March Madness looms and basketball players talk about getting “schooled” on the hardwood of the courts. What better way for the matrimonial bar to be “schooled” for the hard knocks in the courtroom than a quick primer on the often-uttered-seldom-artfully-utilized-or-thoroughly-understood “SUNY cap.”
The phrase, well-familiar to matrimonial practitioners, refers to the attempt to limit a parent’s college education contributions to the amount of costs charged at the State University of New York. Although frequently suggested by counsel, the concept has pitfalls aplenty for clients and attorneys alike.
While parental funding of a child’s college education is not mandatory in New York, the courts have, nonetheless, transformed the state’s broad child support obligations into a child-friendly approach to parental obligations to finance college education. The Legislature has directed courts to order a parent to contribute to a child’s college education, dependent on the circumstances of the case and abiding by the child’s best interest. N.Y. Dom. Rel Law §240 (1-b)(c)(7), see Tishman v. Bogatin 94 A.D. 3d 621 (1st Dept. 2012) (requiring a parent to finance a private college based the parent’s educational background, their financial ability, the type of college that is best suitable for the child, and the child’s academic ability and endeavors).
In implementing this Legislative command, the courts, as demonstrated in Tishman v. Bogatin, have even ordered parents to cover the costs of expensive private colleges, if justified by the parent’s background and resources.
In the face of this expansive pro-child approach, parents often seek to define their own obligations for college education costs by invoking the SUNY cap in agreements or stipulations. The cap sets an upward limit on the total combined contribution of parents to each child’s college costs. Some rules of thumb are essential.
1) An ill-defined reference to the cap can cause complications. The tuitions — and other costs — at New York’s public universities varied significantly in 2013: the tuitions at the University at Buffalo, SUNY Geneseo and SUNY Oswego were $10,182.75, $2,935, and $4,315.50, respectively. Therefore, the cap, if inserted into a separation agreement, should specify the exact SUNY college to which the cap will be referenced.
2) A practitioner should specify whether the cap applies to tuition at the time of the agreement or at the time the child applies: with escalating tuitions, even in the state system, the future consequences for parents could be substantial.
3) Parents need to understand that if the cap is merely tuition, then neither parent will be obligated to contribute anything to room and board, fees and other college costs, which, in the state system, can escalate as fast as tuition.
4) If parents choose the SUNY cap in their agreement, there is no case law suggesting that a court could override that provision and impose a more expensive financing option on the parents. New York courts have enforced the agreed SUNY cap, even after the child has enrolled in a higher cost college, Fersh v. Fersh, 30 A.D.3d 414 (2d Dept. 2006); see also Gretz v. Gretz, 109 A.D.3d 788 (2d Dept. 2013)(denied request to exceed the SUNY cap set forth in a stipulated settlement).
The appellate divisions have also imposed SUNY caps, on appeal, when lower courts, without reliance on an agreement, declined to cap college costs, Holliday v. Holliday, 35 A.D.3d 468 (2d Dept. 2006). But, practitioners who blithely insert language leaving the question to “another day” or stating that the couple will pay “according to their means,” may find that a future court orders a parental contribution to college costs in excess of the SUNY cap.
There is no judicial rule favoring a SUNY cap, and the Second Department has held that any presumption of its applicability is inconsistent with the broad “parents-should-pay-tuition” concept enshrined in the Domestic Relations Law and the common law of New York, Tishman v. Bogatin, 94 A.D.3d 621 (1st Dept. 2012).
5) Any parent, under an agreement with a broad command to “pay college costs,” who seeks to impose a SUNY cap on their soon-to-be college student, should seek court intervention well in advance of the student’s enrollment. When the child is already enrolled at a private college, a parent may find it impossible to have a court interpret general college support language to limit expenses to a SUNY cap, see R.E. v. S.E., 27 Misc. 3d 1216(A) (Sup.Ct. New York Cty 2010)(no SUNY cap considered when child already enrolled at an Ivy League institution).
