Parents Disown Children to gain Scholarship Money

https://www.propublica.org/article/university-of-i...
As college acceptance becomes increasingly competitive, and college costs continue to rise, some parents have found a "technique" for their children to gain scholarship money

The Technique

"Parents are giving up legal guardianship of their children during their junior or senior year in high school to someone else -- a friend, aunt, cousin or grandparent. The guardianship status then allows the students to declare themselves financially independent of their families so they can qualify for federal, state and university aid, a ProPublica Illinois investigation found."

Who is involved

  • ~50 cases in Illinois-Investigation is ongoing
  • 25 students that attend the University of Illinois
  • The parents professions range from doctors to lawyers to real estate agents

Problems with this technique

  • FAFSA financial aid is first come, first serve. Additionally according to the article, Illinois did run out of financial aid. That means these students took from other kids who more desperately needed the money to get a college education
  • These parents are literally disowning their children. One could argue it is "for the better" but lawyers and doctors are willing to write their kid in someone else's name just to save on a college education.

Questions for Discussion

(feel free to answer as many as you want to)

  • Would you disown your kids to save money?
  • Clearly college education is rising, so what are your thoughts to reduce the cost of college? What abuot the education system in general? Can it be fixed?

Some of my thoughts

To get this discussion going, here are some of my thoughts for the second bullet point. I think college is too expensive due to certain departments that offer few transferable skills to the real world, which is why they are not generating enough revenue on their own. In my college, I'm required to take humanities classes from SPECIFIC departments (not just a gen-ed). These classes did not help me at all, I will be quite frank and wasted my credit hours. That's the problem with the structure of our degrees imo. Before I continue to rant on, I"m going to stop and here what you all have to say before I jump back in.

Comments (48)

Aug 2, 2019

Also read the article and was a bit in disbelief that people would really do that, but then it's been brought up a few times in conversation this week and while the article does focus on the benefits of financial aid, there's another potentially even better benefits of getting assessed in a different (ie. weaker) peer group. And at least judging by my professional network, the practice of gaming the system by pretending to be from a lower socioeconomic background is quite widespread. Heard quite a few stories of people renting a shit apartment in a super low income area for exemple and while on one hand it's a bit much, college are only themselves to blame with their admission practice that invite gaming.

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Aug 2, 2019

I would be interested to hear some of those stories if you don't mind.

Aug 4, 2019

I personally know a few students who had a bad relationship with their parents--their parents did not want to pay for their college

Well, in my state you don't qualify for financial aid unless your parents commit 30% of their income first. So these students were stuck

Aug 4, 2019

Part of the problem though is in my state, my parents were required to commit up to 30% of their income before I was eligible for any aid.

My parents did not want to give up 30% of their income (makes sense tbh). I knew a lot of students in a similar situation where their parents made too much for them to qualify for aid, but didnt want to pay for their childs college

As a result they couldn't attend.

Aug 3, 2019

I think there are a lot of reasons for the bizarrely skewed education system in the US. But that colleges are expensive due to certain departments offering few transferable skills is a very shitty analysis. I know from my own university that the departments offering the most transferable skills (medicine, engineering, etc...) take more than 90% of the entire budget. Humanities departments are relatively cheap to run. Furthermore, it doesn't explain why tuition fees are rising exponentially over time.

What does influence the situation:
- Higher white-collar wages
- Excessive acceptance of foreign students
- Unregulated education market

Aug 3, 2019

I would assume that the excessive acceptance of foreign students is simply to charge the international rate. For grad school I'm not sure how difficult it is to find local people to do a PhD which has a high opportunity cost especially for business majors. Higher wages shouldn't be a problem if the costs of college rose relative to those wages, but that is clearly not the case. Education costs are rising much faster then wages.Also aren't public schools regulated by the govt? Sorry for my ignorance here.

Aug 3, 2019

You make a fair point with regards to the wages. I don't have the numbers or anything, but it wouldn't surprise me if the discrepancy between certain prestigious white-collar jobs and normal low skilled white-collar jobs is rising. I don't know.

As for foreign students, they have an opportunity cost and they take in physical space. Every foreigner accepted is one American student less. New investments for grad school buildings equals less investment in expansion for ordinary bachelor students. Also, the fact that there are simply more students today influences the situation.

