Latest guardianship fraud tactic to pay college

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The latest college admissions scam works like this: “Dear kid, for your last year of high school, I’m handing you over to Uncle Louie as a tutor so you can get more financial aid for college. . It’s just for a few months and you might not even have to live in her house. “

You just put a price tag on your teenager, who may also now be an accomplice in fraud.

Just months after Operation Varsity Blues, where Hollywood stars and other wealthy families reportedly paid bribes for fake admission tests and fake sports CVs to get their kids into college elite, the new fraud is slightly more complex but just as infuriating.

Unfortunately, the parents caught up in the latter case could have resorted to common and perfectly legal strategies to obtain more financial aid.

As initially reported by the nonprofit ProPublica Illinois, the parents are believed to have ceded custody of their child to a parent or family friend so that the student could claim financial aid from the university as an independent student rather than a dependent.

In other words, with parents’ finances out of the picture on financial aid forms, the student could claim financial hardship based on their own resources and assets and qualify for scholarships they don’t. might not be entitled otherwise.

Dozens of Chicago-area parents, including doctors and lawyers from affluent suburbs, allegedly tried to thwart the financial aid system by using a loophole in guardianship status, allegedly with the help of several law firms. ‘lawyers and an academic advisor, according to ProPublica.

About 1% of the approximately 17 million students undergo court-approved guardianship changes when there are legitimate reasons for another adult to step in to care for the child. For example, a single mother who cannot care for her child, or situations involving physical or emotional abuse of the child.

Many student loan frauds typically involve parents lying about their income and assets, and students falsely claiming to live in a state to obtain in-state tuition fees.

Kalman Chany, academic advisor and author of the Princeton Review’s “Paying for College” textbook, said it was the first time he had heard of this particular abuse of the law.

This alleged scam takes money away from needy students, added Mark Kantrowitz, editor and vice president of research at SavingforCollege.com.

“These parents crossed a moral line in pursuing false legal guardianship,” Kantrowitz said.

The US Department of Education said it plans to take action to close the loopholes that have allowed parents to relinquish guardianship of their children in hopes of securing more financial aid.

Of course, financial aid experts have stated that there are perfectly legal strategies parents can follow to increase eligibility for need-based financial aid.

Parents can reduce their income during the base year for submitting financial data to the FAFSA, and subsequent years.

If the parents are divorced, Kantrowitz said it is generally best for the child to live with the parent with the lower income because the custodial parent is responsible for completing the FAFSA. But, he warned, the situation becomes more complicated if the custodial parent remarries. Then the income and assets of the step-parent must be declared on the financial assistance forms.

Parents can reduce assets to report on financial aid documents by paying cash to manage mortgages, auto loans, and credit card debt, Kantrowitz said.

(Questions, comments, topic ideas? Email [email protected])

(c) 2019, Steve Rosen distributed by Tribune Content Agency, LLC.


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