Education Dept. investigating parents transferring Guardianship for Financial AId

[Lanny]

This story apparently originated in Chicagoland and with the Wall Street Journal.  At the end, it says that "Two of the Chicago-area parents who spoke to the Wall Street Journal said the strategy of transferring guardianship was recommended to them by a consulting company that helps families plan for college."

https://www.foxnews.com/media/fox-friends-takes-on-college-financial-aid-loophole-tuition-costs-are-crazy

 

[Janeway]

Sounds like a good idea.

 

But on that note, someone claimed they did not think the wealthy would do this and it would just be the middle income people, but I disagree. No one pays a consulting company unless they have plenty of money.

[Lanny]

35 minutes ago, Janeway said:

Sounds like a good idea.

But on that note, someone claimed they did not think the wealthy would do this and it would just be the middle income people, but I disagree. No one pays a consulting company unless they have plenty of money.

 

Probably extremely illegal.  Maybe some of them will be indicted by the Feds, like the people in the college admissions scandal that broke in March.  I suspect that you are correct that probably people who can pay a Consulting company have $$$.

[GoodGrief]

I've also heard of students marrying friends (with the intent that this is temporary) for improved financial aid situation.

[Corraleno]

 In a discussion of this case on another board, some people claimed that in order to be deemed independent for FAFSA purposes (no parental income required) the guardianship actually has to be court-ordered, not just a court-approved voluntary transfer. I hope that's true and that these people are prosecuted for fraud and have to pay back every dime. The idea that someone making $250K/yr and living in a $1.2 million house should be able to get a Pell Grant and full financial aid for her kid because "she didn't save enough for college" is just obscene. 

 

[Lanny]

Corraleno this also goes back to the earlier College Admissions scandal. Will the students involved be expelled from their schools? Did they knowingly participate in this?

[catz]

Ugh - I do think they should get the boot from those schools.   They took FA they didn't actually qualify for from the hands of someone who DID legally qualify.  I hope they're prosecuted.  

I agree it takes some level of financial privilege to work with a consultant and then set the legal wheels in motion to get this done.  

I would say there are plenty of people who have a much higher EFC than they can actually afford including us.  The formulas are very simplistic.  That doesn't remotely justify fraud.  

I think these incidents we are finding out about recently are just the tip of the iceberg honestly.  

[daijobu]

4 hours ago, Lanny said:

 

Probably extremely illegal.  Maybe some of them will be indicted by the Feds, like the people in the college admissions scandal that broke in March.  I suspect that you are correct that probably people who can pay a Consulting company have $$$.

 

The WSJ reporting makes it clear that this is legal.   Article may be behind a pay wall.

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. “This is legal, but we question the ethics.”

The woman and another Chicago-area parent who spoke to the Journal said they followed the strategy laid out by a college consultant company called Destination College, based in Lincolnshire, Ill. The company says on its website it has saved families as much $40,000 a year per student. The website doesn’t specify how.

I love this image from their website:

I can just hear the parents:  "Bwahahahahah!"

[daijobu]

If you sign up for their Premier Plan you will receive:

 

 

I think we are looking at the bullet for "Using income and asset shifting strategies to increase ... aid."  

 

 

[Janeway]

5 hours ago, GoodGrief1 said:

I've also heard of students marrying friends (with the intent that this is temporary) for improved financial aid situation.

I suggested this too..I was half joking..but only half. LOL

[Janeway]

5 hours ago, Corraleno said:

 In a discussion of this case on another board, some people claimed that in order to be deemed independent for FAFSA purposes (no parental income required) the guardianship actually has to be court-ordered, not just a court-approved voluntary transfer. I hope that's true and that these people are prosecuted for fraud and have to pay back every dime. The idea that someone making $250K/yr and living in a $1.2 million house should be able to get a Pell Grant and full financial aid for her kid because "she didn't save enough for college" is just obscene. 

 

What is the difference between court ordered and court approved? I do not think there is a difference.

