Hot on the heels of this spring’s college admissions scandal, where wealthy parents were fraudulently buying admission to prestigious institutions for their underqualified children, comes another example of dishonorable parenting with regard to higher education.
The Education Department is looking into a tactic that has been used in some suburbs here, in which wealthy parents transfer legal guardianship of their college-bound children to relatives or friends so the teens can claim financial aid, the Wall Street Journal reported July 29.
The strategy caught the department’s attention amid a spate of guardianship transfers. It means that only the children’s earnings were considered in their financial-aid applications, not family income or savings. That has led to awards of scholarships and access to federal financial aid designed for the poor, these people said.
Several universities in Illinois say they are looking into the practice, which is legal. “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,” said Andrew Borst, director of undergraduate enrollment at the University of Illinois.
One Chicago-area woman told The Wall Street Journal that she transferred guardianship of her then 17-year-old daughter to her business partner last year. While her household income is greater than $250,000 a year, she said, she and her husband have spent about $600,000 putting several older children through college and have no equity in their home, which is valued at about $1.2 million, according to the property website Zillow. She said she has little cash on hand and little saved for her daughter’s education.
We’ll pause for a moment to let everyone with a household income nowhere near that of the Chicago-area woman weep on her behalf.
Transferring her daughter’s guardianship was largely a matter of paperwork, the mother said. Her business partner attended a court hearing with an attorney. She, her husband and her daughter didn’t even need to show up, she said. Once the guardianship was transferred, the teen only had to claim the $4,200 in income she earned through her summer job, the mother said.
Today, her daughter attends a private college on the West Coast which costs $65,000 in annual tuition, she said. The daughter received a $27,000 merit scholarship and an additional $20,000 in need-based aid, including a federal Pell grant, which she won’t have to pay back. The daughter is responsible for $18,000 a year, which her grandparents pay, the woman said.
We congratulate the woman’s daughter on the $27,000 merit scholarship. That’s obviously an example of high achievement.
We’d like an opportunity to ask the woman — and anyone else engaging in this practice — if they’re comfortable with the possibility of college-bound kids from lower-middle-class or low-income homes being denied Pell grants or other need-based financial aid because those engaging in the practice found a loophole for their kid.
Calling this practice “opportunity hoarding” sounds about right.
We’re glad to hear a fine Big Ten institution such as the University of Illinois is looking into the practice, and that the Education Department is as well.
Guardianship transfer should not be allowed to be the determining factor in whether a student receives need-based financial aid. It may be legal, but it reeks of greed.
Need-based financial aid should go, first and foremost, to students of modest means, or little to no means.
It shouldn’t go to the children of the wealthy, young people whose parents have found another way to game the system.