United States: NJ Court Finally Recognizes The Economic Realities Of Parental College Contributions

Last Updated: June 20 2014
Article by Eliana Baer

It all started with the 1982 Supreme Court case of Newburgh v. Arrigo.

That is the case that lawmakers, judges and attorneys alike point to when they are asked the age-old questions "why do divorced parents have an obligation to contribute to college, but intact parents do not?"  Eric Solotoff blogged about this conundrum on March 13, 2014 when Rachel Canning's story hit the news (remember – that teen who sought and failed to compel her married parents to contribute to her college education?).

In addition to the factors it sets forth that a court must consider in allocating college contribution, a main takeaway from Newburgh is as follows:

In general, financially capable parents should contribute to the higher education of children who are qualified students. In appropriate circumstances, parental responsibility includes the duty to assure children of a college and even of a postgraduate education such as law school.

The thoughts conveyed by Newburgh – that college is a necessity – have been echoed throughout the nation.  In a 2013 HuffPost/YouGov poll, 53 percent of respondents agreed that a college education was necessary in order to get ahead in life, compared to just 28 percent who said it was not.

Since Newburgh, it has become axiomatic in New Jersey that parents must split in some fashion – i.e. not always 50/50, but full contribution allocated between the parents – their children's college education upon divorce.  It became obligatory, the right of the child, just like child support for each child whose parents separated.

Newburgh became even more oppressive for some when in 2000, Finger v. Zenn overturned the so-called "Rutgers Rule" set forth in 1968 in Nebel v. Nebel, which limited a parent's mandatory contribution to the amount which would have been required to send the student to a state university such as Rutgers.  Suddenly, parents were faced with astronomical college tuition obligations to costly private or ivy league universities.  These stresses were only heightened as college tuition continued to rise through the early 2000s.

But in recent years, particularly during the recession, and with the skyrocketing costs of private universities, this rule of financial contribution has become a rule of potential financial ruin.  I have heard and observed clients in distress at the prospect of paying for college.  When there is not enough money to go around for even daily expenses, how could a court mandate that college takes priority?

Well, a new superior court case, published on June 13, 2014 – Black v. Black – tackles these very interesting and real issues head on.  The case presented three legal issues regarding a divorced parent's obligation to contribute to the cost of a child's college education, when he has previously agreed to do so in a marital settlement agreement:

1.         What happens when there is a damaged relationship between a college-age student and a parent?  Should the parent still be obligated to provide ongoing financial assistance?

2.         Whether a parent should be obligated to pay for the cost of an expensive private college over a more modestly priced state school; and

3.         Whether the court can consider a student's younger siblings of relatively close age who are likely to attend college in the near future as part of the college contribution analysis.

In this blog, I am only touching upon the last two inquiries.  The first one – the relationship between the contributing parent and the college student – will be a topic for a later blog.

One of the financial hurdles immediately recognized by the court head on in this case was that there was not a whole lot of money to go around.  The custodial mother was imputed an annual income of $20,000 while the non-custodial father was imputed an annual income of $60,000.  The father agreed to pay the mother $300 per week in alimony, along with child support under the New Jersey Child Support Guidelines for three children, who at the time of the divorce were 16, 13 and 10.  Additionally, the parties jointly stipulated that they would share in the cost of their children's future college costs.

In the years that followed, there was a breakdown in the relationship between the oldest child and the father, however, the relationship with the two younger children remained intact.

In 2012, the oldest child graduated from high school and was accepted into Rutgers University at an annual cost of $12,000, most of which would be covered by grants, scholarships and loans.  The parties disagreed as to the amount of contribution from each parent, with the mother apparently requesting that the father contribute the vast majority of the uncovered costs.  It appeared that the father's main objection centered around the child's unwillingness to repair their relationship.

As a result of the disagreement, the father refused to contribute, leaving the mother to raise $4,000 for the child to attend his freshman year.

