Parents Giving Up Custody of Kids to Scam Financial Aid
Dozens of well-off students from the Chicago area are getting college subsidies.
ProPublica has uncovered another parental gaming of higher education admissions that’s arguably more cynical than the Varsity Blues scandal.
Dozens of suburban Chicago families, perhaps many more, have been exploiting a legal loophole to win their children need-based college financial aid and scholarships they would not otherwise receive, court records and interviews show.
Coming months after the national “Varsity Blues” college admissions scandal, this tactic also appears to involve families attempting to gain an advantage in an increasingly competitive and expensive college admissions system.
Parents are giving up legal guardianship of their children during their junior or senior year in high school to someone else — a friend, aunt, cousin or grandparent. The guardianship status then allows the students to declare themselves financially independent of their families so they can qualify for federal, state and university aid, a ProPublica Illinois investigation found.
“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.”
—“Parents Are Giving Up Custody of Their Kids to Get Need-Based College Financial Aid“
I can’t imagine signing over custody of my children, let alone to save a few bucks on college. And, in the grand scheme of things, scamming money intended to help children who otherwise couldn’t afford to go to college ranks is more repugnant than taking a slot intended for a star water polo player.
The extent of the scheme isn’t yet known:
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 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.
The play is one that, in hindsight, seems obvious. Still, it may be that one attorney figured out the loophole and it hasn’t spread much beyond his client base.
Borst said the university told the three students midway through last school year that their university-based 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.”
The university now asks more questions of students 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. The questions have deterred some families from continuing to seek university aid, Borst said.
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.
While the intent here seems clearly fraudulent, it’s quite probably legal.
Nearly all the cases identified by ProPublica Illinois were handled by one of two law firms: The Rogers Law Group in Deerfield, which handled most of them, and the Kabbe Law Group in Naperville. The only case filed by a different firm involved the family of Rick Rogers, of the Rogers Law Group.
The petitions filed by Rogers, whose firm specializes in real estate, are very similar, with language saying the guardianship would be in the minors’ “best interest” and typically citing educational reasons.
Many, for example, say: “The Guardian can provide educational and financial support and opportunities to the minor that her parents could not otherwise provide.”
Reached by phone, Rogers declined several times to comment about the families he represented, the process or why he sought a legal guardian for his son.
The Illinois Probate Act, the law that governs guardianship, does not specify circumstances in which guardianship should be denied.
According to Illinois law, a court can appoint a guardian if the parents consent, the minor agrees and the court determines it is in the minor’s best interest. Even if a parent is able to care for the child, the court can approve the guardianship if the parents voluntarily relinquish custody of the child.
Interestingly, then, the parents are essentially filing the guardianship petition on the basis of the scam they’re trying to commit. An appeal in one case cited was extremely explicit:
In the brief, attorney Mari Berlin argued that the student’s parents are finalizing a divorce and can’t afford to support his college education. It said that the family is “working with a Certified College Planner to help him find a way to independently support himself through college, with specific focus on how to afford tuition.”
Berlin wrote in the brief that the student, who dreams of becoming a doctor, would be best served by a guardianship “that would allow him to attain the independent status necessary to achieve his goal.”
Even after caught, Berlin justifies the ruse:
Berlin said families who are going this route are in a financial position where their income is too high to qualify for financial aid but they still will struggle to pay for college. While this is an atypical use of guardianship, Berlin said, families have a strong legal basis for bringing the cases. The law doesn’t preclude it, she said.
“It’s a solution they have been able to find as college costs go up and they are unable to pay,” she said. “It is in the best interest of the minor, which is the statute’s purpose.”
This is not a new issue, of course, but it’s gotten worse as tuition has skyrocketed. I vividly remember a conversation 35 years ago, when I was a high school senior, with a fellow high-ranking member of my class who was lamenting that, despite exemplary grades and extracurricular achievement, she wasn’t getting much in the way of financial aid because her father, who owned a small garage, made too much money to qualify. She managed to get through college and medical school all the same.
College is much, much more expensive now than it was then even adjusted for inflation. And merit-based aid may well be less available now than it was then. So I get the pressure.
Still, it’s unconscionable for upper middle class parents to take money intended for low-income children.
I agree, but in my experience there’s an entire cottage “financial advising” industry set up to do exactly this. The pro-publica case may be particularly extreme, but this has been going on for years.
My parents (middle-to-upper middle class) attended a “preparing your finances for college” seminar in the early 1990’s as they were prepping for me to go to college. I vividly remember how upset my father was after he came back. He shared that the entire seminar was essentially selling services that would “hide” money in order to help kids qualify for debt-free financial aid services.
The sad truth is that this is one of those example of how having resources provides access to resources that help you circumvent the system. And I think there are a lot of people out there who don’t see taking advantage of the system in these ways as being immoral.
