Single Parents Struggle To Get Kids Through College

Paying for college is a formidable task for most families, but it’s especially daunting for people like Karen Pederson, a single mother in Seattle struggling to regain her financial footing after a recent divorce.

Pederson figures the cost of educating daughter Keri and son Ryan could easily top $200,000 - nearly four times her current annual income - by the time both are finished.

Although her ex-husband is helping out, she’s had to get creative to fill the gaps, like selling property obtained in her divorce settlement and applying for loans and grants.

And Pederson is probably more fortunate than many of the country’s 15.5 million single-parent households. Not only is she eligible for financial aid, but she also has the support of a former spouse.

A recent survey by broker Charles Schwab Corp. found only 9 percent of single parents expect their ex-spouses to contribute toward college, while more than two-thirds expect their kids to pick up part of the slack.

At the same time, college costs are projected to continue rising by at least 6 percent a year.

In 10 years, the cost for tuition, books, fees, and room and board is estimated to reach $68,000 for a four-year public college and $143,000 for a private school, according to the latest College Board survey.

“It’s important not to be too overwhelmed by the numbers,” said Cynthia L. Conger, who runs the financial planning firm Arkansas Financial Group in Little Rock.

Conger, herself a single mother of two college graduates, notes that it might be harder for a single parent to save, but he or she may find it easier to obtain financial aid.

Her advice to households with one or two parents is the same: “Just do something … (even) if all you can afford is $25 to $50 a month. If you start early and put it into a growth mutual fund, you will have something toward education.”

Starting early is the key, but even the best plans can collapse when a marriage breaks up or a spouse dies.

Nearly half of all marriages now end in divorce.

It’s important, therefore, for the subject of who will pay for college to be addressed before a divorce is finalized.

Jan Warner, a Columbia, S.C., lawyer who counsels divorced individuals on financial matters, suggests getting some commitment written into a property settlement.

For instance, certain assets can be placed in a child’s name or given to a spouse with the instruction that they be used for college expenses later on.

The Pederson family sought help from College Planning Solutions Inc., a consulting firm based in Kirkland, Wash., that specializes in college admissions and financial planning.

“You can take adversity and turn it into opportunity,” said Bob Mahmoudi, president of College Planning Solutions.

Mahmoudi, who charges a few hundred dollars for his services, says at least 40 percent of his clientele is comprised of families headed by a single parent. “The majority will qualify for financial aid,” he said.

In awardng aid, many schools will concentrate on the income of the custodial parent.

Conger suggests parents fund no more than two years of college in the child’s name.

And she and others caution parents not to sacrifice their future retirement to pay for all of their children’s education.

“The child will have a borrowing capability available for education, but the parent won’t after they’ve reached retirement age,” she said.

“Obviously, there are tax advantages of holding it in the child’s name … It likely will be taxed at the child’s lower tax rate. But that does count against you when you’re applying for financial aid,” she said. “The money that is in the child’s name is assumed to be 100 percent used for education.”

Mahmoudi says it’s important for neither student nor parent to shortchange themselves.

Unfortunately, he said, “most students of divorced families set very low goals.

“I find that very sad.”