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Paying for College

Honey, You Shrank the College Aid

You'd think that bringing two salaries and two sets of savings under one roof would be a good thing -- but that windfall could mean losing out on college financial aid.Here's why: If you're the parent who fills out the federal financial-aid form, known as the FAFSA, you have to include your spouse's income and assets as part of the household, even if he or she has no plans to kick in for the college bills.

You'd think that bringing two salaries and two sets of savings under one roof would be a good thing -- but that windfall could mean losing out on college financial aid.

Here's why: If you're the parent who fills out the federal financial-aid form, known as the FAFSA, you have to include your spouse's income and assets as part of the household, even if he or she has no plans to kick in for the college bills. The other biological parent's income is not counted, at least on the federal application. Many private colleges, however, require financial information for both sets of parents.

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How do you know which parent should fill out the form? That would be whoever had primary physical custody of the child for the previous tax year (not necessarily the parent who claims the dependency exemption). If your child lived with you even for a few more days than with your ex, you fill out the form. Neither a divorce decree nor a prenup gets you off the hook.

Physical, not legal, custody is the key here, however, "and you can certainly plan physical custody," says Deborah Fox, of Fox College Funding, in San Diego. If the other parent makes significantly less money than your household, and your divorce agreement gives you the flexibility to do so, have the child spend a few more days at that parent's house in the year before applying for aid.

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Note that the more children you claim as members of your household, the less you will be expected to contribute to college costs. In this case, support is the determining factor. If you provide more than half of the support for your children or stepchildren, whether they all live with you or not, you get to list them as members of your household.

ALSO SEE: Blended Family Finances

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