Aside: I was incredibly proud, at the time and now, of my father for his revulsion at those schemes.
To be fair, it’s not “a few”. Don’t get me wrong, it think it’s a scummy thing to do but we’re talking hundreds or thousands of dollars per semester per student. They wouldn’t be doing this in the first place if it wasn’t financially worth their while – I’d imagine filing custody issues isn’t cheap or quick. Poor folks certainly can’t afford to pull off something like this…
Damn right. This falls under the thinking of “why is nobody helping me? Poor people get everything!”. I’ve heard variations of it over the years – why should middle-class kids have to pay full price for lunch when poor kids get reduced or free ones, more scholarships and aid available to “low class people” instead of “hardworking families”, etc. No one seems to get that qualifying for these things is not a good thing and means life’s kinda sucky for the kids we’re trying to help out.
I believe the PC term we’re using for this kind of BS is “economic anxiety” when really it’s plain ole’ “how dare you help them before you help me!” These families don’t *need* the money but think they *deserve* it. Why? Because they’re “middle class” backbone of America, they’re not “rich” at all (compared to the Kardashians, anyways) and they should be entitled to every red cent truly impoverished folks do. Entitlement mentality at it’s finest.
@KM:
I’d be willing to bet that a significant percentage of them *do* think they “need” it. A lot of middle class people don’t have the faintest notion of what real need is. They think that because they are having a hard time getting all of their bills paid at the end of the month, that’s it–they qualify as “struggling.” Rather than looking at their budget and realizing that gee, maybe the grocery bill could be trimmed a bit, and maybe we don’t need the premium cable package AND hulu, netflix, and Amazon subscriptions–they think “we have a hard time making ends meet” and that’s the entirety of the introspection.
I’ve come across a handful of these types, and it never fails to make me ill.
“While ProPublica Illinois uncovered this practice in north suburban Lake County, where almost four dozen such guardianships were filed in the past 18 months..”
Where the limousine liberals reside.
@Guarneri: You have no idea what you are talking about.
Lake County is a collar county, and has been solidly Republican for ages. It’s just recently started trending more Democratic, which can be attributed largely due to the fact that its population is highly educated.
Editing to point to this article from 2018:
https://www.dailyherald.com/news/20181107/democrats-make-inroads-and-maybe-history-in-lake-county
“Democratic victories for county board seats also have brought the party to the precipice of a historic situation, as no one can remember when — or if — the Lake County Board was ever controlled by Democrats.”
“To save a few bucks”. The WSJ also covers this. In their example, a young lady qualified for a $27,000 merit scholarship and a $20,000 need-based grant, leaving her on the hook for $18,000.
If $20,000 of after-tax dollars is “a few bucks” for Mr. Joyner the reporting on the collapse of journalism needs to be revisited.
https://www.wsj.com/articles/college-financial-aid-loophole-wealthy-parents-transfer-guardianship-of-their-teens-to-get-aid-11564450828
Also left unreported: by operation of Illinois law a guardianship will automatically terminate when the minor turns 18. One wonders how financial aid applications evolve as the student ages. I very much doubt that a child who undertakes a formal emancipation can free her parents from paying, or we would be reading about that. And maybe we will!
https://www.illinoislegalaid.org/legal-information/helping-clients-minor-guardianship-cases
@mattbernius:
People with money like to keep it. The college financial advising cottage industry is small potatoes compared to the “make yourself eligible to have Medicaid pay for your nursing home” industry. People who spend a lifetime railing about givers and takers have no problem gaming the system in a way that allows them to pass on substantial estates to their children while the rest of us pay for their nursing homes.
So now we reach a point that on the front end they grab the diminishing funds we set aside to make college affordable and on the back end they grab the increasingly limited funds we apportion for indigent health care. In between, they get to moan about how high their taxes are and all the lazy moochers and welfare queens.
@Tom Maguire: I saw the WSJ link on memeorandum but didn’t bother to click through as I presumed it paywalled. The ProPublica example is $11,000—which is still a lot of money. I make college professor money, which is good but almost certainly less than the parents in question make. But I wouldn’t game the system to take money away from poor kids.
My wife’s ex-husband stopped paying child support the minute his two oldest kids turned 18. He’s under no legal obligation to pay even a cent towards college. Similarly, my girls get Social Security money from their late mother’s account. The payments stop the instant they turn 18 or graduate high school.
@KM:
Poor people don’t have to, since they already qualify.
This is what happens when you start means-testing things. You create resentment and perverse incentives. It gets worse when there is a hard cutoff. I know someone who has to be careful to never work more than N hours, or her children will lose their state provided health insurance — that first dollar over some threshold would put her back thousands of dollars per year.