As for regulation, I meant for example that in Europe there are ceilings on tuition.

Aug 3, 2019

Found this on Forbes that indicates tuition is rising 8 times faster than wages. https://www.forbes.com/sites/camilomaldonado/2018/... This is the most recent article I could find from a reliable source that has this indication. Most of the other stuff was dated (although a wide gap was noticed even then).

Aug 3, 2019
Marlborough:

You make a fair point with regards to the wages. I don't have the numbers or anything, but it wouldn't surprise me if the discrepancy between certain prestigious white-collar jobs and normal low skilled white-collar jobs is rising. I don't know.

As for foreign students, they have an opportunity cost and they take in physical space. Every foreigner accepted is one American student less. New investments for grad school buildings equals less investment in expansion for ordinary bachelor students. Also, the fact that there are simply more students today influences the situation.

As for regulation, I meant for example that in Europe there are ceilings on tuition.

I don't think you have any idea what you're talking about it.
Most terminal masters (e.g., a MFE which charges 80k / year in tuition and fees alone) programs exist to subsidize the school's core programs.
Similarly, out of state tuition and minimal financial aid for foreign students subsidizes in-state people.

Array

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Controversial
Aug 4, 2019

That violates about every micro economics course ever talked. A foreigner doesn't take an americans seat. They pay a ton of money and increase the supply of seats.

Their are public schools that are literally keeping the lights on from the profits of foreign students. Believe it's a very important source of funding for u if I.

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Aug 3, 2019

My kid brother had this done and got a full ride to Champaign

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

Aug 3, 2019

Gaming the system is nothing new. I previously worked a portfolio acquisition of low income housing apartment buildings. Basically the developer would build these for cheap and they get their full investment back as long as they rent to low income families. The buildings I saw were nice since they were new, but the rent for tenants was like $200 since the govt subsidized the rest. You would think these people would have limited money, well guess what, when I saw the parking lot, it had brand new Mercedes, BMWs, and Range Rovers. I went into some units and saw massive flat panel TVs with surround sound systems plus the newest gadgets you could find. Granted not every resident was like this, most did qualify but there was a decent population of fakers out there that gamed the system.

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Aug 3, 2019

Wouldn't it be super obvious if a Mercedes was in the parking lot. Couldn't the neighbors just report???

Aug 3, 2019
FutureBankTeller:

Wouldn't it be super obvious if a Mercedes was in the parking lot. Couldn't the neighbors just report???

Lol, the car you drive is hardly an indication of your wealth. I know too many who drive expensive cars with little savings. My former boss drives a beat up Nissan, but I know he's very rich.

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Aug 6, 2019

Drug dealers.

Most Helpful
Aug 3, 2019

At the end of the day, while it's distasteful to me that people would literally disown their kids to game the college admissions & aid systems, it's not illegal. If you are emancipated or some poorer family member has guardianship, the college can't really expect much in terms of a family contribution toward your education. And let's be honest, even if you make $250K per year as a lawyer or doctor, it's difficult to afford $70K straight out of your pocket for tuition, room, board, fees, travel, etc. Even if you can afford it, no one wants to pay that much for a single kid to go to college.

What's more, unless you're exceedingly rich and a potential 'development target' for the school (a material donor), I'm not sure you want to be lumped in the same geographic and socioeconomic demographic as your true peers if you're upper-middle class (as a lot of applicants to Ivies are). If you're not a legacy, not an athlete, and just a very clever upper-middle class white guy, your acceptance rate to Harvard is likely below 1%. You don't want to be in that pool. If you can game the system, I'd bet you'd stand a better chance at admission. Even if it didn't impact your admissions chances, in the event that you did get in, your college would essentially be free.

As I said, it's not illegal, it's just frugal to the point of being embarrassing. I can't imagine anyone goes around bragging that they did this. To be fair, if your parents are completely unwilling to support you in college, it's actually your best move to emancipate yourself. Just because your dad is a doctor doesn't mean he intends to pay anything for your schooling.

