Parents transferring custody of their children is the latest financial aid scam.
An investigation by the news outlet ProPublica in the Chicagoland area has uncovered cases involving wealthy parents who are suspected of transferring guardianship of their high school-aged student(s) to a friend or family member for student aid assistance.
Once guardianship is awarded, their child is then able to declare financial independence from his or her family and then qualify for need based grants they may otherwise not qualify for, such as the PELL or MAP grants.
According to the U.S. Department of Education website, “a student in legal guardianship does not need to report parent information on the Free Application for Federal Student Aid (FAFSA) form because he or she is considered an independent student.”
Almost four dozen guardianships have been filed in Lake County in the last 18 months, and similar petitions have been filed in at least five other Illinois counties.
The Wall Street Journal reported Monday that several universities in Illinois are also looking into the practice, which has reportedly been used in Chicago suburbs. However, there is concern that this could be happening nationwide.
Andrew Borst, director of undergraduate enrollment at the University of Illinois, told the Wall Street Journal: “Our financial-aid resources are limited and the practice of wealthy parents transferring the guardianship of their children to qualify for need-based financial aid — or so-called opportunity hoarding — takes away resources from middle- and low-income students.” Borst said it’s a legal as well as an ethical question.
Both the U.S. Department of Education and the Illinois Student Assistance Commission have been informed of cases suspected of using this legal loophole. According to the Associated Press, The Education Department’s inspector general declined to say whether it’s investigating but it was recommending that the department add new language to its rules to close the loophole.
This comes on the heels of the “Varsity Blues” scandal in California earlier this year, where affluent parents paid to ensure their students were accepted to highly accredited colleges and universities.
Jeremy Coumbes helped to gather this report.