Lynn Marie Larsen v. Roger Wayne Larsen , 912 N.W.2d 444 ( 2018 )

IN THE SUPREME COURT OF IOWA
No. 16–1794
Filed May 25, 2018
IN RE THE MARRIAGE OF LYNN MARIE LARSEN AND ROGER
WAYNE LARSEN
Upon the Petition of
LYNN MARIE LARSEN,
Appellee,
And Concerning
ROGER WAYNE LARSEN,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Story County, Michael J.
Moon, Judge.
A father requests further review of a court of appeals decision
affirming award of a postsecondary education subsidy. DECISION OF
COURT OF APPEALS VACATED; DISTRICT COURT JUDGMENT
REVERSED AND REMANDED.
Erin M. Carr of Carr & Wright, P.L.C., Des Moines, for appellant.
Nicole S. Facio of Newbrough Law Firm, L.L.P., Ames, for appellee.
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WIGGINS, Justice.
In this case, we consider Lynn and Roger Larsen’s parental
responsibility for postsecondary education for their daughter following
the dissolution of their marriage. As part of the dissolution proceedings,
the parties entered into a partial stipulation regarding financial
contributions toward their daughter’s postsecondary education. When
their daughter began to attend college at Iowa State University (Iowa
State), they could not agree on the proper amount owed by each parent
to support her education. On Lynn’s motion and after an evidentiary
hearing, the district court entered an order requiring the parents to each
pay $6629.73 toward their daughter’s education for the 2016–2017
school year.
Roger challenges the amount of postsecondary education subsidy
the court ordered. Roger claims the court improperly calculated the
reasonable costs for only necessary expenses by failing to consider actual
costs and by improperly including sorority dues and a cash allowance.
With respect to the daughter’s available resources, Roger argues the
court failed to include the full amount of scholarships awarded, failed to
include available but unaccepted unsubsidized student loans, and failed
to include an amount for income that could be generated by the daughter
from part-time employment during the school year and summer
employment.
We transferred the case to the court of appeals. The court of
appeals affirmed. We granted further review. For the reasons expressed
below, we vacate the decision of the court of appeals, reverse the
judgment of the district court, and remand.
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I. Factual and Procedural Background.
Roger and Lynn Larsen married in 1995 and divorced in 2015.
They have three children, including a daughter named H.M., who was
born in October of 1997. H.M. enrolled in Iowa State for the 2016–2017
school year. Lynn earns approximately $77,000 a year from her job at
Iowa State, while Roger earns approximately $110,000 per year from his
job with the Iowa Department of Transportation and from his service in
the military reserves.
During the course of their marriage, Lynn and Roger set aside
funds for each of their three children for educational expenses in § 529
accounts. See I.R.C. § 529 (2012) (establishing tax-free educational
accounts for college expenses). The balance for H.M. was $63,107.24 on
March 31, 2015.
As part of the dissolution proceedings, Lynn and Roger entered a
partial stipulation. Of importance, the partial stipulation stated in the
event any of the three children attended a course of study or training
beyond high school as contemplated by Iowa Code section 598.21F
(2015), each of the parents must contribute to the applicable costs. The
partial stipulation further stated the § 529 accounts for each child must
first be used to discharge Lynn’s and Roger’s respective shares of their
postsecondary education subsidy contributions. They “acknowledge[d]
these accounts are for the children and will not be used for any other
purposes or withheld from any of the children.” The partial stipulation
stated Lynn and Roger could not avoid the obligation to provide a
postsecondary education subsidy based upon claims of alienation or
estrangement. The district court incorporated the partial stipulation into
the divorce decree.
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The following year after the dissolution, H.M. began her education
at Iowa State. H.M. contemplates a five-year course of study at Iowa
State in architecture. Lynn filed an application for a hearing to
determine the postsecondary education subsidy owed by each party.
At the August 22, 2016 hearing, Lynn offered testimony and
presented exhibits. Lynn provided an Iowa State financial award
document that shows $20,000 as the estimated cost of attendance for
the 2016–2017 school year. This document projected $8219 in tuition
and fees, $8356 in housing and meals, $995 in books and supplies, and
$2430 in anticipated personal expenses. Lynn also provided a shopping
sheet by Iowa State that shows $19,750 as the estimated cost of
attendance for the same school year. Lynn also offered a U-bill that
reflects the actual cost of attendance for fall 2016.
Lynn presented evidence H.M. had joined a sorority for the 2016–
2017 school year. Lynn testified H.M. had been offered a part-time, five-
hours-per-week job at minimum wage.
