Dozens of suburban Chicago families, most likely many more, have been exploiting a legal loophole to win their teenagers’ need-based college financial aid and scholarships they would not otherwise receive, court records and interviews revealed this week.
How’d they pull it off? Parents allegedly filed paperwork to transfer legal custody of their children to a friend or relative while they are in high school. This allows their teenager to declare themselves financially independent on college applications, and thus claim dramatically lower incomes and earn need-based financial aid.
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In one case, a student whose parents owned a home worth $1.2 million only had to declare an income of $4,200, which was their income from a summer job. The student was then able to qualify for about $47,000 in federal Pell grants and scholarships to attend a private university with tuition of $65,000 per year.
Believe it or not, the practice is legal, but according to reports, the Education Department is investigating the matter. Andy Borst, the director of undergraduate admissions at the University of Illinois at Urbana-Champaign, told ProPublica:
“It’s a scam. Wealthy families are manipulating the financial aid process to be eligible for financial aid they would not be otherwise eligible for. They are taking away opportunities from families that really need it.”1
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According to ProPublica, Illinois laws that govern the transfer of legal guardianship are broadly written. As long as parents, children and the court agree, a judge can approve the transfer even if parents are able to financially support their kids.
Most of the cases cite language that states the new guardians “can provide educational and financial support and opportunities to the minor that her parents could not otherwise provide.”
Mark Kantrowitz, a leading financial aid expert and publisher and Vice President of research for the website savingforcollege.com, called the guardianship changes “an extreme measure,” adding:
“This is the first time I have heard of something so brazen. It’s completely unethical.”1
University of Missouri spokesman Christian Basi responded to ProPublica saying the school is investigating to ensure that legal guardianships are not filed “simply to try and gain financial advantage.” He indicated that university officials are flagging student accounts that appear to have benefited from this practice. Basi said:
“We are and would be extremely disappointed with anyone who would try to change their information with the sole purpose of taking money from a need-based program when they would typically not be eligible.“1
A University of Wisconsin-Madison spokesperson said the university may review and adjust its financial aid award at any point if evidence emerges that a student is actually receiving parental or other financial support not reported on the FAFSA.
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It is uncertain if the loophole has been used in states other than Illinios. The Department of Education does not require students to report their parents’ income on federal financial aid forms if they have legally been declared independent.
The scandal in Illinios comes just months after the unveiling of a college admissions scandal that saw more than 50 people charged with lying and buying their kids’ way into elite universities around the country. Well known celebrities including actresses Lori Loughlin and Felicity Huffman were named in the scandal, and many parents were reported to have paid $200,000 to $400,000 to secure their children spots at top universities such as Georgetown and Yale.
Investigators called it the largest admissions scam ever prosecuted by the Justice Department. It set off a nationwide reckoning regarding everyday access to elite colleges that have become more competitive in recent years. It will be interesting to see if the recent abuse of college aid in Illinois is occurring in other states as well.
