Dentons US LLP

05/07/2025 | News release | Distributed by Public on 05/07/2025 15:06

New Iowa Law, Same College Tab: Keep It Open with Creative Planning

May 7, 2025

When Governor Kim Reynolds signed Senate File 513 into law (effective July 1, 2025), she fundamentally changed how divorced parents in Iowa handle college expenses. The new legislation eliminates Iowa courts' authority to require divorced parents to pay for their children's post-secondary education costs, ending a decades-old practice that made Iowa unique among most states.

The Old Way: Courts could make you pay

Under Iowa's expiring law, courts had the power to order each divorced parent to pay up to one-third of their child's college expenses. This controversial provision treated children of divorced parents differently from those from intact families or never-married parents, who could freely decide whether and how much to contribute to their children's education.

The New Reality: Parents take control

Starting July 1, 2025, divorced parents in Iowa will have the same freedom as all other parents to determine if and how they'll fund their children's college education. While courts can no longer mandate these payments, savvy parents and their attorneys can still create binding agreements that ensure their children's educational futures remain secure.

Getting Creative: Three smart strategies from the Dentons Playbook

At Dentons Davis Brown, we've long helped divorced parents craft innovative solutions for funding their children's education. Here are three strategies that put parents in the driver's seat:

  1. The 529 trust with academic accountability

Create a joint 529 college savings plan with built-in performance triggers. Both parents contribute monthly amounts based on their income percentages, while an independent trustee manages the fund. The twist? Withdrawals are tied to academic milestones-maintaining a specific GPA, completing credit hours on schedule, or achieving other educational benchmarks. This approach incentivizes student success while ensuring fair parental contributions.

  1. The college real estate investment strategy

During divorce proceedings, parents jointly purchase an investment property specifically designated for future college expenses. The rental income gets earmarked exclusively for education costs, and upon graduation, the property can be sold with proceeds split according to the original agreement. It's like having a dormitory that pays for itself!

  1. The educational investment portfolio approach

Parents establish a diverse investment portfolio dedicated solely to education funding, with contributions weighted by each parent's income. They agree upfront to liquidate investments in a specific order (bonds first, then mutual funds, then stocks) to minimize market timing risks. This strategy provides both structure and flexibility as college costs and market conditions evolve.

The bottom line

While Iowa courts are stepping out of the college-funding business, divorced parents don't have to leave their children's educational futures to chance. With creative planning and skilled legal guidance, parents can craft agreements that work for everyone-no judge required.

Related Resource:

Iowa Divorce Law is Changing: What parents need to know about college expenses

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