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Financial aid fraud is wrong — but overcorrection could hurt more students

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Here we go again. Families guided by a private college adviser have found another way to game the system to benefit their students by paying less for college than they should. 

ProPublica Illinois recently found a group of students — many of whom have worked with the private college financial adviser Destination College — were able to declare themselves as financially independent because their parents transferred their guardianship to a relative or friend. This practice abuses the principle our financial aid system is structured upon: parents should pay what they can afford for their child’s higher education. 

Twenty-four is the magic age when a parent no longer holds this financial responsibility, according to current law. There are several situations when the law grants financial independence to a student under the age of 24. These situations include serving in the military; being married, homeless, emancipated, or in a legal guardianship; and providing more than 50 percent support for a child/dependent.

The families in this scandal are taking advantage of the legal guardianship exception so that their children can complete the Free Application for Federal Student Aid (FAFSA), used to determine eligibility for the federal Pell Grant as well most need-based state aid programs like the Illinois Monetary Award Program (MAP), without providing their parents’ financial information. A legal guardianship ends when the child turns 18, and these students are not required to include either their parents’ or their guardian’s financial information on the FAFSA.

But how widespread is this problem? It’s likely not very. In Illinois, where this conversation began, over 130,000 MAP grants are awarded annually based on financial need. According to the Illinois Student Assistance Commission, just over 1,200 of those in fiscal year 2019 were awarded to students who said they had been in a guardianship. For the last five years, the number of students stating such has remained stable. ProPublica mentions four dozen or so suspicious guardianship cases. If they all received the MAP, they would represent .04% of the total grants. 

These students with manufactured guardianships are not bankrupting the need-based aid system. Their dollars would have done little across the 80,000 Illinois residents who qualified for MAP but did not receive it because the state ran out of funds (as it does most years). But they are setting another example of people of privilege using their resources to try to game a system set up to help those in our society who need it most. None of these facts make exploiting this legal loophole ethical. Whether it can be considered fraud should be left to the courts. 

However, this ProPublica examination will likely cause similar research in other states and much pacing of the halls of state legislatures and Congress. Certainly policymakers should examine the evidence and consider if changes need to be made to who can apply for financial aid without including parent income and assets. But there are many students who desperately need these exceptions and any changes must protect them. 

Students from low-income families who are genuinely separated from their parents are unlikely to have the ability to use the courts for guardianship transfer or emancipation. Instead, they go through a complicated financial process called a dependency override. This process is in place so that a student who has no ability to have their parents complete the FAFSA can be considered independent for financial aid purposes. These students usually have not heard from their parents for a significant period of time period due to a variety of factors such as incarceration, deportation, addiction, or mental health issues. 

The student must share their painful story with their college’s financial aid office so that they can be considered independent for financial aid purposes. In fact, this process is currently so difficult that a team of Maryland legislators, led by Rep. Elijah Cummings (D-Md.) and Sen. Ben Cardin (D-Md.), introduced legislation called the FAFSA Fairness Act to make it easier.

The American financial aid system rests on the principle that parents who can afford to pay are asked to do so, in full or part, based on their means. This isn’t the first time concern has risen about families exploiting a loophole, such as the fear that young adults were getting married to secure more financial aid for both “spouses.” 

As long as our system remains built on the “pay what you can afford” approach, there will always be individuals who try to game the system. The challenge facing policymakers is to ensure a system that limits these individuals’ ability to take advantage of taxpayer spending without creating undue burden on the students who most need this support.

Carrie Warick is the director of policy and advocacy for the National College Access Network, whose 500 members in 49 states are committed to helping more students from low-income backgrounds, first-generation students and students of color enter and complete postsecondary education.

Tags Ben Cardin Education Department Elijah Cummings Student loan

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