The fact that colleges expect parents to contribute meaningfully to their kid's education is a relatively recent development. As recently as the 90s, parents weren't required to fill out financial aid forms at most colleges. Colleges weren't nearly as expensive on an inflation-adjusted basis as they are today. And when my parents went to college, they legitimately paid for their own educations with summer and term-time jobs. That's obviously impossible now especially since colleges tend to reduce your financial aid dollar-for-dollar by the amount of your savings. If you worked your ass off in high school and saved $35K or $40K, most universities would expect you to use all of that on your education. Similarly, if your parents have the money sitting around for a rainy day or for retirement, most colleges will look to tap almost all of it.

I know a CIO at a large endowment who makes about $600k per year (the 990 forms for his endowment are available online, so I looked). He's a rich enough guy, but he only recently started making that sort of money. He has 5 kids that are either still in college or have just recently graduated. They went to very expensive private schools, and with his income level, they receive no financial aid whatsoever. When it's all over and he has paid for everything (including a couple master's degrees), he will have spent over $1.5M on his kids' college educations. When you add in all the private schooling before that, I shutter to think what he has paid in educational costs over the years. If you told him that all he had to do to have an extra $1.5M in his retirement accounts (plus whatever he would have received in compounded investment income from that money) was emancipate his kids before they applied to school, I bet he'd have considered it. I don't think it's right, but I can see why someone in his position might do it.

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Aug 3, 2019

1.5 Million??? Dude... IF the dad is that rich what is the point of private school. Seems like he has good connections already. On a personal level this is one of the major reasons I went to a state school (due to finances). Parents upper middle class but nearing retirement and unable to support. I was able to get decent scholarship at a state school. And I"m not the only one. Many kids at my state school bring up expenses as a major factor that they chose to attend there. IMO these parents that are gaming the system have a crybaby attitude. Yeah, it sucks but you've got to work around it. That's what the other 95% of people in the same scenario are doing. Disowning your kids is ridiculous and a poor role model for them when they grow up.

Array

Aug 4, 2019

Yeah, in my state you cant get financial aid unless your parents are paying 30% of their income first.

If your parents choose not to--you can't get financial aid.

Aug 5, 2019

That sucks. You're technically an adult at 18. You can vote and join the military. Your parents are no longer legally responsible for you in any way. They certainly don't have to pay for your college. It seems odd that the state could mandate that anyone's parents have to pay anything for their kids' college educations. Aside from the people clearly gaming the system, what if your parents just don't like you and won't support you while in school?

As an adult, you can go buy a car. If the loan is made to you, your parents aren't responsible for paying it. Just because you want to go to college doesn't mean your parents are obliged to pay in any way. It's kind of remarkable that in upper-middle class households it's simply taken as given that parents are obligated to pay for college when they really don't have to at all. I don't know when that mentality shifted, but 30 years ago, I don't think that belief was nearly as widespread.

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Aug 3, 2019

You guys realize that the parents aren't disowning their kids, right? It's disowning from a legal perspective. It's not like it's 1953 and the kid came out of the closet and the parents disowned their kid for being gay. It's different.

That being said, whether this is legal or not, it's pretty damn sketchy.

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Aug 3, 2019

The legal perspective does carry symbolic weight to it. It's like when people try to annul marriages claiming that the marriage contract signed was void because no underlying marriage existed. That argument is sketch and not really fitting. Sure the parents in the OP are not shipping their kid halfway across the globe but there is a symbolic element to writing their kid off as someone else's that simply cannot be overlooked.

Aug 6, 2019

Look if I were some rich kid I'd take the symbolic gesture. The symbol represents saving a fuckload of money.

Aug 3, 2019

It's completely gaming the system, and I think those involved should be penalized. This is complete speculation - but I'm sure the investigation will reveal that the majority of these cases will show atypical guardianship relationships. I bet a lot of these kids are still living the exact life as before AKA being financially supported and living in the same household as their parents. As mentioned above, they are being LEGALLY disowned but nothing actually changes.

This is a complete punch in the gut for anyone who actually went through a true change in guardianship - which I'm sure is more common in underprivileged communities. Just because loopholes exist doesn't mean that there is justification to exploit them.

Aug 4, 2019

There are also a ton of people with parents who dont want to pay for their childrens college, but make too much so the kids do not qualify for financial aid.

