How Your Living Arrangements Affect Divorced Parents FAFSA Outcomes

When it comes to paying for college, few things are more misunderstood, or more costly, than how FAFSA treats divorced parents. As a Certified College Funding Specialist (CCFS®) and founder of Tracy Armstrong, CCFS, I’ve worked with hundreds of families who are doing everything right… only to be tripped up by one small but powerful detail: their living arrangements.

If you’re a divorced or separated parent, what might seem like a personal or legal arrangement, like who your child lives with, how many nights they spend in each home, or how expenses are shared, can significantly impact how much financial aid your child receives. In fact, it can even mean the difference between qualifying for tens of thousands in aid… or receiving nothing at all.

In this blog, I’ll break down what you need to know about divorced parents FAFSA rules, how your living situation affects outcomes, and what you can do today to protect both your child’s education and your own financial future.

Why FAFSA Is Different for Divorced or Separated Parents

When parents are divorced, the Free Application for Federal Student Aid (FAFSA) only requires information from one parent, the custodial parent. But here’s the catch: custody is not about court documents or who claims the child on taxes. FAFSA defines custodial parent based strictly on where the student lived most during the 12 months prior to filing.

So even if a divorce decree says you share custody 50/50, or if one parent pays more in child support, FAFSA doesn’t care. What matters is where your child actually slept more nights in the last year. That’s it.

Let me repeat that, because it’s crucial:

For divorced parents, FAFSA considers only the income and assets of the custodial parent, defined as the parent with whom the student lived the most in the past 12 months.

The “Custodial Parent” Is the Financial Key

Choosing the right custodial parent on the FAFSA could open, or close, the doors to financial aid. In many cases, when I work with families inside The College Planning Mastery Program, we discover that just shifting the living arrangements slightly (even by one or two nights) can mean the FAFSA is filed with the parent who has lower income and fewer assets, dramatically increasing aid eligibility.

This isn’t about gaming the system. It’s about understanding the system and making decisions that are in your family’s best interest.

For example:

• If Parent A earns $140,000/year and Parent B earns $65,000/year, and the student lives 183 nights with Parent B vs. 182 nights with Parent A, Parent B becomes the custodial parent, and only Parent B’s income is reported.
  
  

• That difference in reported income could easily change the Expected Family Contribution (EFC) or Student Aid Index (SAI) by $20,000 or more.
  
  

The result? More grant aid. More need-based scholarships. Less student debt.

What About Stepparents?

This is where it gets even more complicated, and more important to plan ahead.

If the custodial parent is remarried, the stepparent’s income and assets must be included on the FAFSA, even if that stepparent has no legal obligation to support the student.

Let me be honest: this one shocks a lot of families. And it’s one of the most common and costly mistakes I see. I’ve worked with families who are absolutely stunned to learn that a stepparent’s six-figure income, used entirely for their own children or expenses, has now wiped out their student’s financial aid eligibility.

So what can you do? This is where planning ahead is powerful. If your child splits time equally between both households, and one household includes a remarried parent while the other doesn’t, it may make more sense for FAFSA purposes for the student to “live more” with the unmarried parent, assuming all other factors are comparable.

Real-World Scenarios I See Often

Inside The College Planning Mastery Program, we build comprehensive funding plans that help families like yours navigate these challenges. Here are a few real examples of how divorced parents FAFSA rules play out in everyday situations:

Scenario 1: 50/50 Custody, Unequal Incomes
A student splits time equally between both parents. One parent earns double the income of the other. After a careful review of the student’s calendar, we realize she spent 10 more nights at the lower-income parent’s home. That parent becomes the custodial parent, and her FAFSA eligibility increases significantly.

Scenario 2: Remarriage Complication
A student primarily lives with a lower-income parent who recently remarried. The new stepparent earns a high six-figure salary. Because FAFSA includes the stepparent, the student’s aid is reduced by nearly 70%. After consultation, the family restructures the student’s living schedule to reflect time with the non-remarried parent instead.

Scenario 3: Divorce After FAFSA Submission
A family finalizes their divorce after submitting FAFSA. In this case, the FAFSA must be updated to reflect the custodial parent based on where the student lives after the divorce date, not before. If you’re filing during or just after a separation, this timing matters tremendously.

What You Can Do Now

If you’re a divorced or separated parent, or considering separation, it’s critical to look ahead. FAFSA rules are complex, but they’re also predictable. The good news? A small change in how you document or plan your child’s living situation can lead to real, measurable savings.

Here’s how to start:

1. Track Where Your Child Lives

FAFSA uses the last 12 months from the day you file, not the calendar year. Keep a written or digital record of where your child is sleeping each night. Courts may not need this info, but FAFSA will.

2. Analyze Income and Asset Levels

Which parent’s financial profile is more aid-friendly? We analyze this deeply inside my program to determine the best filing strategy.

3. Consider the Impact of Remarriage

If a custodial parent is planning to remarry, it’s important to understand how that new spouse’s income will impact FAFSA.

4. Seek Professional Guidance

Every family situation is different. That’s why I offer a complimentary consultation to walk through your personal scenario and identify strategic solutions that align with your financial goals.

FAFSA Changes Are Coming: Be Prepared

As of the 2024–2025 FAFSA update, there are new rules for determining custodial parent status. Instead of counting the number of nights a student lives with each parent, the custodial parent will now be determined based on which parent provides more financial support.

This change has massive implications for divorced parents, and could eliminate some of the strategies that previously worked under the "nights lived" rule.

What does this mean for you?

• Documentation of financial support (not just housing) will become essential.
  
  

• Conversations around who pays for what, including groceries, clothing, activities, insurance, will now affect FAFSA.
  
  

• Strategic planning becomes even more necessary, because there will be less flexibility in choosing the “aid-friendlier” parent.
  
  

As always, I stay up to date with every change so I can guide families like yours to avoid mistakes and optimize your funding strategy.

Final Thoughts: FAFSA Doesn’t Have to Be a Barrier

Navigating divorced parents' FAFSA rules can feel like walking through a maze, but you don’t have to do it alone.

I’ve helped over 1,000 students enroll in college with funding strategies that protect both parental retirement and student opportunity. Through Tracy Armstrong, CCFS, and my signature College Planning Mastery Program, I walk alongside families step by step, so that your child gets into the right school and you can actually afford to send them there.

If you're wondering whether your living arrangements are set up for FAFSA success, or if you’re just starting the college planning process and feeling unsure, let’s talk. I only work with a select number of families each year, and our first step is always a no-pressure discovery call.

You deserve a clear, confident path to college funding, and your child deserves a future free from debt. Let’s make that happen, together.

Schedule your complimentary consultation today.