[Hoggirl]

^Agree. I think it’s a misuse of terms with the (wrong) idea that court-appointeed is involuntary (abuse, neglect, etc) and court-approved is voluntary.  

Edited July 31, 2019 by Hoggirl

[Penelope]

Who comes up with these crazy schemes?

It seems like there could be an easy way to screen for some of this with a question or two on the College application, which already asks many personal questions. They could ask whether the parent/guardian is parent or guardian, and ask when guardianship was established. More recent could be a flag to look more closely,

Maybe it is legal from the financial aid standpoint, but it seems like there would be fraud involved somewhere. Don’t you have to give a very good reason for the judge to change guardianship from a living parent? That might involve lying to the court. There would also be tax implications. And is the teen really living with the guardian full time?

I wonder if anyone has done this sort of thing just to get in-state tuition or in-state scholarship money. If you live in a state with limited options, transferring guardianship to a grandparent or other relative in another state for a couple of years would work. I can’t imagine doing something like that, but there’s always someone.

Edited July 31, 2019 by Penelope

[Sebastian (a lady)]

On 7/30/2019 at 3:26 PM, Janeway said:

Sounds like a good idea.

 

But on that note, someone claimed they did not think the wealthy would do this and it would just be the middle income people, but I disagree. No one pays a consulting company unless they have plenty of money.

There is a huge range of consultant services from hourly to multi-year comprehensive packages. Getting help with college planning isn't limited to the wealthy. 

[Sebastian (a lady)]

This is the wording on the FAFSA. It is a separate question from the one that asks if the student is a ward of the court.

In my mind this falls into legal but wrong.  

Has it been determined by a court in your state of legal residence that you are an emancipated minor or that someone other than your parent or stepparent has legal guardianship of you? (You also should answer "Yes" if you are now an adult but were in legal guardianship or were an emancipated minor immediately before you reached the age of being an adult in your state. Answer "No" if the court papers say "custody" rather than "guardianship.")

 

[Corraleno]

Sounds like there are a bunch of kids who are about to be told they may not be attending UI this fall:

The U.S. Education Department condemned Ms. Georgieva’s actions and said it was moving to stop them.

“Those who break the rules should be held accountable,” spokeswoman Liz Hill said Tuesday in a statement. “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.”

Colleges started receiving applications from Ms. Georgieva’s clients last year. The University of Illinois, where annual costs, including tuition, room and board, range from $32,000 to $36,000 for in-state students, said it spotted 15 students who may have used the strategy. “The university likely will withhold institutionally funded need-based financial aid until we are satisfied that students who have transferred guardianship don’t have other financial resources available,” said Andy Borst, director of undergraduate admissions of the University of Illinois. 

 

[Hoggirl]

Residency rules have really changed since I was in college.  Back when dinosaurs roamed the earth, the student could typically establish residency by staying in the state over the summer and working.  Dh had a friend who did this at the University Texas.  He paid OOS his freshman year, but was in-state the remaining years.  This was over 35 yeas ago, however. 

A child of a friend recently did this at the University of Missouri - stayed over the summer and was able to establish Missouri residency. So, apparently some states do still allow this.   I believe the daughter had to work a certain number of hours. 

[Guest]

To me, this is a sign that college now costs way too much. When an instate school takes the full salary of someone making twice the state required minimum wage to pay for the cost of attendance, I think parents transferring guardianship has less to do with “rich folks trying to save a buck” and more to do with pure desperation among middle class families that are in that gap where EFC is a pipe dream and need based aid means “need not apply”. 

[daijobu]

5 hours ago, Hoggirl said:

Residency rules have really changed since I was in college.  Back when dinosaurs roamed the earth, the student could typically establish residency by staying in the state over the summer and working.  Dh had a friend who did this at the University Texas.  He paid OOS his freshman year, but was in-state the remaining years.  This was over 35 yeas ago, however. 

A child of a friend recently did this at the University of Missouri - stayed over the summer and was able to establish Missouri residency. So, apparently some states do still allow this.   I believe the daughter had to work a certain number of hours. 

