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“It’s A Scam”: Rich Chicago Parents Giving Up Custody Of Kids To Exploit Financial Aid Loophole

Courtesy of ZeroHedge. View original post here.

Well-off Chicago residents have been exploiting a legal loophole to obtain need-based college financial aid and scholarships by giving up legal guardianship of their children. 

The tactic, which has been used by dozens of families (and maybe more according to Propublica Illinois), involves handing over guardianship to a friend or relative during the student's junior or senior year in high school - allowing them to declare themselves financially independent from their families. This qualifies them for federal, state and university financial assistance, according to the report. 

"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."

While ProPublica Illinois uncovered this practice in north suburban Lake County, where almost four dozen such guardianships were filed in the past 18 months, similar petitions have been filed in at least five other counties and the practice may be happening throughout the country. ProPublica Illinois is still investigating. -Propublica

According to the University of Illinois, at least 14 applicants have done the same - three of whom just completed their freshmen year, and the rest enrolling this fall according to Borst – who noted that the three students will have their university-based financial aid reduced. 

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

ProPublica Illinois found more than 40 guardianship cases fitting this profile filed between January 2018 and June 2019 in the Chicago suburbs of Lake County alone. The parents involved in these cases include lawyers, a doctor and an assistant schools superintendent, as well as insurance and real estate agents. A number of the children are high-achieving scholars, athletes and musicians who attend or have been accepted to a range of universities, from large public institutions, including the University of Wisconsin, the University of Missouri and Indiana University, to smaller private colleges. -Propublica

When reached for comment by ProPublica Illinois, parents or guardians in 15 of these cases flipped out – some hanging up the phone, others refusing to comment, and some demanding anonymity. 

In light of the scam, the University of Illinois is now scrutinizing applicants who have recently entered into a guardianship, " including whether they have contact with their parents, who they live with and who pays for their health insurance and cellphone bill," according to the report. 

Borst says the questions are working, and that some families have backed off seeking financial aid from the university. 

While the university has discretion over offering institutional aid, it is obligated to distribute the federal and state grants for needy students, known as the Pell Grant and the state Monetary Award Program, or MAP grant in Illinois, Borst said. Combined, they can total about $11,000 a year.

He said the university has alerted the U.S. Department of Education and officials at the Illinois agency that administers state financial aid, the Illinois Student Assistance Commission. An ISAC spokeswoman said the agency has not yet been told about a specific case, but that it would alert the state attorney general and the U.S. Department of Education if necessary. A U.S. Department of Education spokesman said he could neither confirm nor deny current or potential investigations. -Propublica

Last year, around 82,000 students were eligible for the MAP grant, however around 5,000 students did not receive it because there wasn't enough money for the first-come, first-served award. 

Read the rest of the report here


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