I have 2 step children with my wife and have placement in NY. The older one is off to college this fall. The younger one is 15 and planning on moving in with his father in KY when she leaves. We were planning on changing the custody papers on him so his dad has custody when he leaves. After reading the fafsa paperwork the older one would be better off with him as the custodial parent too. With us as her custodial parents she will get $0 aid. My wife and I don't make enough to pay for my stepdaughter's college. We fall into that group that makes just enough to get $0 help with anything. We were actually thinking about moving to FL or SC when they left.
With that being said is changing custody of our older daughter's custody a possibility? I realize that it won't help for her freshman year because that year will be based on our income, but it would definitely help for sophomore and beyond. Are there rules that govern this?

When the FAFSA is done each year, a child of divorced parents is asked to use the information of the custodial parent.
The custodial parent is defined as the parent with whom the student lived the most in the 12 months prior to the date of filing the FAFSA.
It is not based on any custodial paperwork, but simply who the student lived with the most.

So what happens after her first year of college. She's planning on living at college and staying with friends in the summer. She'll live with parents for only a few days of the year.

In cases where custodial parent cannot be determined by living situation (where the student lived equally with both parents, or neither), the next qualification would be whichever parent provided more of the student's financial support.

According to the Dept. of Education:

"If your parents are divorced or separated, answer the questions about the parent with whom you lived more during the past 12 months. If you lived the same amount of time with each parent, give answers about the parent who provided more financial support during the past 12 months or during the most recent year that you actually received support from a parent. If this parent is remarried as of today, answer the questions on the FAFSA about that parent and the person whom your parent married (your stepparent)."

For more information, see this flow chart of who is considered a parent for FAFSA purposes.