Moneybox

That Parents Are Giving Up Custody of Their Kids to Get Financial Aid Means the System, Not Just the Parents, Is Broken

A graduating student wears a money lei, a necklace made of U.S. dollar bills, at the Pasadena City College graduation ceremony.
We’ve reached a point where even fairly comfortable families feel like they’re being asked to pay more for college tuition than they can afford
Robyn Beck/Getty Images

According to a report published by ProPublica this week, parents in Illinois have been giving up legal custody of their children as they near college age in order to make the kids look less wealthy and maximize the amount of need-based financial aid they receive for school. The news organization found more than 40 such cases around Chicago filed during the past 18 months. The parents involved tend to be well-paid professionals. They include “lawyers, a doctor and an assistant schools superintendent, as well as insurance and real estate agents,” the sorts of people you’re likely to hear complain that they earn too much for their kids to qualify for financial aid but not enough to pay for college out of pocket without pain. Their kids attended big public universities as well as smaller private schools.

One obvious way to read this story is that affluent and entitled households are using their resources to game a system meant to help lower income kids. That seems to be the angle ProPublica is going with. “It’s a scam,” said Andy Borst, director of undergraduate admissions at the University of Illinois at Urbana-Champaign (his school found 14 applicants who tried this hustle). “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.”

Borst isn’t wrong. In our current world of scarce higher educational resources, posing as a poor kid in order to skim aid dollars from a limited pot is, objectively, a pretty crappy thing to do. But it’s also a sign of a deeper crisis of legitimacy in higher ed.

We’ve reached a point where even fairly comfortable families feel like they’re being asked to pay more for college tuition than they can afford, regardless of what a university’s financial aid formula says. (Just Google the phrase “too rich for financial aid, too poor for collegeand see what pops up.) Some of this is just the unfortunate product of the insane status anxiety that surrounds college in the United States, which leads many parents to believe that they need to send their child to the “best” and most expensive school, even if there are perfectly good and more affordable alternatives. It’s also a bit ironic, since, over the decades, colleges have shifted a greater share of their financial aid to upper-income students by awarding more of it based on “merit” rather than “need.” As a result, according to the College Board, the average student from a family earning six figures today actually receives enough grant money to exceed their officially calculated financial need. But again, the concept of “need” is highly subjective, and regardless of why or whether it’s justified, a lot of ostensibly well-off Americans come out feeling like victims in our current system of college finance. And when people feel victimized by the rules, they inevitably try to get around them.

It probably doesn’t help matters that the actual process of applying for financial aid can seem like an absurd challenge that’s meant to be gamed. After all, once you’re reading tips on CNBC about how to properly shelter your family’s assets in order to keep them from counting against your kid’s aid award, it might not feel like that huge a jump to just file some paperwork at court so your kid can declare herself “financially independent.”

This is where part of the logic of scrapping our current approach to student aid and making college tuition free comes into play. Critics of that idea often complain that free college would waste money on rich kids who don’t need it. But as I’ve argued before, in many ways that’s a feature rather than a bug. By promising everybody a college education at the low, low price of $0, you create a reasonably straightforward, transparent system where nobody feels like they need to cheat to get ahead. It’s a way of making government seem like, and be, something that works for all, not just those deemed worthy of help, or who are willing to cheat for it.

Preserving our current system of doling out financial aid based on complicated formulas to determine need or vague definitions of merit might make more sense if it were doing a fantastic job helping the students that it’s supposed to. But it’s not. Every year, for instance, millions of students fail to fill out the paperwork necessary to apply for help, many of whom would be eligible for assistance if they only sent in the forms. Meanwhile, plenty of poor and lower-middle-class students are ending up stuck under loads of crushing student debt. Even if you don’t care about the concerns of the upper middle class, there are plenty of reasons to move to a more straightforward system of cheap or tuition-free college for all.

The fact that parents have resorted to schemes where they sign away legal guardianship of their kids in order to save money on college is a sign, however, that something is deeply wrong, and not just with those parents. We have an insane system of financial aid that’s inspiring insane behavior. By comparison, making college free looks imminently logical.