Reports by the Wall Street Journal and ProPublica show that affluent parents in Illinois are transferring the guardianship of their children to friends and family in an effort to save on college tuition.

By transferring legal custody, the child can identify themselves as financially independent from their families on financial aid applications, resulting in more aid money.

This practice is legal, however, school officials are calling the practice unethical, and the Education Department is looking into the matter.

Illinois Families Game Financial Aid

Recent reports show that affluent parents in Illinois are transferring the guardianship of their children to friends and other relatives so that their children will be awarded more financial aid money when applying for college.

According to both ProPublica and the Wall Street Journal, at some point during their child’s junior or senior year of high school, families will legally give custody of their child to a friend or family member. This allows their child to identify themselves as financially independent from their families when they apply for financial aid and college scholarships and can result in the student receiving more money.

The Journal spoke to one Chicago-area family that used this practice, which is legal. The family they spoke to makes over $250,000 in annual income and live in a house valued at over $1 million. The mother claimed that they had already spent over $600,000 on college tuition on older kids.

After their daughter’s guardianship was transferred, the only income she had to claim was a little over $4,000, which she earned from a summer job. She ended up attending a private school with a tuition of $65,000, and got $27,000 in merit scholarships and $20,000 in need-based aid.

The family told the Journal that the process of transferring guardianship pretty easy and mainly just involved paperwork. The co-worker taking custody had to attend one court hearing, but the daughter did not have to go, and neither did her parents.

Logistics and Potential Consequences of the Process

Even though this practice is legal, colleges in Illinois are concerned about its use and question the morality behind it. But still, several schools in Illinois are starting to take a closer look at the situation.

Andrew Borst, the director of undergraduate enrollment at the University of Illinois told the Journal it could take opportunities away from students who actually come from low-income families.

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

The Journal looked at court documents and found 38 cases where juniors or seniors in high school had their guardianship transferred. Many of those families lived in homes valued over half a million dollars.

In Illinois, even if a parent can provide care to a child, a court can still transfer guardianship so long as the parents relinquish care, the child and the new guardian consent, and a court finds that it is in the child’s best interest. In most of the 38 cases, the language used to justify why it is in the child’s best interest usually resembled, “The guardian can provide educational and financial support and opportunities to the minor that her parents could not otherwise provide.”

ProPublica spoke to someone who became a child’s legal guardian for this reason. He said he wrestled with the ethics of the matter, because his wife works at a college, so he saw the situation from both sides. They were afraid that by doing this, they could take aid away from another family, even though he was told this would not be the case.

“It’s one of these gray areas, and my heart wanted me to do it for the family,” he said to ProPublica. “But I also have a conscience. I wanted to make sure we were doing the right thing.”

Consulting Firm Behind the Practice

So, how did these families manage to do this? Both the Journal and ProPublica say that many followed a path created by a consulting firm called Destination College. The group is based in Chicago and says it works to make college more affordable for families and their children.

“Our team of tax, financial and academic planning experts specializes in creating a customized guide, making sure the students are matched to the major and school of their interests, and the parents can comfortably afford it,” Destination College’s website says.

The firm claims to save students an average of $30,000 a year on college. Nowhere on the site does it directly suggest that families transfer the guardianship of their child, but there is language that could be hinting at the practice.

Destination College offers three packages: Basic, Preferred, and Premier. One of the features in the Premier package is: “College Financial Plan, Using Income and Asset Shifting Strategies to Increase Your Financial and Merit Aid and Lower Out of Pocket Tuition Expenses.”

Lora Georgieva, the founder of Destination College, has denied giving comments to both outlets.

According to the Journal, the Education Department is reportedly looking into this practice. It is currently unclear whether or not this is happening in any states outside of Illinois. However, other schools in the midwest have been alerted about the practice, and some have said they will keep an eye out for evidence of its occurrence.

In order to prevent this from happening in the future, some have recommended amending language in the Federal Student Aid handbook.

One suggestion given to the Journal read, “If a student enters into a legal guardianship, but continues to receive medical and financial support from their parents, they do not meet the definition of a legal guardianship and are still considered a dependent student.”