Wealthy parents transferring custody of children to get college financial aid, report finds

Some parents are giving up custody of their teens to qualify them for need-based college financial aid, a ProPublica investigation found.

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ProPublica detailed how the method is executed in a report released Tuesday. In the child's last years of high school, parents give up guardianship of their children to friends or another family member. Students can then claim financial independence when applying to college, meaning their financial needs are judged without consideration of the parents' income.

“It’s a scam,” Andy Borst, director of undergraduate admissions at the University of Illinois at Urbana-Champaign, told ProPublica. “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.”

The parents involved in many of the cases ProPublica discovered include lawyers, a doctor and an assistant school superintendent, the report said. Many of the children had excellent academic records and were athletes or musicians.

The group's investigation was based in suburbs of Chicago in north Lake County, Illinois, where it reported nearly four dozen such guardianships were filed in the past year and a half. The group is investigating whether the practice is happening throughout the country.

In Illinois last year, more than 80,000 students who were eligible for the state Monetary Awards Program didn't receive it because the state ran out of money, according to the report.

Borst told ProPublica he was tipped off to the practice when a high school guidance counselor from an affluent Chicago suburb called him to ask why one of her students had been invited to an orientation program for low-income students. He investigated and found that the student had obtained an illegal guardian.

Since then, the University of Illinois has since identified 14 students who did the same. Three had just completed their freshman year, and 11 plan to attend in the fall. Borst said he told the three students midway through last school year that their financial aid would be reduced.

“We didn’t hear any complaint, and that is also a big red flag,” Borst said. “If they were needy, they would have come in to talk with us.”

Borst said the university has alerted the U.S. Department of Education and Illinois education officials.

The Department of Education is now investigating the practice. Department of Education press secretary Liz Hill released the following statement to People magazine:

"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.”

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