The ethics of using the financial aid guardianship loophole
When it comes to financial aid rules, is following the letter enough, or does the spirit matter, too?
Many people are ready to go to bat for the ethical approach, judging by the swift reaction to stories on Monday by ProPublica Illinois and The Wall Street Journal, detailing how families in suburban Chicago transferred legal guardianship of their teens in order to declare them independent so they could receive more financial aid.
On Tuesday, the U.S. Department of Education said it would look into how to close such loopholes. And on Thursday, Illinois lawmakers called for a hearing with the same goal in mind.
The controversy has also prompted some schools, even beyond Illinois, to examine financial aid awards to students whose guardianship was transferred near the end of high school. The University of Missouri in Columbia, for instance, told The Associated Press that fewer than 10 such students were found, and if the guardianship was transferred for the sole purpose of gaining need-based aid, the aid will be withdrawn.
While people have been swift to see this as yet another example of wealthy “Varsity Blues” types manipulating the system to their gain, not everyone doing this is very wealthy. The consultant who suggested it to clients told The Wall Street Journal in a follow-up article that she was simply following a rule laid out in the FAFSA handbook about guardianship. Though some clients were wealthy, she said, most made between $75,000 and $125,000 a year. She saw them dipping into their retirement savings to pay for college and she wanted to save them money.
For the sake of students who are homeless or otherwise on their own, without the aid of a parent’s income, it’s important that aid intended for them gets to them. But beyond the outrage over the exploitation of a loophole, a bigger question remains: What more can be done to improve higher education affordability and financing so people won’t be tempted to think that ethics, familial bonds, or a secure retirement is the price they have to pay to send their children to college?
Stacy Teicher Khadaroo, Education writer
Why We Wrote This
Some parents transferred legal guardianship of their teens in order to get more financial aid. Is that loophole ethical?