 

Yes, I think these rules are state- or college-specific.  If residency rules are an issue, one should check with their college.  

[Corraleno]

4 hours ago, dmmetler said:

To me, this is a sign that college now costs way too much. When an instate school takes the full salary of someone making twice the state required minimum wage to pay for the cost of attendance, I think parents transferring guardianship has less to do with “rich folks trying to save a buck” and more to do with pure desperation among middle class families that are in that gap where EFC is a pipe dream and need based aid means “need not apply”. 

I agree that college costs way too much, but the people in this case aren't desperate parents whose only option is committing fraud. They include doctors, lawyers, and other professionals, living in an affluent suburb of Chicago. One family was making more than $250K/yr, with a home worth $1.2 million. They had already spent $600K on their older children's schooling, but hadn't saved anything for the youngest, so they transferred guardianship to a parent's business partner so the kid could qualify for full financial aid at a $65K/yr OOS LAC. They could have saved more for college by living below their means, they could have required their older kids to stick to a budget instead of full-paying for private schools, they could have focused on schools with good merit aid, or started at CC, or any of the other things that ethical parents do when they can't afford to give their child a blank check to attend any school they want. The idea that money designated for the truly needy should be spent sending the child of a 2-percenter to an expensive private LAC is obscene.

[Guest]

The school where this broke was University of Illinois-a state school where in state cost of attendance is 32-36k/yr. They had 15 such cases. My guess is that not everyone who tried this was a millionaire. Even 2 years at 36k is out of the range of affordable for many families who would have an EFC of that number.  Getting mad at the 1% for financial aid fraud while not getting mad at college tuition that is at an unaffordable level for many middle class families is not going to solve the problem for most of the 99%. 

[Sebastian (a lady)]

7 hours ago, Corraleno said:

I agree that college costs way too much, but the people in this case aren't desperate parents whose only option is committing fraud. They include doctors, lawyers, and other professionals, living in an affluent suburb of Chicago. One family was making more than $250K/yr, with a home worth $1.2 million. They had already spent $600K on their older children's schooling, but hadn't saved anything for the youngest, so they transferred guardianship to a parent's business partner so the kid could qualify for full financial aid at a $65K/yr OOS LAC. They could have saved more for college by living below their means, they could have required their older kids to stick to a budget instead of full-paying for private schools, they could have focused on schools with good merit aid, or started at CC, or any of the other things that ethical parents do when they can't afford to give their child a blank check to attend any school they want. The idea that money designated for the truly needy should be spent sending the child of a 2-percenter to an expensive private LAC is obscene.

Where are you seeing details on specific family situations? The articles I've read haven't been that granular. 

[Corraleno]

13 minutes ago, Sebastian (a lady) said:

Where are you seeing details on specific family situations? The articles I've read haven't been that granular. 

It was in the Wall Street Journal article. One of the other parents involved is the head of the law firm that handled the guardianship cases for many of the families.

[Corraleno]

2 hours ago, dmmetler said:

The school where this broke was University of Illinois-a state school where in state cost of attendance is 32-36k/yr. They had 15 such cases. My guess is that not everyone who tried this was a millionaire. Even 2 years at 36k is out of the range of affordable for many families who would have an EFC of that number.  Getting mad at the 1% for financial aid fraud while not getting mad at college tuition that is at an unaffordable level for many middle class families is not going to solve the problem for most of the 99%. 

There are many many parents on this board who cannot afford their EFC, yet they manage to get their kids through college without committing fraud or depriving even needier students of resources they deserve. 