Roger also offered testimony and presented exhibits. He testified
he and H.M. are estranged. Roger provided exhibits showing H.M. has
$2119.11 in her bank account and an outstanding loan of about $15,000
on her automobile. From the total cost of attendance, Roger subtracted
scholarships and loans available to H.M., $6000 in H.M.’s potential
income from part-time employment during the school year and summer
employment, $750 in child support, and $2119.11 in H.M.’s bank
account.
As a result of Roger’s calculations, neither Lynn nor Roger would
be obligated to pay a postsecondary education subsidy for H.M. Roger
testified the parental contribution should be zero because his
calculations showed there would be a surplus. He did not include
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sorority dues and a cash allowance in his calculations. He believes H.M.
can self-fund her education as he has done toward his own education.
After posttrial motions urging corrections and expanded rulings,
the court ultimately determined in an amended order that $19,889.20
was the cost of attendance at Iowa State for the 2016–2017 school year.
The court included $1920 in sorority dues to the total cost of attendance.
From $19,889.20, the court subtracted $5520 in scholarships. The
court then divided the remaining balance of $14,369.20 1 in half for a
$7184.60 2 contribution from each parent. Because this amount was
more than one-third of the total cost of attendance, the court reduced the
required contribution of each parent to $6629.73.
Roger appealed the court’s amended order. We transferred the
case to the court of appeals. The court of appeals affirmed. Roger
applied for further review, which we granted.
II. Scope of Review.
Dissolutions of marriage are tried in equity and appellate review is
de novo. In re Marriage of Vaughan, 812 N.W.2d 688, 692 (Iowa 2012).
On appeal, we give weight to the fact findings of the trial court but are
not bound by them. In re Marriage of Olson, 705 N.W.2d 312, 313 (Iowa
2005).
III. Discussion.
A. Process for Determining Postsecondary Education
Subsidy. Under Iowa Code section 598.21F(1), a court may order
divorced parents to respectively pay “a postsecondary education subsidy
if good cause is shown.” Iowa Code § 598.21F(1) (2015). The Code
defines a postsecondary education subsidy as
1The court mistakenly stated $14,363.20 in its order.
2The court mistakenly stated $7181.60 in its order.
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an amount which either of the parties may be required to
pay under a temporary order or final judgment or decree for
educational expenses of a child who is between the ages of
eighteen and twenty-two years if the child is regularly
attending a course of vocational-technical training either as
a part of a regular school program or under special
arrangements adapted to the individual person’s needs; or is,
in good faith, a full-time student in a college, university, or
community college; or has been accepted for admission to a
college, university, or community college and the next
regular term has not yet begun.
Id. § 598.1(8). H.M. will turn twenty-three in October of 2020.
In determining good cause, the court must take into account “the
age and ability of the child, the child’s financial resources, whether the
child is self-sustaining, and the financial situation of the parents.” In re
Marriage of Goodman, 690 N.W.2d 279, 282–83 (Iowa 2004); accord Iowa
Code § 598.21(F)(2). The district court found and we agree that good
cause exists to award a postsecondary education subsidy.
If good cause is shown, the court engages in a three-step process
to determine the amount owed. First, the court must ascertain “the cost
of postsecondary education based upon the cost of attending an in-state
public institution for a course of instruction leading to an undergraduate
degree and shall include the reasonable costs for only necessary
postsecondary education expenses.” Iowa Code § 598.21F(2)(a).
Second, the court must ascertain the amount of the child’s
reasonably expected contribution in light of “the child’s financial
resources, including but not limited to the availability of financial aid
whether in the form of scholarships, grants, or student loans, and the
ability of the child to earn income while attending school.” Id.
§ 598.21F(2)(b).
Third, the court must subtract the child’s expected contribution
from the total cost of postsecondary education. Id. § 598.21F(2)(c). The
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court must then allocate the remaining costs between the parents in an
amount not to exceed thirty-three and one-third percent of the total cost
of postsecondary education. Id. This appeal calls us to review the three-
step analysis applied by the district court.
B. Step One: The Reasonable Costs for Only Necessary
Postsecondary Education Expenses. The legislature requires us to
determine “the cost of postsecondary education based upon the cost of
attending an in-state public institution for a course of instruction leading
to an undergraduate degree and shall include the reasonable costs for
only necessary postsecondary education expenses.” Id. § 598.21F(2)(a).
This finding is required whether the child is attending an in-state public
institution, an in-state private institution, or an out-of-state institution.
