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Wealthy parents giving up guardianship of their kids to qualify for financial aid, report says

ProPublica said it found dozens of parents exploiting a legal loophole to save money on their children's tuition at the expense of low-income students

Wealthy parents in Illinois are giving up legal guardianship of their children in order to "scam" universities into qualifying them for need-based financial aid, ProPublica Illinois reports.

In a report released Tuesday, ProPublica said it found dozens of parents, many of whom are doctors and lawyers, exploiting a legal loophole to save money at the expense of low-income students.

Executing the plot is rather simple once a family gets an attorney’s help. In the last years of high school, parents give up guardianship of their children to family members or friends. This allows the students to declare financial independence, so when they apply for college, their financial needs are judged without consideration of the parents' income. Most of the guardianship cases were executed by two law firms in the Chicago suburbs, the report found.

“It’s a scam,” Andy Borst, director of undergraduate admissions at the University of Illinois at Urbana-Champaign, told ProPublica. Borst said wealthy families are “manipulating” financial aid rules to make themselves eligible, while students facing financial hardships aren't getting all of the money they need to attend college.

According to ProPublica, more than 80,000 of the students in Illinois eligible for the state’s Monetary Award Program didn’t receive the scholarship because the fund ran out of money.

These wealthy families, he said, “are taking away opportunities from families that really need it.”

Borst told ProPublica he realized something fishy was happening when a school guidance counselor from a wealthy Chicago district asked why a student was invited to a low-income student orientation program.

The student, it turned out, had a legal guardian.

The University of Illinois has found more than a dozen students who've used this legal loophole and it has begun to press students who have legal guardians about their financial situations, Borst said. The school now asks some students who pays their cellphone bill and health insurance, and if they still live with their parents.

ProPublica identified a college consulting firm run by Lora Georgieve called Destination College which has ties to many of the families suspected of exploiting this loophole. The group, which did not reply to ProPublica’s request for comment, offers “strategies to lower tuition expenses.”

Borst said his school and other public universities are reviewing their policies to try to stop this scam. “I hope we can nip this in the bud now,” he said. “If it is legal, at what point is it wrong?”