Education Department investigating wealthy parents using guardianship transfers to get financial aid: report
© Greg Nash

The Education Department is reportedly investigating wealthy families' alleged use of guardianship transfers to enable their children to receive more college financial aid. 

Parents have been giving custody of their teens to relatives or friends so that the youngsters can receive more college financial assistance, The Wall Street Journal reported Monday, citing people familiar. 

The newspaper reported that several universities in Illinois are also looking into the practice, which has reportedly been used in Chicago suburbs. 

"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.”

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Fifteen accepted students had transferred guardianship, admissions officers found. The school will withhold internally funded need-based aid from those students “until we are satisfied that students who have transferred guardianship don’t have other financial resources available,” Borst said.

He added that those students are each receiving as much as $11,785 in state and federal aid, in addition to university aid. 

Going through 1,000 probate court cases in Lake County, Ill., in 2018, the Journal found 38 in which a high school junior or senior had undergone a guardianship transfer.  

The review found that in almost all 38 cases, when asked why the petitioner should become the guardian, the person answered something like, “The guardian can provide educational and financial support and opportunities to the minor that her parents could not otherwise provide.”

Chicago attorney Mari Berlin, who has represented 25 families who have done guardianship transfers to get independent student status, told The Journal she believes such transfers are in students' best interest.

“The guardianship law was written very broadly,” she said. “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.”

Education Department spokeswoman Liz Hill told The Hill in a statement Tuesday that the department was committed to evaluating what changes can be made to dissuade those "who seek to game the system." 

"The laws and regulations governing dependency status were created to help students who legitimately need assistance to attend college. 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," she said, but did not comment further.

The report comes on the heels of a college admissions scandal, in which wealthy parents and others have been accused or convicted of scheming to help their children cheat on college entrance exams or bribe athletic coaches to help their children enter competitive universities. 

Revelations of those cases have renewed debate regarding the role of wealth in college admissions. 

The Hill has reached out to the Education Department for comment.