Wealthy Illinois Parents Transferred Kids’ Guardianship to Finesse Financial Aid

Never underestimate the ability of rich people to find a new scam. With a new spotlight on the outright bribery that brought down people like Lori Loughlin, wealthy parents have found a new way to game the college admissions system for their kids. The Education Department is investigating the practice of rich families transferring guardianship of their children—often to family members or friends—so the kids qualify for financial aid.

The tactic makes the children eligible for financial aid as only their own earnings are considered in aid applications, post-transfer. As they are teenagers, their take is significantly less than that of their well-off parents.

The strategy was noticed after a number of wealthy children in Illinois were signed off to a guardian in their final years of high school, according to the Wall Street Journal.  The University of Illinois became aware of the practice after a high-schooler mentioned the admissions strategy to her counselor. The counselor passed the news on to the university, which is investigating 15 students whose guardianship was recently transferred to see if they have to revoke need-based aid. 

Perhaps surprisingly, there is nothing illegal about the practice under current law. However, shuffling paperwork to use benefits intended for impoverished students is questionable. 

“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,” the University of Illinois director of undergraduate admissions Andrew Borst told WSJ. “This is legal, but we question the ethics.”

The solution might be adding a clause to the Federal Student Aid guidelines that clarifies who is and is not a dependent student.

“If a student enters into a legal guardianship, but continues to receive medical and financial support from their parents, they do not meet the definition of a legal guardianship and are still considered a dependent student,” a source said the clause would read.