Perna, thank you, that link was so useful and answered my question. Here is what it says about "informal separation", which would be our category if we try to claim separation on the FAFSA:
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If the family claims to be informally separated, the school will want to see documentation that the couple did not cohabit

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That seems pretty clear. So he needs to move out.

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Check your state and/or county laws as you have to have a separate residence for X period of time before you can get the divorce

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In my state there is no requirement that you have separate residences before the divorce. Some couples live together up until the final divorce papers are signed. My state, however, does have a 90 day waiting period. After you file for divorce, you must wait a minimum of 90 days before you can become legally divorced and sign the final papers. I think this is to prevent ill thought out and rushed divorces.