The costs of attending an in-state public institution should be
substantially the same whether the child attends an in-state public
institution, an in-state private institution, or an out-of-state institution.
In this case, Lynn and Roger are arguing over the specific costs for
H.M. to attend an in-state public institution. We now hold arguing over
the specific costs is unnecessary. Our federal government has
established programs to make benefits available to eligible students
seeking a postsecondary education. 20 U.S.C. § 1070 (2012). In
connection with determining what benefits are available to the students,
Congress requires the institutions to determine the cost of attendance for
each institution. See id. § 1087ll. In calculating the cost of attendance
for full-time students, the statute defines the cost of attendance as
(1) tuition and fees normally assessed a student
carrying the same academic workload as determined by the
institution, and including costs for rental or purchase of any
equipment, materials, or supplies required of all students in
the same course of study;
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(2) an allowance for books, supplies, transportation,
and miscellaneous personal expenses, including a
reasonable allowance for the documented rental or purchase
of a personal computer, for a student attending the
institution on at least a half-time basis, as determined by the
institution;
(3) an allowance (as determined by the institution) for
room and board costs incurred by the student which—
(A) shall be an allowance determined by the
institution for a student without dependents residing
at home with parents;
(B) for students without dependents residing in
institutionally owned or operated housing, shall be a
standard allowance determined by the institution
based on the amount normally assessed most of its
residents for room and board;
(C) for students who live in housing located on a
military base or for which a basic allowance is
provided under section 403(b) of title 37, shall be an
allowance based on the expenses reasonably incurred
by such students for board but not for room; and
(D) for all other students shall be an allowance
based on the expenses reasonably incurred by such
students for room and board[.]
Id. § 1087ll (1)–(3).
The institutions make the cost of attendance available on their
respective websites for prospective students to see and use when
considering which institution to attend. See, e.g., Office of Student Fin.
Aid, Iowa State Univ., Undergraduate Students: Fall & Spring (2018),
https://www.financialaid.iastate.edu/cost/cost-of-attendance/undergra
duate-students-fall-spring-all-years/ [https://perma.cc/SA5C-W4DX].
We believe the cost of attendance as published by each institution
pursuant to 20 U.S.C. § 1087ll is presumed to be the reasonable and
necessary cost of attending an in-state public institution for a course of
instruction when a court makes its calculation under Iowa Code section
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598.21F(2)(a). If a party can show a special need or some other
circumstances that the presumptive cost is not the reasonable and
necessary cost of attending an in-state public institution for a course of
instruction for that particular student, the court may vary from the
presumptive cost.
Here, the parties argue over the $1920 cost of sorority dues. The
presumptive cost of attending Iowa State as shown by the record for the
2016–2017 school year is $19,750. Housing, meals, and other
educational expenses are included in the presumptive cost. The issue as
we see it is whether the record supports an award of a postsecondary
education subsidy beyond the presumptive cost of attending Iowa State. 3
We find, there is nothing in the record to establish that H.M.’s
college costs reasonably requires a postsecondary education subsidy in
an amount in excess of the presumptive cost. Accordingly, we decline to
vary from the presumptive cost in making an award under section
598.21F(2)(a).
In summary, we hold the presumptive cost of attending an in-state
institution under section 598.21F(2)(a) is the cost of attendance as
published by the in-state public institution. In this case, H.M. is
attending Iowa State. There has been no showing of factual
circumstances to increase this amount. Therefore, the reasonable costs
3Even though we have held the postsecondary education subsidy constitutional,
its constitutionality has been questioned. See Dan Huitink, Forced Financial Aid: Two
Arguments as to Why Iowa’s Law Authorizing Courts to Order Divorced Parents to Pay
Postsecondary-Education Subsidies Is Unconstitutional, 93 Iowa L. Rev. 1423 (2008); see
also Curtis v. Kline, 666 A.2d 265, 270 (Pa. 1995). But see Johnson v. Louis,
654 N.W.2d 886, 891 (Iowa 2002) (concluding statute did not impermissibly
discriminate against illegitimate children whose parents were never married); In re
Marriage of Vrban, 293 N.W.2d 198, 202 (Iowa 1980) (concluding statute did not violate
equal protection where parents were divorced).