The child exceled during his first year of study.  At the conclusion of his freshman year, the child set forth his desire to transfer to the University of Miami – an out of state, private institution – so that he could pursue a major in Marine Biology.  The price tag for this transfer: $55,000 per year, less $33,000 in estimated financial aid, leaving an uncovered balance of $22,000 per year.

In assessing the father's college contribution, the court very closely considered "the availability of colleges and universities which are significantly less expensive, and thus more reasonably affordable for some parents, than a student's school of 'top choice.'"

In examining the issue, the court specifically stated that "[t]he case of Finger v. Zenn...does not hold to the contrary."

The court said that Finger only stands for the proposition that the family court is not prohibited from ordering a non-custodial parent to financially contribute to a child's college costs in an amount exceeding the cost of attendance at a state college.  It specifically rejected the interpretation some courts have espoused that when a student seeks to attend a private university, the comparative cost of tuition at Rutgers or another less expensive state college is, as a matter of law, immaterial to the analysis.

Poignantly, the court recognized:

In intact families, where mothers and fathers address such issues outside of divorce court, the comparative expenses and affordability of tuition at different colleges is usually a significant factor for consideration by financially responsible parents and students alike. The issue of cost is no less important in families of divorce, particularly in cases where neither parent can afford a blank checkbook approach to education.

Recognizing the above, the Court came to the conclusion that regardless of what school a student personally wishes to attend, no parent should be expected to contribute more than he or she can reasonably afford.

The Court then went on to examine another financial reality posed by the parties' situation: when there are other, younger children in the family, who are good students and who are relatively close in age to an older, college-age sibling, this can be a relevant factor in determining how much money the parents should apply towards the oldest child's college education?

There are real economic implications to a parent's decision to help fund a first child's education, especially when there is no money specifically set aside for the expenditure.  The parents may potentially be sacrificing the educational opportunities of the younger children in favor of the older child.

As a result, the Court ultimately found that the parties have a reasonable ability to contribute $7,500 per year – $3,375 from the mother and $4,125 from the father (45%/55% split) – which was to be allocated between three college savings plans to be established and earmarked for all three children's potential college costs.  This would result in a total contribution of $60,000 ($7,500 * 8 years), or $20,000 per child for his or her college education.

This opinion is novel for parents and the legal community alike.  Oftentimes, judges may be quick to strictly adhere perceived interpretations of case law based upon the prevailing legal practice, all the while ignoring the harsh economic realities posed by their decision.

Recall the Rutgers professor who agreed to contribute to the cost of graduate school and then got saddled with a $120,000 for his daughter to attend Cornell Law School?

The judge in this case, however, was not afraid to go out on a limb and deviate from awarding an amount that would have been financially devastating for both parents, and potentially for their younger children.

This case is especially instructive in drafting divorce agreements, so that litigants and their children can avoid long, protracted battles that ultimately do nothing more than deplete funds that would otherwise be contributed toward college. For example specifying the following in your divorce agreement could cut off much potential conflict at the pass:

1.         Percentages of Contribution.  Especially if your child is close to college-age, specify what percent each parent will contribute.  This will avoid the nickel and diming in the future.

2.         Expenses Covered.  Will the parents be responsible for room and board?  What about books? SAT and college preparatory classes?  Years abroad?  Set forth in your agreement exactly which expenses will be covered.

3.         Type of School.  Should the cost of tuition be capped at a state university or would you like to see your child go on to a prestigious, yet pricey, private school?  Reasonably decide what you can afford and cap the contribution if you believe paying for private college will impose financial stress.  Again, this does not mean that your child cannot attend the private school; he or she may just have to bear some of the cost.

4.         Establish 529 Accounts Early On.  If you have more than one child, a 529 account may be most appropriate if limited funds need to be allocated equally.  You may even want to stipulate to a joint 529 account in your divorce agreement, with an agreement by each party to contribute a certain amount each year. Remember, money placed in a 529 grows tax free and you can take it out if your client receives a scholarship, penalty free.  It is a win-win all around.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Eliana Baer
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.