"Amid an intense national furor over the fairness of college admissions, the Education Department is looking into a tactic that has been used in some suburbs here, in which wealthy parents transfer legal guardianship of their college-bound children to relatives or friends so the teens can claim financial aid, say people familiar with the matter," The Wall Street Journal reports.
"The strategy caught the department’s attention amid a spate of guardianship transfers here. It means that only the children’s earnings were considered in their financial-aid applications, not the family income or savings. That has led to awards of scholarships and access to federal financial aid designed for the poor, these people said.
Several universities in Illinois say they are looking into the practice, which is legal. '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,' said Andrew Borst, director of undergraduate enrollment at the University of Illinois. 'This is legal, but we question the ethics.'
One Chicago-area woman told The Wall Street Journal that she transferred guardianship of her then 17-year-old daughter to her business partner last year. While her household income is greater than $250,000 a year, she said, she and her husband have spent about $600,000 putting several older children through college and have no equity in their home, which is valued at about $1.2 million, according to the property website Zillow. She said she has little cash on hand and little saved for her daughter’s education.
Admissions officers found 15 students whom they had accepted who had recently legally transferred guardianship. The school said it will likely withhold institutionally funded need-based aid 'until we are satisfied that students who have transferred guardianship don’t have other financial resources available,' Mr. Borst said.
Apart from the university aid, the students each are receiving up to $11,785 in state and federal aid, he said.
'They are gaming the system, whether it is legal or not doesn’t make it any less unsavory,' said Justin Draeger, CEO and president of the National Association of Student Financial Aid Administrators."
NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Articles included under the notable headlines section are not written by NASFAA, but rather by external sources. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.
Publication Date: 7/30/2019