How some rich parents 'cheat' to cut kids' college bill

Parents in the Chicago area are reportedly giving up guardianship of their teenagers in order to help them pay for college, according to new reports.

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The practice is allowing students who are applying for college to declare themselves financially independent and therefore eligible for more scholarships and financial aid, reports from the Wall Street Journal and ProPublica found.

According to the Journal, there were 38 cases in 2018 where parents transferred legal guardianship of their teens -- either juniors or seniors in high school -- to a friend, another relative or a co-worker in Lake County, Illinois.

Some of those families lived in homes valued at more than $1 million, while most lived in homes valued around $500,000, the Journal reported.

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

Borst told ProPublica that the University of Illinois discovered three enrolled students -- and 12 applicants -- who had used guardianship transfer to receive more financial aid.

Large group of happy college students celebrating their graduation day outdoors while throwing their caps up in the air (iStock)

The three students -- who reportedly just finished their freshman year -- had their university-based financial aid reduced in the middle of the year, ProPublica reported.

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

However, one attorney from Chicago firm Kabbe Law Group, who has represented families that have transferred guardianship, told the Journal that the transfers are in the best interest of the students.

“The guardianship law was written very broadly,” Mari Berlin told the Journal. “Judges were given an immense amount of discretion. The standard is, best interest of the child, and I think it’s hard to argue that this is not in the student’s best interest.”

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The Education Department started an investigation after the University of Illinois notified the agency of the practice. The department could change some language in the Federal Student Aid handbook that would guard against wealthy families taking advantage of the practice, according to the Journal.