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for postsecondary education expenses under section 598.21F(2)(a) is
$19,750. 4
C. Step Two: Calculation of the Daughter’s Contribution. We
now consider step two in the statutory approach, namely, consideration
of the amount H.M. may reasonably contribute to the cost of her
education. Under Iowa Code section 598.21F(2)(b), the district court is to
take into account “the child’s financial resources, including but not
limited to the availability of financial aid whether in the form of
scholarships, grants, or student loans, and the ability of the child to earn
income while attending school.” The district court included $5520 in
scholarships awarded to H.M. as part of her expected contribution.
We first note Roger argues there was an additional $500
scholarship not included in the court’s calculation. Lynn asserts,
however, there was in fact no additional $500 scholarship. The court
found Lynn’s assertion credible. We do not disturb that finding, except
insofar as the court made a minor error in calculating the total
scholarship funds available to H.M. Based on our de novo review of the
record, the available scholarship funds were $5525.
Roger challenges the court’s calculation of H.M.’s expected
contribution on several grounds. First, Roger asserts the scholarship
amount should be subtracted from the total reasonable costs for only
necessary postsecondary education expenses as part of step one of the
statutory analysis and should not be considered a contribution by H.M.
under step two. Second, he asserts H.M.’s contribution should include
$5500 in unsubsidized student loans that were available to H.M. but
4If
a child is attending an institution other than an in-state public institution,
the court should take the average cost of our in-state public institutions as the
presumptive cost for purposes of section 598.21F(2)(a).
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which she declined. Third, Roger asserts the court did not include any
financial contribution that H.M. could make toward her education with
money earned from part-time employment during the school year and
from full-time summer employment. Fourth, Roger suggests the $750 in
child support provided to Lynn over the summer months prior to the
2016–2017 school year should be included as a contribution by H.M. to
her education. Finally, Roger notes H.M.’s $2119.11 bank account
balance should have been considered in calculating H.M.’s financial
contribution to her education.
On the issue of treatment of the $5525 in scholarships awarded to
H.M., the court properly included scholarships in the calculation of
H.M.’s contribution to her college expenses under step two of the
statutory analysis as provided in Iowa Code section 598.21F(2)(b). The
statute itself explicitly mentions “scholarships” as a source of the child’s
contribution. Accordingly, the court did not err by attributing the
scholarship funds to H.M. as part of her contribution to her education.
We next turn to the question of whether available student loans
should have been considered as part of H.M.’s expected contribution.
Roger claims H.M. was offered $5500 in unsubsidized student loans to
defray educational costs, yet H.M. declined them. Roger argues these
funds were available to H.M., and thus the loans should be included in
the calculation of her expected contribution.
We do not agree. Under the statute, the court must determine
amounts that the child may reasonably be expected to contribute to
defray the costs of postsecondary education. In In re Marriage of Neff, we
held that in some circumstances, available loans should be considered in
calculating the child’s contribution to her education. See 675 N.W.2d
573, 579–80 (Iowa 2004). We noted it was reasonable to require the
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children to assume responsibility for repayment of loans because of the
“meager financial situation of the parents.” Id. at 580. The point of Neff
is that while loans may be included in the child’s expected contribution
for postsecondary education, the inclusion of the loans must be
reasonable under all the facts and circumstances of a particular case.
Here, Lynn and Roger had set aside what around the time of their
partial stipulation amounted to a little over $63,000 in a § 529 account
for H.M.’s education. It makes little sense to require H.M. to accumulate
a substantial debt burden in her college years when her parents had
prudently set aside substantial funds for her postsecondary education in
an amount sufficient to avoid such a result. The very purpose of setting
the money aside in a § 529 account is to lessen the need to accumulate
debt to finance a college education.
Further, the record indicates that interest on the unsubsidized
loans would commence accruing immediately. As a result, if H.M.
accepted the loans, by the time she graduates from her five-year program
and has the ability to begin repaying the putative loans, she would have
accumulated five years of accrued interest. Given the balance in the
§ 529 account and the incomes earned by Lynn and Roger, we decline to
disturb the court’s conclusion that the amount of available unsubsidized
loans should not be included in the child’s expected contribution.
Roger suggests if there is a surplus in the § 529 funds set aside for
H.M., the funds may be transferred to the § 529 accounts of other
children, thus providing a rationale for limiting the expenditure of funds
in H.M.’s § 529 account. Lynn disagrees and contends that each child’s
§ 529 accounts may only be used for the benefit of that child. The
dispute is not presently before us. Regardless, there is no evidence of
any kind in the record related to the potential postsecondary educational
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needs, if any, of the other children. Further, the record shows that since
the divorce, Roger has not made additional contributions to the § 529
accounts of his other children nor has he rebalanced the amounts in the
portion of the three § 529 accounts under his control since the
dissolution. Under these circumstances, we decline to limit our
consideration of the funds that might be available in H.M.’s § 529
account to provide for the speculative educational needs of her siblings.
