The Washington PostDemocracy Dies in Darkness

Amid reports of parents transferring custody of their children to get financial aid, Education Department recommends steps to prevent fraud

Officials at the University of Illinois at Urbana-Champaign are looking into cases in which students' guardianships were transferred late in high school, perhaps to obtain more financial aid. (iStock)

The Education Department said Tuesday it is recommending steps to prevent attempted fraud in college financial aid amid reports of parents transferring custody of their children so they can qualify for more help.

The Wall Street Journal and ProPublica Illinois reported that some wealthy parents in Illinois have asked friends or relatives to take legal guardianship of their children to allow the teenagers to claim financial aid. The revelations, in the wake of the “Varsity Blues” national college-admissions scandal, provoked outrage.

“It was so brazen,” said Andy Borst, undergraduate admissions director at the University of Illinois at Urbana-Champaign, who worries that need-based aid is being taken away from students who cannot afford college otherwise.

“The laws and regulations governing dependency status were created to help students who legitimately need assistance to attend college,” Education Department spokeswoman Elizabeth Hill said in a statement Tuesday. “Those who break the rules should be held accountable, and the Department is committed to assessing what changes can be made — either independently or in concert with Congress — to protect taxpayers from those who seek to game the system for their own financial gain.”

Borst became concerned last summer after getting questions from high school counselors in affluent areas about orientation and grant programs for students from low-income families.

When university officials looked into it, they found three cases in which a transfer of guardianship had recently occurred. The school contacted the families to ask questions including who was paying for the student’s health insurance, cellphone and other expenses; they wanted to determine if the students still lived with their parents or if they were truly financially independent of them.

Some families were not forthcoming, Borst said, and some parents said they no longer wanted to be considered for aid from the university. The school has identified 11 additional cases.

The Wall Street Journal reported that a review of probate-court cases in wealthy Lake County, Ill., revealed 38 cases in 2018 in which guardianship of a high school junior or senior was transferred, with nearly all using similar language in the application: “The guardian can provide educational and financial support and opportunities to the minor that her parents could not otherwise provide.”

Borst said he is aware of this happening at five other colleges.

“It seems to be isolated to this area outside of Chicago,” said Jill Desjean, a policy analyst for the National Association of Student Financial Aid Administrators, but it is a new issue and the association does not know the scope of the problem.

Without changes, Desjean said she thought it would be difficult to detect and stop the practice. There is a detailed process for verifying income, she said, but financial-aid administrators do not have discretion to question whether the legal guardianship was transferred for legitimate reasons; a judge has made a determination.

Borst said the University of Illinois reported concerns to the Education Department and to a state agency that oversees state aid. Because the students have paperwork showing guardianship had been transferred, they are obligated to receive federal and state grants. But lawyers advised Borst that the university could use its discretion in deciding whether to give aid from the school, he said. Many of the students in question qualified for “Illinois Promise,” which can provide tens of thousands of dollars in aid annually. The university offers the aid to ensure high-achieving students from even the lowest-income families can afford an education.

“Attorneys are saying it’s legal, but at what point does it become wrong?” Borst said. Because of the way the state’s grant is structured, it is first-come, first-served need-based aid, Borst said. “By giving these students money, that was taking money from students who are truly low- and middle-income.”

The Education Department’s Office of Inspector General does not confirm or deny investigations, spokeswoman Catherine Grant said in an email, but she said the office is aware of the issue. Grant said officials have advised the Federal Student Aid office to add clarifying language to its handbook: “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.”