiff appealed.
The parties had two children and were divorced in 2002. The MSA, incorporated into the judgment of divorce, addressed college expenses for the children. The MSA contemplated both parents would be involved in the college selection process and established the parties’ contribution to college expenses would be calculated on a pro rata basis. The MSA established the following regarding the payment of college expenses:
“The parties recognize their obligation to contribute to the cost of their children’s post-high school education should the child demonstrate an aptitude for and an interest in same. The parties shall consult in advance with regard to post-high school education for their children. During the child’s senior year in high school, the parties shall communicate, in writing, concerning the child’s choices for post-high school education. In the event that either party does not approve of any institution to which the child seeks to make application, such disapproval shall be given in writing, with the reasons set forth, 30 days prior to the application deadline. If such disapproval is not set forth in writing, with the accompanying specific reasons for such disapproval, then there shall be a presumption that both parents agree to contribute to the cost of any and all institutions to which the child applies and is accepted, according to the terms of this Agreement. In no event, however, shall either party act in such an unreasonable manner as to prohibit the child from applying to any such institution.
The parties shall contribute to the cost of the child’s post high school education on a pro rata basis, in accordance with their respective earned and unearned incomes at the time the child is accepted into the institution. The parties’ obligation to contribute to the cost of post high school education shall apply only after exhausting all loans, grants, scholarships, the value of the UGTMA accounts that then exist for the benefit of the children, and any other sources of financial aid to which a child might be entitled.”
In opposition to defendant’s motion to enforce the MSA regarding the oldest child’s college expenses, plaintiff argued that defendant (1) did not include him in the child’s college selection process; and that (2) he should receive a credit for scholarships and financial aid that the child had declined from other universities that were not offered by the school that was eventually chosen.
The trial judge held he was “not making a decision about which school the child should attend,” and limited his decision to the percentage contribution of each parent for college expenses. The judge determined it was undisputed that each party anticipated contribution toward the expense, and hence, the court was not undertaking a determination of whether contribution was warranted in the first instance. Therefore, a decision based on the factors in Newburgh v. Arrigo, 88 N.J. 529 (1982) was not necessary (see below). The trial judge further ruled that a court may take certain principles in Newburgh into consideration in making a determination, but the question of whether a parent should be compelled to contribute requiring application of the factors were not before the court.
Unfortunately for the trial court judge, the Appellate Division disagreed and ruled that the Newburgh factors should have been applied, even in cases where the property settlement agreement, or judgment of divorce, or MSA, as in this case addressed college contributions. See Gotlib v. Gotlib, 399 N.J. Super. 295, 310-11 (App. Div. 2008).
Newburgh states that a parent’s obligation for the cost of postsecondary education depends upon the expectations and relevant abilities of the child and the parents considering all relevant factors, including:
(1) whether the parent, if still living with the child, would have contributed toward the costs of the requested higher education;
(2) the effect of the background, values and goals of the parent on the reasonableness of the expectation of the child for higher education;
(3) the amount of the contribution sought by the child for the cost of higher education;
(4) the ability of the parent to pay that cost;
(5) the relationship of the requested contribution to the kind of school or course
of study sought by the child;
(6) the financial resources of both parents;
(7) the commitment to and aptitude of the child for the requested education;
(8) the financial resources of the child, including assets owned individually or held in custodianship or trust;
(9) the ability of the child to earn income during the school year or on vacation; (10) the availability of financial aid in the form of college grants and loans;
(11) the child’s relationship to the paying parent, including mutual affection and shared goals as well as responsiveness to parental advice and guidance; and
(12) the relationship of the education requested to any prior training and to
the overall long-range goals of the child.
[Id. at 545.]
The Appellate Division stated that “when making a decision regarding the obligation of a parent to contribute to college expenses, the judge has “an obligation under Newburgh and N.J.S.A. 2A:34-23(a) to consider all the enumerated factors” and should not base its decision on any single factor. Gotlib, 399 N.J. Super. at 309 (quoting Raynor v. Raynor, 319 N.J. Super. 591, 617 (App. Div. 1999)).
Because the trial judge did not apply the Newburgh factors in the trial decision, the Appellate Court remanded to the trial court.
The Appellate Court also ruled that the “plaintiff’s interpretation of the MSA [was] flawed.” The MSA did not require scholarships or financial aid from other schools be considered in determining plaintiff’s contribution to college expenses. The MSA required that the child accept all “loans, grants, scholarships,” and “any other sources of financial aid” at the school he or she decides to attend. The Appellate Court determined that the financial aid offered by the two unselected schools should be considered on remand as a factor in determining plaintiff’s contribution toward the oldest child’s college expenses.
The Appellate Court further ruled that in addition to the Newburgh factors in determining contribution toward college costs, there are additional equitable considerations that may be taken into account. The Appellate Court identified one such consideration as whether there are younger siblings of relatively close age who are likely to attend college at the same time as the older sibling. In such circumstance, the family court may consider a reasonable financial plan, which fairly allocates present and future funding resources among all of the children, rather than exhausting all resources on the oldest child who happens to attend college first. Black, 436 N.J. Super. at 134. On remand, the Appellate Court stated that in analyzing the resources of the parents and the amount they can pay toward the oldest child’s education, it is appropriate for the judge to consider the parties will likely need funds available in the immediate future to pay college expenses for both children simultaneously.
As demonstrated in Landre, who pays for college when parents are divorced is not an easy question and will likely be different in each case based on facts and circumstances.