More than 82,000 Illinois students did not get state MAP grants that they qualified for last year, because the grants are awarded on a first come, first served basis, and they ran out of money. The families involved in this scam took state grants, Pell grants, and institutional grants that were intended for much needier students. The student at the $65k/yr west coast LAC is getting $18K/yr from her grandparents, in addition to her Pell Grant and other need-based aid. The grandparents' money + basic student loans would have covered tuition & fees for a local college if she lived at home, or she could have looked for a school where she'd get enough merit aid that the $23K (basic loan + cash from grandma) would have covered the rest. Instead they paid $5,000 to a "college financial consultant," plus legal fees, to get need-based aid they didn't deserve, which took money away from students who did deserve it. These students come from a very affluent suburb of Chicago — Stevenson High School, for example, has an Olympic swimming pool, a top water polo team, multiple state-of-the-art performing spaces, and an in-school espresso bar. A few miles away there are schools with very different levels of resources, and there are students at those schools, with no resources, who lost out on grants that went to these kids.

Yes, college costs way too much, but in no way does that excuse what these people did. I have tons of sympathy for the students who couldn't go to college at all because they lost out on grants. I have ZERO sympathy for these entitled jerks.

Edited August 2, 2019 by Corraleno

[plansrme]

On 7/30/2019 at 8:50 PM, daijobu said:

If you sign up for their Premier Plan you will receive:

 

 

I think we are looking at the bullet for "Using income and asset shifting strategies to increase ... aid."  

 

 

 

I LOVE that they misspelled "scholarship."  

[8filltheheart]

23 hours ago, Plum said:

If getting into a college results in this level of shenanigans, there's a serious problem with the system. It's not just the cost of college tuition. It's about the culture that college has created. 

It's the parents that believe their kid must get into not just a college, but the college. It's about the bumper sticker parents that really only want to brag about where their child attends all the while racking up $100+ in debt that they will never be able to repay. It's about grade and degree inflation that has resulted in the diluted value of those grades and degrees. It's about more kids having anxiety and other mental health issues while physically exhausting themselves trying to outperform the other students. It's the colleges that keep raising the cost of tuition, books, dorms, food, parking while piling fee upon fee. It's the companies that require all of their upper management to have masters degrees just so they could hold a status title. 

While I believe not everyone is built for college, everyone should have the opportunity to go and try to better themselves. Jobs are changing in unexpected ways. It would be better for society as a whole if we were structured to be able to return to college throughout life and learn some new skills to meet the needs of our current job while not going into huge debt. Because debt can sink us all. 

While I have no sympathy for people that work the system like this, I understand their motivations. They are selfish and wrong, but only a symptom of a much larger problem. They are not only screwing others out of financial aid, they are setting a terrible example for their kids. I'm sure there is some fraud in there somewhere, perhaps taxes. 

Honestly, only people who live in a bubble believe that a person's future life is dictated and controlled by the name on their diploma. Most people go to college, get a job, and just live their lives without hyper focus on who is who doing what where with whom bc they have connections from there.

With the exception of one family, it is only in the virtual world that we have ever encountered people to swallow that a kid's future is determined by the name in their college diploma. The one family we know IRL that holds that POV certainly does not outcomes that support that position even though it is the one they hold. 

The entire scenario of the families in the article just reeks of lack of ethics and morals.  How do children view parents who sell their parental bond for $$? What type of mental psyche embraces the view that a college name is worth sacrificing their legal connection to their child? Only depraved ones who value $$ more than relationship.

There are definitely ways to attend higher ed in this country without going into thousands of dollars of debt or selling your soul. They just need to stop holding their noses in the position where rain will drowned then.

Edited August 3, 2019 by 8FillTheHeart

[Frances]

8 hours ago, Plum said:

I don't personally know anyone with this sort of mentality either. I just don't hang with those types of people though. However, I do know people that work at an elite private college prep school and oh the stories they tell about the demands put upon their kids...it's just sad. The type where doctor or lawyer is expected. The type whose families are all alumni of one college, so the idea of not getting in is unacceptable and would be considered failure. They start their kids on the college prep track in preschool, hire tutors and nannies, force them into extra classes....and the list keeps going. It's all too much for me to think about and I don't even have to live it. 

I agree this is about ethics and morals as well. I certainly wouldn't do this, even if offered the service for free and my kid was given the choice of any college. While there are people that would jump at that chance, calling it just a piece of paper and it doesn't really mean anything, they are not being honest with themselves. But I have a feeling that people that do this sort of thing, are the type that I described above and already have a strained relationship with their kids, and they probably not even aware of it. 

