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Giving Up Guardianship to Receive Financial Aid – Is it Legal?

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In the spring of 2019, the world was made aware of the college admissions cheating scandal that centered on celebrities Lori Loughlin and Felicity Huffman. The two actresses were charged with criminal acts. However, there’s a recent scandal making headlines. The question is whether or not this one constitutes unlawful actions.

According to studies published by ProPublica and The Wall Street Journal, affluent parents are now giving up guardianship of their children just so they can go to school. By sacrificing guardianship, the children headed off to college can then receive financial aid. Some are calling the move unethical while others are wondering if the move is illegal. 

How the Scheme Works

According to the studies, wealthy parents are giving up guardianship so their children can receive financial aid. Guardianship is typically given to a grandparent or aunt or uncle during the last year or two of high school, just before children apply for college. 

After transferring guardianship, the child applies for financial aid. Under normal circumstances, they’re required to disclose their parents’ income. This helps financial aid officers determine if the child actually needs financial aid, which is something reserved for students that come from low-income homes. When the parents are no longer the legal guardians however, students are not required to disclose this information. Matters on financial aid are then decided on the student’s income and assets. The income of their guardian is not taken into consideration. 

This situation gives the student a much better chance of receiving financial aid and allows the parents to keep more of their income. Typically, the children and parents resume their normal lives. The child remains in the home and continues on with their lives as they always did. A lack of guardianship does not bar the child from living at home. 

Why Some Say the Scheme is Unethical

There have been many that have spoken publicly about how they think the practice of giving up guardianship for financial aid is unethical. One of these individuals is Andy Borst, director of undergraduate admissions at the University of Illinois at Urbana-Champaign. He called the practice a scam. Many of the cases studied happened at Illinois colleges. 

The reasoning for Borst’s opinion, and many others, is the fact that when children of wealthy parents receive financial aid for college, it takes away from those that truly need it. Financial aid is often distributed on a first-come, first-served basis. The amount of financial aid is also limited, meaning that not everyone that applies will be able to receive it. 

For example, the federal Pell Grant and the Illinois State Monetary Award Program both distribute grants to students in need. Combined, they can provide as much as $11,000 annually for students in need. In 2018 alone, there were 82,000 eligible students that did not receive it simply because there was not any money left (according to ProPublica Illinois).

Between January of 2018 and June of 2019, ProPublica Illinois identified over 40 cases that fit the profile of parents giving up guardianship so their child could claim financial independence. Those numbers were collected solely from the Chicago suburbs of Lake County.

Considering the number of cases found in the state of Illinois, it’s easy to imagine that in 2018, many more eligible students could have received grants that were denied. On a national level, there are likely hundreds of thousands of eligible students denied financial aid when it is instead going toward children that have wealthy parents capable of paying their college tuition. 

Some also argue that the practice hurts taxpayers. Critics of the practice say it places an unnecessary burden on taxpayers when they are paying to send the children of wealthy parents to school. Whether financial aid is provided through a state or federal program, it is taxpayers that ultimately pay for the costs of those programs. 

Why Some Say the Scheme is Not Unethical

Not everyone disagrees with the practice, though, or believes it to be unethical. There is no doubt that the cost of college has skyrocketed in recent years. For example, in Illinois (the state centered around the financial aid scheme), the cost of tuition, fees, and room and board for full-time students at public universities has doubled within the past 15 years (College Illinois Tuition Costs and Fees).

These expenses are not only difficult for low-income parents to pay, but in some cases, for wealthy parents to pay, as well. In one case, the wealthy parents of a student were in the middle of getting a divorce. It was not finalized at the time the child applied to college, meaning the parents’ combined income would be taken into consideration. However, by the time the child was actually in college, the parents would not have the same income that they did at the time of sending in the application. That would put them in financial hardship in the future. 

Due to these expenses, some say, all parents look to cut costs when sending their child off to school, no matter how much income they have. This is just one more way to do it. Although the parents transferring guardianship may have found a loophole in the financial aid system and are using it to their advantage, that does not automatically mean the practice is unethical. 

Additionally, financial aid benefits the child, and there are dozens of laws throughout the country protecting the best interests of children. Many that argue against statements that this is unethical often raise this point asking if children are benefiting from the financial aid and receiving an education, how is that unethical?

Is it Against the Law?

The question of whether or not the practice is ethical may be a moot point. No matter the personal views on the topic, the fact is that it is legal

First, before transferring guardianship, a judge must sign off on it. Judges take many factors into consideration when making decisions on guardianship, with the best interests of the child at the top of the list. With dozens of students in question with this particular practice alone, dozens of judges have already determined that guardianship was what was best for the child. 

Second, the U.S. Department of Education has stated there is no obligation for a parent to contribute to the education of their children. This also makes the practice of transferring guardianship well within the boundaries of the law. 

Even if it is not against the law, several schools across the country are already taking action. Colleges and universities in Illinois, Missouri, and Wisconsin are currently assessing applications for financial aid. They have stated that they will adjust financial assistance if they believe the student is receiving other means of support. 

The U.S. Department of Education, and a representative of the Illinois Board of Higher Education have also stated that they would assess the way financial aid is currently distributed. Both agencies have stated that if changes are needed, they will be made to ensure as many students as possible that require financial aid receive it. While that may mean scrutinizing applications both carefully, it also means that all students will be considered, regardless of their parents’ income. 

 

*Data gathered from ProPublica Illinois.

 

Steven NovakAbout the Author
Steven M. Novak is an accomplished attorney with the Estate and Probate Legal Group, Ltd., where he focuses on estate and probate law. He has had extensive courtroom experience in probate administration and litigation. Novak was named an Illinois Super Lawyers Rising Star in 2017, 2018, and 2019, putting him in the top 2.5% of lawyers in Illinois. He also has a background in serving veterans and their families with legal matters.

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