6) Parents may often fund Uniform Gift to Minor Act accounts or other tax-deferred college accounts (e.g., state 529 Savings Accounts) for their children and seek to use those available funds to cover their contributions to the SUNY cap. However, at least one court held that, unless the agreement “unambiguously” provided that the already-accumulated funds could be credited against the parental contribution, the parental contribution could not be reduced by these already-funded accounts, Kurtz v. Johnson, 54 A.D.3d 904 (2d Dept. 2008), see also A.C. v. J.O., 40 Misc. 3d 1226 (A) (Sup. Ct. Kings Cty. 2013)(court ordered funds from children’s 529 Savings Accounts were not credited against the parental contribution).
Any parent who already has these accounts created at the time of the divorce, or who seeks to fund such tax-deferred accounts after the divorce, should carefully review the scope of the language in any judgment or separation agreement before utilizing these devices, as absent specific language sanctioning the use of these tax-deferred funds to reduce parental out-of-pocket costs, these accounts will likely inure solely to the benefit of the child.
7) Parents should also specify whether student loans reduce the parental contributions to the SUNY cap. Numerous New York courts have required parents who undertake a general obligation to “pay according to their means” or “their then ability” to pay for loans incurred by a student, even though the underlying agreement never required it, Matter of Rashidi v. Rashidi, 102 A.D.3d 972 (2nd Dept. 2013)(even though the judgment of divorce applied a SUNY cap and despite any language regarding the allocation of the student loans, the court held that the parents were liable to repay any loans incurred by the son), see also Bungart v. Bungart, 107 A.D.3d 751 (2nd Dept. 2013) (in the absence of a clear and unambiguous provision expressly authorizing the deduction of the children’s student loans from the college expenses toward which the parties agreed to pay, a court should not take into account any college loans for which the student is responsible).
Any ambiguous language describing the allocation of student loans in an agreement will, in New York’s pro-child environment, be interpreted against the parent and result in the parent covering their child’s loan obligations.
8) Practitioners should be alert to a lack of specific language on pre-college expenses under the SUNY cap — the ever-present fees, application costs and testing fees for college entrance. These fees, which can be sizable, can easily be read into a broad agreement to “pay college costs,” and the parents may face additional costs even before the child is admitted to college, A.C. v. J.O., 40 Misc. 3d 1226 (A) (Sup. Ct. Kings Cty. 2013)(even in the absence of an agreement, the parents were required to pay their proportionate share of college application fees, fees for the SAT and other pre-college standardized tests, and preparation costs for those tests). If parents seek to curb their contributions to these costs, the courts will need specific language to justify excluding them.
9) Parents in their agreement must exactingly specify whether gifts or scholarships insure to the benefit of the child or reduce the parental contribution. This court recently held that a tuition benefit, obtained through the father’s second wife, inured solely to the benefit of the child and did not offset either parent’s obligation to finance college expenses when they had agreed to a SUNY cap, S.B. v.. J.R., 2013 N.Y. Misc. LEXIS 5470 (Sup. Ct. Monroe Cty 2013).
10) In considering the SUNY cap, the parents and practitioners should be alert to a potential Rohrs credit, which may permit the parent paying support to a dollar-for-dollar reduction in child support payments equivalent to the room and board expenses paid by him for each child residing away from home while attending college, Rohrs v. Rohrs, 297 A.D.2d 317 (2d Dept. 2002)(error not to reduce basic child support obligation by amount contributed to pay for room and board expenses while the child is away at college); Levy v. Levy, 52 A.D.3d 717 (2d Dept. 2008).
The credits are optional and only applied to a parent’s out-of-pocket costs, Juhasz v. Juhasz, 92 A.D.3d 1209 (4th Dept. 2012)(no credit if funds are paid from a grandparent trust fund). The parents could agree that the payor spouse is entirely responsible for the room and board expenses, up to his share of the SUNY cap, an allocation, which could maximize the payor’s Rohrs credit.
The Rohrs credit is not unlimited: even if the credit is granted, the reduction in support should not drop below the floor of support for any remaining non-college children or children who are not yet emancipated.
11) In many cases, costs under the SUNY cap are often divided pro rata between the parents, Patete v. Rodriquez, 109 A.D.3d 595 (2d Dept. 2013). Calculating the pro rata contribution — if it is the only descriptive language in an agreement — can cause complications. Some courts have favored an “income only” approach to pro rata contributions, Martinovich v. Bloch, 40 Misc. 3d 1215(a)(Sup. Ct. Queens Cty 2013).