Prevented some people I know from attending uni

Aug 3, 2019

,

Array

Aug 4, 2019

I'm going to be completely honest, it is taking advantage of the system to put your children into college if you can legitimately afford. First of all, if you decide children, don't you think you should start saving money for college or university the day the child was born? This takes away money from people who can't legitimately afford go to college due to their social economic condition. This isn't new, at Stanford, if your parents give money to the school and their child applies, they get put into a special pool. The acceptance rate goes from 4-5% to 15%. I have a wealthy friend who has crazy money, $1 Billion+, the dean of admissions called and asked if their son and my friend would like to attend their IVY university, no questions asked.

"It's okay, I'll see you on the other side"

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Aug 4, 2019

I'm not sure this takes away any money from truly needed.

Pell Grants and federal financial aid just increases the deficit. Those programs are not limited by how much is used.

At the elite private schools most of them have enough cash to pay everyone's need.

I don't like this but at the same time college has become a complete racket and I therefore don't think it's hugely immoral to play the game.

People making 250-500 a year pay incredibly high marginal tax rates. First taxes are high at that level. And second they lose out on all these benefits. And often have to live in areas with high real estate prices.

Also the poor pay very high marginal rates. But mostly because a lot of benefit are lost for making just a little more money.

I'd be way more against doing this if the market had created an affordable high quality product. There should be high quality schools at 25-30 a year. Instead everyone tries to price as high as possible and then play games with merit and financial aid.

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Aug 5, 2019

Hell private high school is expensive these days. About the same price as undergrad at some state schools.

Greed is Good!

Aug 4, 2019

Unless you refuse to pay for your childs college, want them to do it themself, but realize they cant get financial aid because they make too much.

Was a problem for some people I know. They had to do college over 7-8 years because they were ineligible for any financial aid whatsoever because their parents didnt want to pay, and had to pay tuition through part time jobs

Aug 6, 2019

Really messed up situation. I think the point of college is kind of lost if you take 3 or less years or greater than 4. The whole point is to be in a place with all of these other people trying to learn like you in a really compressed timeframe, if you cut it down you learn less, and if it's long then it lacks the rigorousness of always not having enough time.

Aug 5, 2019

i love this

Aug 5, 2019

Are the parents at risk at all for this? My mom did this with my brother. Us Slavs will always learn the rules and then exploit them.

heister:

Look at all these wannabe richies hating on an expensive salad.

https://arthuxtable.com/

Aug 5, 2019

Probably will have to house your brother in basement once he is kicked out of college and can't even file him as dependent cause he isn't anymore.

Aug 5, 2019

I got a (near) full-ride academically, but I wish I had thought of this. With the sky-rocketing of prices of attendance, colleges have invited this type of gaming. Lower your prices or see this shit continue. Honestly, I applaud the strategy. I was in the same boat. Parents made just enough to be middle-class but couldn't help pay anything. They did let me stay on their insurance, but I worked 3 jobs through college and graduated with a BS/MS in Engineering with only 18k in debt. Paid it off in 6 months following graduation and never paid a dime in interest. Went in-state than to the better private schools I got into. Made my first 100k/yr at 26 and am continuing the growth.

College is doable but gaming is not the issue. The issue are prices of education. If you're smart, you find a way to minimize your input for your maximized output. Bravo parents.

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Aug 5, 2019

It's a bold move but I respect the shit out of it

Aug 5, 2019

I was an international student and while I needed a full scholarship to attend a U.S. college, my scholarship ended up being merit based. As a result, I couldn't apply it to a "study abroad" program to study a foreign language in a native environment, because the college only transferred need based scholarships to partner universities.

Anyway, I'm wondering if at some income level, rich kids aren't even eligible for merit based scholarships. Is that the case? I hope not!

Aug 5, 2019

I think this varies by state but some states have specifically merit-based scholarships that do NOT depend on income level

Array

Aug 5, 2019

This is not surprising. At my school, lots of out of state kids were "emancipated" from their parents so they could get instate tuition. Nothing new here.

Greed is Good!

Aug 6, 2019
Comment
Aug 6, 2019
Comment

Greed is Good!