College Guardianship Fraud

By Nate Delesline III

Published on August 11, 2021

College Guardianship Fraud

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"Wealthy families are manipulating the financial aid process to be eligible for financial aid they would not otherwise be eligible for. They are taking away opportunities from families that really need it."

–Andy Borst

Regardless of your financial situation, college can cost a lot of money. Whether students seek a two-year degree, a four-year degree, or a graduate degree, recent federal data shows the average cost ranges from $10,000 to nearly $30,000 per year.

And depending on where you'd like to study, that figure could easily double.

As a result, various options, including federal financial aid, exist to bridge that cost gap. Financial aid programs assume that a typical student has some financial support from their parents. The Department of Education (ED) uses student-submitted data on the Free Application for Federal Student Aid (FAFSA) to determine financial aid eligibility.

In 2019, investigative journalists at ProPublica uncovered that some wealthy families found a way to take advantage of the system. Here's what the parents would do: Parents would voluntarily go to court just before their child's 18th birthday. They'd agree to give up legal guardianship of their children to a family member or friend. If the court approved their request, the prospective college student qualified as independent under financial aid rules.

This change in status shields the parents' income from consideration during the financial aid application process. Instead, officials consider the guardian's lower income. Students could also then report their own, usually minimal incomes. With a guardianship status change, students potentially qualified for substantially more financial aid and scholarship money.

According to ProPublica, a high school counselor's call to a university official first raised suspicions about college guardianship fraud. In 2018, the counselor, who worked in a wealthy Chicago suburb, contacted the undergraduate admissions officer at the University of Illinois. The counselor asked why the university invited a certain student to an orientation program for low-income students.

When the admissions officer checked the student's financial aid application, he found the student had obtained a legal guardian. That status qualified the student for enhanced financial aid. The Illinois university official, Andy Borst, called the practice "a scam."

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"Wealthy families are manipulating the financial aid process to be eligible for financial aid they would not otherwise be eligible for. They are taking away opportunities from families that really need it," Borst said.

However, some of the people involved, including parents, stood by their actions. They defended the tactic as legal and necessary. They said the high cost of higher education places college out of reach, even for people with above-average financial means.

ProPublica said in 2019 that it found more than 40 similar cases of guardianship fraud. The media outlet said the University of Missouri, the University of Wisconsin, and Indiana University accepted these students.

Although the parents involved claim their tactics did not break the law, financial aid expert Mark Kantrowitz disagrees. By excluding or failing to share all relevant information, Kantrowitz said, parents could face perjury or contempt of court charges.

Other types of student aid fraud include understating income, overstating household size, and fake marriages. People might also try to game the system through identity fraud. In those cases, a person might apply for financial aid using someone else's personal information.

According to the education department's inspector general, the office is "not aware of any prosecutions involving legal guardianship student aid fraud since 2019." Providing false information on the FAFSA can result in criminal or civil penalties. Examples can include prison, probation, fines, restitution, or community service.

News of the college guardianship scandal broke just months after the Varsity Blues scandal. In the Varsity Blues case, dozens of wealthy parents gave William Singer, an independent college admissions counselor, millions of dollars. Singer then used the money to bribe college coaches and athletic administrators.

After receiving the bribes, the college officials designated those students as recruited athletes. The move increased the students' chances of college admission. About 55 people faced criminal charges or pleaded guilty in connection with the case.

This blog highlights the college guardianship fraud scandal's origins. Keep reading to find out what's changed since the story became public.


What is Guardianship Fraud?
 

The process of changing guardianship varies by state. In general, guardians must be at least 18 years old. They cannot have felony convictions related to harming children. In most cases, requests to change guardianship must go through a formal legal process in the court's civil or family law system.

An attorney may need to file, present, or finalize guardianship changes. Often, a judge has the final say. While legal, critics of guardianship changes made only for financial aid reasons condemn the practice as unethical.

That's because doing this takes financial aid away from people who genuinely need it. Financial aid programs operate on the expectation that families and students who can afford to pay more for higher education will do so. Deliberately misstating financial information also leads to criminal charges.

