Unfortunately, it really isn't any of your business how XW spends her alimony or child support, as long as your DD is having her needs met. College does not count as such a "need," unless your D contract says it does.
So, it is probably both futile and inappropriate to try to negotiate with XW. Someone gave you great advice: decide what YOUR boundary is and communicate it to DD. You might also communicate that boundary to XW: "XW, fyi, I will pay _______ toward college applications. I thought I'd let you know as DD may seek help to cover additional costs."
Yes, XW is being a creep by not chipping in. Too bad. None of your business.
DD also needs clear boundaries. To allow her walk all over you financially and guilt guilt you into funding would not be good for her.
There are two questions:
(1) What is the consequence for the theft? Zero funding for applications? Calling the police? Signing loan papers? This is YOUR choice. If you come up with multiple acceptable consequences, then perhaps you might give her a choice between them.
(2) How much will you give her toward applications and under what conditions? 0$, $400, matching funds up to $500?? (If you go matching funds, let DD figure out how to get the moolah...) Anyway, again, the amount and conditions are YOUR choice. You can report your boundary to her very matter-of-factly. Take it or leave it. No emotion. (I would urge you, though, not to tie too many strings to the money--like trying to control which schools she can spend it on.... )
Sorry your XW isn't being a better partner. It stinks.
