Can College Loans Be Required In a Marital Settlement Agreement?
During a divorce, many topics are covered in the Marital Settlement Agreement, and many more when the divorcing couple have children together. This can include child support as well as future college contributions. Depending on the agreement, the divorcing parties may specifically determine the percentages that each will pay for college costs, or will—if the child or children are young—defer setting any percentages until the child is in their senior year of high school. Within these agreements, there is often language that stipulates the children are required to apply for any available financial aid, grants and/or loans. However, does this mean children must be forced to take out loans for an obligation that is intended to part of their parents’ obligation?
A recent New Jersey Appellate Division opinion tackled this complicated question in the matter of M.F.W. v. G.O. In the case, the parties divorced in 2003 when their daughter was 5 years old, and their settlement included an agreement to pay for college and included language requiring that the daughter “…shall apply for all loans, grants, aid and scholarships available to her, the proceeds of which shall be first applied to college costs.”
When their daughter came of age to apply for and attend college, she was accepted into Georgetown University, which came at a cost of over $66,000 per year. The mother sought the father’s contribution for both the college and pre-college costs, but the issue wasn’t resolved and an enforcement motion was eventually filed. One of the father’s defenses against the college contribution was that his daughter should have been required to obtain student loans before he agreed to contribute. That being said, in the time since the couple had divorced in 2003, the father’s net yearly income had increased from approximately $80,000 per year to approximately $217,000 at the time of the motion.
The trial judge rejected the father’s request to enforce the “loans” portion of the agreement and require his daughter to obtain student loans, and noted that it was “unfair and unjust” and “repugnant” that the father would seek to do so. The judge also noted that the daughter “should not be bound to a contract which she is not a party to” because her parents “have a legal obligation to support her.” This is extremely noteworthy because previously, such “loans and grants” provisions have been standard in divorce agreements for decades, and had not caused a legal stir until M.F.O.
The father appealed this ruling, arguing among other things that the trial court should have enforced the parties’ agreement regarding loans and the Appellate Division affirmed the decision. The Appellate Division noted that agreement are usually enforced and should not be disturbed, unless there is a change of circumstances, i.e. in regards to the parties’ increased income. Accordingly, they held that “the court found ‘unfair and unjust’ the provision that required [the daughter] to apply for loans and financial aid because it was the parents’ obligation to pay for college and they had the ability to do so.”
Furthermore, the Appellate Division observed that the father “acknowledged that ‘[t]he parties both have significant financial resources and can afford to send their daughter to Georgetown University.’ The court did not err by not enforcing this position.”
Needless to say, this ruling changes the landscape for divorced parents in New Jersey, as well as their college-bound children.