Guardianship fraud affects individual colleges too. School-level officials also make important financial aid decisions, like determining the cost of attendance. The federal government looks at three main pieces of information to determine financial aid eligibility. The expected family contribution, or EFC, is based on a formula. It may include taxable and untaxed income, along with assets. Social security or unemployment benefits could also count.

The expected family contribution subtracted from the cost of attendance determines financial need. It also determines how much and what types of need-based aid a person may receive. Additional considerations include family size and if other family members will attend college during the same year.



Independent vs. Dependent Students

Legal guardianship and independence status can affect financial aid eligibility. In short, a person's answers to questions on the FAFSA determine their independent student status.

An independent student meets at least one of the following qualifications: at least 24 years old, married, a graduate or professional student, a veteran, an active-duty member of the armed forces, an orphan, a ward of the court, someone who has legal dependents besides a spouse, an emancipated minor, a current or former foster child, or someone who is homeless or at risk of becoming homeless.

Anyone who answers yes to any of these questions may qualify as an independent student. In addition, they may not need to provide their parent's financial information on the FAFSA. These students may also qualify to apply for independent student scholarships.

Federal, State, and School Changes
 

The Department of Education's Office of Inspector General (OIG) "recommended that (the Federal Student Aid office) update the guidance provided to financial aid administrators," an OIG spokesperson told Affordable Colleges Online.

In response to college guardianship fraud reports, the recommended changes centered on modifying language on the forms. Now, the applications clarify that students do not qualify for aid if they continue receiving financial or medical support from their parents. Officials have changed language in the Federal Student Aid's Application and Verification Guide, the spokesperson said.

In addition, the ED recently announced plans to focus financial aid verification on identity theft and fraud for the 2021-2022 FAFSA application cycle. In a statement, the department said the initiative is part of "broader efforts to provide relief to students and borrowers impacted by the pandemic, and address inequities made worse by COVID-19." The FAFSA application period ends June 30, 2022.

The decision potentially affects millions of students. In the 2019-2020 FAFSA period, the ED received 18,086,485 FAFSA forms, a spokesperson told Affordable Colleges Online. During the same time, 9,357,583 applicants claimed independent student status. "For the 2018-19 FAFSA application cycle, 9,724,636 applicants were independent," the department said.

In a typical year, about 3 million potential Pell Grant-eligible students must provide extra documentation. For example, the ED typically requires them to submit tax returns to verify FAFSA information.

According to officials, this challenging process "disproportionately burdens students from low-income backgrounds and students of color." Part of the reason is 20% of Pell Grant applicants do not need to file taxes due to their low income levels. As a result, students may face difficulty producing the necessary documentation.

The National Association of Student Financial Aid Administrators (NASFAA) also urged the ED to "emphasize requirements for all independent students to report financial support from parents on the FAFSA." The national nonprofit association focuses on legislative and regulatory analysis relating to federal student aid members.

In comments to the ED about the 2020-2021 FAFSA cycle, NASFAA also suggested that digital versions of the FAFSA application include a pop-up style screen. The pop-up could alert applicants to the need to identify money received or paid on their behalf as untaxed income. It could also remind people of the legal requirement to provide truthful FAFSA information.

The schools involved pledged action in questionable guardianship cases. The University of Missouri began investigating "a small number of cases" involving students who obtained need-based financial aid by providing false or misleading information. A university spokesperson said that the school would notify the ED about any students found ineligible for financial aid.

Illinois state legislators held higher education committee hearings after news of the scandal broke. But some legislators and financial aid industry professionals cautioned against overreacting. Doing so, they said, could potentially hurt the students that aid programs seek to help.

"I'm absolutely aware that we could have an overreaction to what is an egregious but localized issue that would negatively impact all legal guardianships, including legitimate ones," Justin Draeger, NASFAA's president and CEO, told Inside Higher Ed. In that same report, one Illinois legislator pointed to college guardianship fraud as a symptom of a bigger issue — the cost of higher education.

"A system that drives families to cheat is a broken system," said state Rep. Carol Ammons.

Nate Delesline III

Nate Delesline III is a Virginia-based writer covering higher education. He has more than a decade of experience as a newspaper journalist covering public safety, local government, business, transportation, and K-12 and higher education.

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