The latest college admission scam is startlingly simple: Give up guardianship of your children so they can qualify for more need-based financial aid.

Dozens of families in suburban Chicago have successfully used a loophole in state and federal regulations to ask the court to transfer custody of their teenagers to less-wealthy relatives or friends for “education” reasons, according to investigations by ProPublica and the Wall Street Journal published last week.

The move, allegedly suggested by at least one Illinois college consultant to her wealthy clients, allowed the students to legally qualify for need-based grants and scholarships for college, the reports found.

It is unclear how many families in New Jersey and the rest of the country have attempted similar guardianship transfers.

But college officials say if you’re thinking of trying the scheme — don’t. They are on to the scam.

Several colleges say they are reviewing their applications to look out for applicants with new guardians. Lawmakers are calling for hearings to see if they need to rewrite state laws to eliminate the loophole and the federal government says it’s time to reform the nation’s financial aid policies.

“What we can tell you is that we are aware of this issue and suggested to the Federal Student Aid office that it add clarifying language to the FSA Handbook that would help close possible avenues for this type of potential student aid fraud,” a spokeswoman for the U.S. Department of Education’s Office of Inspector General said in a statement.

One of the most galling things about this story: We throw poor parents in jail for using an incorrect address to get their kid in a good public elementary. But upper-income parents naming new guardians for their kids to soak up college aid dollars? Legal. https://t.co/3OhiaCylCF — Annie Lowrey (@AnnieLowrey) July 31, 2019

Some defended the attempts to switch custody of children as the latest symptom of an out-of-control college admissions culture where there is increasing pressure on students to get into schools with ballooning tuition rates.

The search “How to transfer guardianship” spiked on Google in the days after the ProPublica and Wall Street Journal stories ran, reports said.

At Rutgers University, the state’s largest university, school officials said they looked at their student files and have not noticed any uptick in guardianship cases similar to the one in Illinois.

“Students in guardianship are a very small percentage of our financial aid applicants and there have been no concerning trends,” said Dory Devlin, a Rutgers spokeswoman. “Rutgers has and will continue to adhere to all requirements for determining financial aid eligibility for students in guardianship.”

Other large state universities — including the University of Missouri, the University of Illinois and the University of Wisconsin-Madison — also said they are on the lookout for cases where students got new guardians right before applying to college.

At the University of Illinois, school officials said they are asking students with new guardians if they are still have contact with their parents and who is paying their cell phone bill, health insurance and other expenses.

Cases where parents ask the court to transfer legal custody of their children to someone else are usually rare. It is typically used by families in crisis because of illness, addiction or extreme poverty.

ProPublica found more than 40 cases filed over the last two years in Lake County, north of Chicago, where parents asked to transfer guardianship of their teenagers right before they turned 18 to aunts, cousins or other relatives or friends.

The parents filing the petitions included lawyers, a doctor, an assistant schools superintendent, insurance agents and real estate agents, according to the report. Some of the petitions used similar language, saying transferring guardianship would be in the “best interest” of the child for education reasons.

The families declined to comment, the report said.

"Exploiting a legal loophole"? You mean cheating, lying, and stealing. This is disgusting. I know students who fought to become emancipated from their families because their lives depended on it. This is just despicably cruel and evil.

https://t.co/HOVdeWs1SE — Anthony Jack (@tony_jack) July 30, 2019

Students typically fill out a FAFSA — or Free Application for Federal Student Aid — with information about their parents or guardians’ income and assets when they apply to college. That income information is used by the federal government to determine if the students qualify for taxpayer-funded grants, loans and scholarships.

States also use the information to identify students who qualify for state-funded financial aid and colleges use the form to see which students are eligible for additional scholarships and grants funded by the school.

“Wealthy families are manipulating the financial aid process to be eligible for financial aid they would not be otherwise eligible for. They are taking away opportunities from families that really need it," Andy Borst, director of undergraduate admissions at the University of Illinois at Urbana-Champaign, told ProPublica.

Kelly Heyboer may be reached at kheyboer@njadvancemedia.com. Follow her on Twitter @KellyHeyboer. Find her at KellyHeyboerReporter on Facebook. Find NJ.com on Facebook.

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