As a rule of thumb, I’d rather have higher taxes and everyone qualifies for various programs. I’m not sure throwing more money at higher education is the answer to anything though (it creates the perverse incentive for the colleges to just raise tuition, which prices out the poor again)
Technically legal is the best kind of legal.
Just out of curiosity legal-types, why would this be illegal? I mean, we know it’s an attempt to defraud the system but what exactly would you charge someone doing this with? Relinquishing custody of one’s kids for some sort of benefit isn’t a crime, nor is accepting care of a minor with the clandestine intent to make a profit (so long as the minor is not neglected or harmed in any way). They’re cooking the books somewhat but they’re not actively lying or misrepresenting themselves.
How would you make something like this stop?
@KM:
Cop Rock – Baby Merchant
When I used to do more driving and would listen to Clark Howard on the radio, I would occasionally hear him advising people to do this type of maneuver for FAFSA filing. It’s always and only about the money looking better in “my” wallet than in “yours.”
@Gustopher:
For that and other reasons, I’ve come around to the idea that school lunches should just be free for everyone just like school buses.
I’m sympathetic to public university being free just like primary and secondary school. But it creates some perverse incentives, given that pretty much everyone needs K-12 in a modern society in a way that they don’t need post-secondary.
@KM:
Just speculating here, but there might be some issues with how they filled out their taxes. Better not still be claiming that kid as a dependent…
This is the perfect example of the greed of many of those who have more…it’s no wonder that polls consistently show that most Americans think these kinds of people should be paying more in taxes…of course, if they were legally obligated to do so, they’d probably be looking for even more slimy ways to save a buck…
The system itself is dumb. Parents aren’t required to pay any tuition no matter how much money they make. Means testing the parents may or may not provide an indication of how much financial support a “child” has to go to college. Keep in mind that the “child” in this case is more than likely 18 years old and already an independent adult.
@Roger: I’m going to push back a little bit here. Nursing home care is very expensive. It is care that my grandfather, who retired with about $1m net worth from P&G, could barely afford for my grandmother, who had had a stroke, and there was very little left of his estate when she died (which is fine – thank goodness it lasted for her lifetime). Alzheimer’s care is even more expensive. There is no plan that covers the cost of this (Medicare does not).
When Gen X hits the pipeline, there will be no pension money and not enough SS to pay for this kind of care. This is what taking care of our elders should mean, and does not. Moreover, if you do qualify for Medicaid you get $40 a month allowance. That will not even pay for a cell phone. All of this is ridiculous and outdated. A socialized plan to subsidize nursing home care, including Alzheimer’s care (maybe a rider), should be added to Medicare and the burden should be taken off Medicaid. Those using Medicare already pay reasonable premiums (even though the Trump-voting beneficiaries of socialism don’t see them as reasonable LOL) – add a reasonable premium to Medicare for nursing home care and take this whole industry out of the running.
Having dealt with this with my parents, who have one house not paid off and are entirely dependent on SS for their retirement income (I don’t think my dad ever made more than $50k/year during his entire career, and he certainly did not have a retirement plan or pension), as well as an inheritance from my mother’s father that consisted of about $100k and a small house in a non-tourist location in Fla., my parents had to choose between selling the house with a mortgage, here among their family, or the house in Fla., which was worth no more than $75k, and didn’t begin to cover the cost of the nursing home that my father was in for a spinal issue for ~16 mos. I will not be eligible for Medicare for over a decade, but I am already trying to plan what to do with my house so my kids don’t end up having to deal with this stuff when I get old. If my mother had had such advice, she could have protected that small house in Fla. that meant a lot more to her than money and was a drop in the bucket as far as the cost of my father’s actual care. (To her credit, she did not sell the house with the mortgage, divorce him, and take off to Fla. and leave him at the tender mercy of the nursing home, as one atty advised her to do. He has just received a diagnosis of lung cancer and is undergoing chemo, so we are starting this all over again; fortunately he was already qualified for and covered by Medicaid, so what Medicare does not cover, Medicaid picks up.)
tl;dr: unless you’re in the top 1-2% you’re going to blow through a whole lot of money very quickly if you need nursing home care (not just assisted living).
(Don’t get me started on the rampant patient abuse and drug scamming that goes on in the nursing homes, and the complete lack of recourse patients and families have with the state boards/complaints. And Trump just made it even harder to hold nursing homes accountable.)
@Blue Galangal: I don’t know that we disagree very much. I think Medicare should cover long term care and we should not have a system that requires people to impoverish themselves to get the substandard care that too many nursing homes provide. It’s just that I have very little sympathy for people who try to limit the truly needy’s access to care, but think they should be able to both preserve their own assets and have the rest of us pay for their care. “Socialized medicine is terrible until I need it” is not a good look.