Reports from ProPublica and the Wall Street Journal published this week reveal that dozens of suburban Chicago wealthy parents transferred guardianship of their teenage children to help them get government-issued financial aid meant for students in need.
The investigations found that dozens of affluent parents in Chicago with the attorney’s help exploited a loophole in the law that allowed them to transfer legal custody of their children to friends, relatives, or someone else. When the child applies for financial aid, they can declare themselves financially independent.
At least 40 wealthy parents (which included lawyers, a doctor, real estate and insurance agents, and an assistant school superintendent) from the Chicago suburbs found a legal guardian for their high school age child between January 2018 and January 2019, according to ProPublica.
“It’s a scam,” said Andy Borst, director of undergraduate admissions at the University of Illinois at Urbana-Champaign. “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.”
Borst said that he first became suspicious when a high school counselor called him to ask why a particular student had been invited to an orientation for low-income students despite being from a wealthy community.
After reviewing the application, Borst said he found she had obtained a legal guardian.
The Department of Education and several universities are looking into an alleged scheme that allows children of wealthy families to qualify for financial aid.
Borst told ProPublica that when the university told the three students that their financial aid would be reduced, none of them fought the decision.
“We didn’t hear any complaint, and that is also a big red flag. If they were needy, they would have come in to talk with us,” Borst said.
According to the Journal, the Department of Education is now investigating the method.
“The laws and regulations governing dependency status were created to help students who legitimately need assistance to attend college. Those who break the rules should be held accountable, and the Department is committed to assessing what changes can be made — either independently or in concert with Congress—to protect taxpayers from those who seek to game the system for their own financial gain,” Liz Hill, Department of Education press secretary said in a statement.
“[The families] are gaming the system. Whether it is legal or not doesn’t make it any less unsavory,” Justin Draeger, CEO of the National Association of Student Financial Aid Administrators said.
The Department of Education is considering closing the loophole by stating they are still a dependent child if a student in guardianship continues to get aid from parents.
In Illinois last year, about 82,000 students who were eligible did not get the aid because there wasn’t enough money. That could mean the decision not to go to college for low-income students.