This Financial Aid Scam Is Unbelievable

How far would you go to get financial aid?

Here’s what you need to know.

Financial Aid: College

If you’ve followed the headlines this year, you’ve undoubtedly read about the largest college admissions scandal in U.S. history. You also may have read that the latest student loan debt statistics show that more than 44 million borrowers collectively owe $1.5 trillion of student loan debt. As the cost of college tuition and student loan debt rise, and college admissions have become more competitive, some parents apparently have taken a different approach to help “lower the cost” of college.

This latest attempt to game the system may not be as large as Operation Varsity Blues, but it is as unbelievable as it sounds. According to reporting in ProPublica Illinois, parents in suburban Chicago have found a creative loophole to secure their children more financial aid and scholarships.

Here’s how it works:

1. During a child’s junior or senior of high school, the parent gives up legal guardianship of the child to a friend or relative. Yes, gives up legal guardianship.
2. The child then applies to college and claims financial independence from the child’s family.
3. The child then receives more financial aid and need-based scholarships.

Investigation: The Findings

A ProPublica investigation found more than 40 of these guardianship cases filed between January 2018 and June 2019 in the Chicago suburbs of Lake County, Illinois. The children have been accepted to multiple colleges and universities, ranging from small private colleges to larger public universities. The parents allegedly include lawyers, an assistant superintendent, a doctor and insurance and real estate agents. According to ProPublica, the parents allegedly were not facing financial hardship and the underlying rationale for relinquishing legal guardianship of their children was based solely on obtaining more financial aid.

According to the U.S. Department of Education, dependent students are required to report their parents’ financial information on the Free Application for Federal Student Aid (FAFSA^®), which is the primary form to apply for financial aid. However, independent students are not required to report their parents’ financial information. Students who are considered financially independent typically not in contact with their parents, homeless or legitimately financially independent, among other situations. The 2019-2020 FAFSA has 10 questions to determine if an applicant is considered financially dependent.

Remaining Questions

There are countless questions, among others, that remain:

• How many more students and parents were involved?
• Were any of these cases involving a legitimate change of guardianship?
• What will happen to students who were improperly awarded financial aid?
• Will these students lose financial aid? If so, how much?
• Will these students be suspended or expelled from school?
• What penalties, if any, will the parents face?
• Did any students not receive financial aid as a result?
• If other students were denied financial aid, will they now receive that financial aid?
• Did any students who benefitted improperly receive a degree?

Stay tuned.