IN its April 15 issue, the magazine Smart Money passed along some devious advice. It came from Doug Mollin, a financial planner, whose subject was how well-to-do parents can qualify for college scholarships based on financial need.
One way to create a pauper's profile, Mr. Mollin said, is to move trust funds and other assets to grandparents, who can transfer them back "once college is out of the picture."
Smart Money also encouraged laziness. It quoted Ray Rusolillo, a senior tax manager at Coopers & Lybrand, as saying: "Strange as it may sound, it is almost better to tell your child, 'don't work.' " Employment, the magazine explained, is financially futile because students receiving federal aid must use 70 percent of their income for college costs, meaning that colleges "bleed your children dry."
Bleed? Whatever happened to sacrificing, saving for college and working your way through?
Similarly, Money magazine's 1992 college guide suggests that shifting debts from credit cards to home-equity loans "will actually increase your eligibility for aid." The reason is that federal formulas for financial-aid eligibility subtract mortgage debt from net worth.
Suggestions like these typify a spreading corruption in college finance and personal ethics. Each year at Connecticut College, we see about 25 scholarship applicants among our 1,650 students whose families have high incomes, significant future earning power and few younger children to support. Yet they submit financial-aid forms showing minimal assets and enormous debts. Other colleges report similar findings.
When we request further documentation it often turns out that these families can afford to put nearly half their incomes into pension plans. Others reduce their assets on paper by investing heavily in life insurance or by making "loans" from personal savings to family corporations.
To be sure, families should be allowed to present a full picture of their financial situation. But this type of duplicity teaches children to cheat the system. It diverts money from the truly needy and forces colleges to spend money on detective work. It is a slap in the face to scholarship donors and it defrauds taxpayers.
Paradoxically, colleges that insist on equal opportunity suffer the most. Cheating is one reason many institutions have had to abandon "need-blind" admissions, the policy of accepting students regardless of their financial resources.
This summer Congress actually widened one loophole in the federal formula. To help middle-class parents, the Higher Education Act of 1965 was amended to remove home equity from the list of assets that the government assumes are available for education.
A more judicious solution would have been to place a cap on such exemptions.
That is the kind of reform needed to move the country toward making fairer judgments of a family's capacity to pay. But we also need to raise the expectation that parents, financial planners and even influential publications will act ethically.
Claire L. Gaudiani is president of Connecticut College.