While parties may choose phrases like “available means” or “then current resources” to describe how the “pro rata” contribution is calculated under the cap, these ambiguous phrases can require extensive review of household incomes, assets and liabilities, incomes or assets of new spouses, and contributions to or borrowings against retirement accounts to determine “available” resources, L.L. v. R.L., 36 Misc 3d 777 (Sup.Ct. Monroe Cty 2012). To avoid these complications, practitioners should better define what assets or whose income will be considered in the pro rata calculation.
12) Parents should be alert to other anticipated costs impacting the SUNY cap: summer school may not be covered by a general college costs obligation. R.E. v. S.E., 27 Misc. 3d 1216(A)(Sup.Ct. New York Cty 2010). The now almost universal semester abroad — with its added travel and accommodation costs — may be covered, even though there is no New York precedence on this issue, Hearon v. Hearon, 1997 Conn. Super. LEXIS 1743 (Super. Ct. Conn. 1997)(authorizing semester abroad costs to be included under an obligation to pay as “financially able”).
13) The parents’ obligation to finance any college expenses ends when the child turns 21, unless there is evidence of an agreement to extend the college obligation beyond that date, Settle v. McCoy, 108 A.D.3d 810 (3d Dept. 2013). If the parents agree, however, to a SUNY cap for “four years after high school,” the obligation exists even if the child turns 21, Hejna v. Reilly, 88 A.D.3d 1119 (3d Dept. 2011).
If a child transfers for valid reasons or defers education, the obligation to pay a SUNY capped cost to make the child eligible for graduation may still exist after 21, Benno v. Benno, 33 A.D.3d 1143 (3d Dept. 2006). If the parties agree to finance “college education costs,” then a party seeking to stop paying at age 21, even though the child has not graduated, may have the burden to prove, by parol evidence or express language, that the parents sought to limit college costs to something short of graduation, Shapiro v. Shapiro, 91 A.D.3d 1094 (3d Dept. 2012).
If parents have taken steps to plan for financing college costs — e.g., funding savings plans — the courts will likely find an obligation to spend accrued funds for college and a further obligation to supplement those funds, regardless of whether there is an agreement, Murray v. Murray, 101 A.D.3d 1320 (3d Dept. 2012).
14) Regardless of whether the SUNY cap is utilized, practitioners should never allow anyone to guarantee paying education costs “beyond the high school level.” One parent agreed to that language in his separation agreement. When he tried to introduce parol evidence that he never intended to fund his child’s graduate school and medical school costs, the court would not hear the evidence and told him to start writing checks, Allyn v. Allyn, 163 A.D.2d 665 (3d Dept. 1990).
15) Federal tax credits should be factor in allocating college costs even under a SUNY cap. Section 25 (A) of the Internal Revenue Code (26 U.S.C. § 25A) provides for two different higher education tax credits — the “Hope Scholarship Credit” under Section 25(A)(b) and the “Lifetime Learning Credit” under Section 25 (A) (c), In re Briley, 2013 Bankr. LEXIS 2491 (Bk. Ct. S.D. Ind. 2013); see also Schramm v. Schramm, 2008 Conn. Super. LEXIS 569, p.5 (Sup. Ct. Conn. 2008) (the value of the tax credits and deductions can certainly be factored into any formula used for the allocation of expenses between them).
These college tax credits generally go to the primary residential parent but if the non-residential parent is paying the substantial portion of college costs, an agreement should consider allocating the dependency exemption — and the tax credits — to the non-residential parent during the child’s college years or at least divide the benefit of those credits between the two parents.
The SUNY “cap,” thoroughly considered, is a “slam dunk” way to cap college expenses for cost-conscious parents facing divorce. Practitioners would be well-advised to “pick” the cap and “roll” it, thoughtfully, into their separation agreements during this March Madness season and beyond.
The Hon. Richard A. Dollinger is a judge in the New York Court of Claims and serves as an acting Supreme Court Justice in the matrimonial part in the 7th Judicial District. Hillary E. Panek is a pre-law student at St. John Fisher College.