We next turn to the question of whether the district court erred in
not including an amount for income that could be earned by H.M. by
working part-time during the school year and full-time during the
summer. Lynn testified that H.M. “has a job [during the school year]
pending with the Department of Recreation Services, and they’ve offered
her five hours a week at minimum wage.” Based on this testimony alone,
H.M. should be able to contribute approximately $1000 per year toward
her education. This would not include summer earnings.
Moreover, the statute speaks about the “ability” of the child to earn
income, not actual work income. Iowa Code § 598.21F(2)(b). Student
jobs generally are not planned far in advance and come and go with little
notice. Although the record below is sparse, we can take judicial notice
that the average unemployment rate in the Ames, Iowa Metropolitan
Statistical Area in 2016 was 2.3 percent. See Bureau of Labor Statistics,
U.S. Dep’t of Labor, Local Area Unemployment Statistics,
https://www.bls.gov/lau/lamtrk16.htm (last visited May 11, 2018)
[https://perma.cc/N3KJ-DRFD]. An expectation that H.M. will be able
to earn income is a realistic one, even on a sparse record.
In Neff, which involved two college-student children of divorced
parents, we said,
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It is not unreasonable to expect both children to work at
least part-time during the school year and full-time during
breaks and the summer months. In doing so, both children
can be expected to earn a substantial amount of money for
college.
675 N.W.2d at 580. Neff is factually distinguishable because these two
children had a track record of working substantial hours, and their
parents were of limited means. Id. Nonetheless, the case drives home
the point that the student’s anticipated earnings can be based on a
reasonable expectation, as opposed to proof of the existence of a specific
job.
Roger next suggests the $750 in child support provided to Lynn
over the summer months prior to the 2016–2017 school year should be
included as a contribution by H.M. to her education. We reject that
approach. The purpose of the $750 was to provide funds for Lynn to
help pay for the expenses arising from physical custody of H.M. We do
not think it is appropriate to include child support payable to Lynn in
calculating H.M.’s expected contribution to her education.
Finally, at the time of the hearing, H.M. had a balance in her
checking account of $2119.11. Roger asserts that these funds should be
considered in determining the contribution that H.M. may make toward
her postsecondary education. We think Roger has a point here. The
balance in H.M.’s checking account at the time of the hearing was
$2119.11. The district court did not include any amount from this
savings account in the child’s expected contribution. The parental
subsidies and scholarships available to H.M., however, will not cover all
the costs of her college education. Factually, she will be ineligible for a
parental subsidy after October of 2020. Although we do not think it is
reasonable to require H.M. to drain all her savings, particularly in light of
her need for regular car loan payments, we think it is reasonable that
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$500 of her savings should be available to pay for her first year of
education.
D. Step Three: Calculation of Each Parent’s
Contribution. Again, we adopt $19,750 as the reasonable costs for only
necessary postsecondary education for the 2016–2017 school year.
From that amount, we subtract H.M.’s expected contribution which, as a
result of the approach outlined above, increases from $5525 to $7025 as
a result of our inclusion of a contribution of $1500 from H.M.’s work
earnings and savings.
The amount left after the subtraction of H.M.’s contribution from
the total cost of attendance is $12,725. Because each spouse has
control over half of the § 529 funds held for the benefit of H.M., we divide
the $12,725 in half to establish a per-parent contribution of $6362.50.
The maximum amount that each parent can contribute for
postsecondary education is thirty-three and one-third percent, or in
simpler terms one third, of the total cost of postsecondary education.
Iowa Code § 598.21F(2)(c). In other words, the maximum that Lynn and
Roger can each pay is $6583.33. Accordingly, because Lynn’s and
Roger’s respective contributions do not exceed the maximum allowed in
this case, Lynn and Roger must each contribute $6362.50 toward H.M.’s
postsecondary education.
IV. Conclusion.
For the above reasons, we vacate the decision of the court of
appeals and reverse the judgment of the district court. Each parent
must contribute $6362.50 toward H.M.’s education for the 2016–2017
academic year. On remand, the district court should enter judgment
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accordingly. We exercise our discretion to decline to award attorney’s
fees.
DECISION OF COURT OF APPEALS VACATED; DISTRICT
COURT JUDGMENT REVERSED AND REMANDED.