The people I know had their kids attend that private high school and ended up with a sensible U for their kid. It's hard when you are in that bubble to not see that greener grass and rationalize this sort of thinking. Their kids worked just as hard as the others and should have the same opportunities. 

I would rather higher learning be intrinsically motivated than extrinsic. People who want to be there, learning what they want to learn, without competitiveness, entitlement or huge tuition bills, would ultimately lead to a better society. Oops. my idealism is showing. 

I do know a few families who are very focused on college name, and at least so far have been successful in attaining it. However, I didn’t see any extra pressure placed on the kids. If anything, the kids were driving it. (I’m not saying this doesn’t happen in some other families, I’m absolutely sure it does.) I have been shocked at how much they are willing to pay for it though. I mean completely blown out of the water at the level of borrowing. Interestingly, one of the kids who not only got into a very selective school, but got into the most selective major there, doesn’t think the program remotely lived up to its reputation.

Edited August 3, 2019 by Frances

[Frances]

3 hours ago, HeighHo said:

Sounds like we are about to have some interesting legal cases. 

Had my dc delayed college for four years, I would be much wealthier due to all the new scholarships the state put in that pay tuition (not fees). I'd rather tuition was lowered for everyone rather than suck the middle class retirement funds of older parents dry.

One of the scholarships newly enacted here is for STEM.  Its the only one that a student of two older working parents would meet the income requirement for.  The student has to work or live in the state for five years after finishing or pay it back.  Be nice if there were that many jobs, but I sure didn't see the NY state employers at the career fair at my dc's colleges.   Over half of my dc's STEM friends are out of state for STEM jobs, or they are living in state and commuting an hour out of state to where the STEM employers are.  

The whole STEM thing is highly overrated. Sure, there are parts of STEM that are hot right now. But many STEM majors leave grads just as likely as almost any other major to be underemployed or unemployed. I really dislike the trend of k12, college, state legislatures, etc. pushing STEM, STEM, STEM in some general, global way and the whole myth that we don’t have enough interested, qualified students.

As one example, one of the state Us here has a Master of Science that is very competitive to get into. Why? Because it primarily takes chemistry and physics majors (STEM majors that can be somewhat difficult to get good paying entry level jobs in) and has them take classes for two terms (there are a few specialization they can choose from) and then do a paid internship for three terms. Many students make enough during the paid internship to pay for the whole degree. These are the kinds of programs we need more of, not some general rah rah throw money and resources at STEM. In this case, employers have some buy in, but are getting students with education and experience tailored to their needs. And the students are pretty much guaranteed a good paying job and a career path when they finish.

And don’t even get more started on the lack of professional healthcare training slots, an area many STEM majors aspire too.

Edited August 4, 2019 by Frances

[Frances]

28 minutes ago, HeighHo said:

My state does need STEM grads, particularly those with two year degrees as well as math and science K12 teachers. This scholarship goes to those who are in the top ten percent of their high school in gpa.  

The STEM scholarship here is not available to people with majors that are not in demand and wont lead to employment in the approved for the scholarship occupations.  Here's the list of occupations:  https://www.hesc.ny.gov/pay-for-college/financial-aid/types-of-financial-aid/nys-grants-scholarships-awards/nys-science-technology-engineering-and-mathematics-stem-incentive-program/stem-approved-occupation-listing.html if you'd like to browse.   There are jobs in several of these fields, but often the new hire is laid off before the five years is up and must go out of state to continue employment.  Not everyone will be able to commute to neighboring states to keep that scholarship from reverting to a loan.

I’m not surprised those with two year degrees and k12 math and science teachers are on the list and it’s good your state attempted to focus the scholarships. But there were quite a few on the list that I have a hard time believing are in short supply unless it’s due to salaries being too low to make it possible to live in certain areas or they are in particularly undesirable or rural  parts of the state.

Are the companies purposefully laying the new hires off before five years?