Education Feature
Scholarship Scams
By Adam Wilkenfeld
CWK West Coast Bureau Chief
 

"As far as I'm concerned, if it SOUNDS too good to be true, it IS too good to be true. It's not true."
-Mandy Bamdad, a mother-

The cost of a four-year college education has shot up more than 600% in the past 30 years. About $90 billion in scholarship money is available to help defray that cost, along with hundreds of scholarship scams that promise money and then take it away instead.

Many parents and high school seniors are overwhelmed by the forms, worried about the costs but are also excited about the future. All of these emotions make them an easy mark for scam artists who promise to find them scholarship money.

"Well, we did pay over a thousand dollars I think," says Rosendo Carranza of a service that failed to find his daughter a single scholarship dollar.

"If they would have kept their promise, I wouldn't be paying for school right now," says 17-year old Nillie, referring to a scholarship service to whom she paid $1,700 to help get her recruited to a college athletic program.

According to the Federal Trade Commission, tens of thousands of high school students are victimized by scholarship scams each year. Many claim to help students get "their share" of "billions of billions of unclaimed scholarship dollars."

"But don't let anybody else do it for you," advises Richard Pfaff, assistant director and administrator of Financial Aid and Scholarships at San Jose State University. "If someone comes up and says, 'If you pay me $500, I'll make sure your son or daughter gets a scholarship,' don't listen to any of those people because you can do it all yourself."

If they say you have to pay money to get money, if they make guarantees or say you are a "finalist" in a competition you never entered or if they say "you can't get this information anywhere else," then experts warn that they are probably lying.

"All of that information is out there for free," Pfaff explains. "There are people in your high school, as well as your colleges, as well as the Internet that are more than willing to give you all of that information, for nothing."

 
Don't Fall Victim to Scholarship Scams

By Pam Frazier
CWK Network, Inc.

According to an annual College Board survey, college tuition recently surpassed a 10-year high, increasing by 9.6% at public, four-year universities and more than 5.8% at private, four-year universities. This increase does not include additional expenses of room and board, transportation, books, computer and/or lab fees, and in light of these findings, it is not surprising that many universities have reported record numbers of submitted financial aid applications. But as budgets get slashed and tuition costs outpace federal aid increases, many students are being forced to find alternative ways to pay for college.

Unfortunately, the search for college money sometimes leads to fraudulent companies who search for deceptive ways to steal money and make empty promises. The Federal Trade Commission (FTC) says that these companies use various tactics that usually involve a guarantee of scholarships, grants or financial aid packages for advanced fees. Some even use high-pressure sales pitches at seminars that require immediate payment to prevent losing out on the "opportunity."

 
What Parents Need to Know

In the year 2000, Congress passed the College Scholarship Fraud Prevention Act to establish stricter sentencing guidelines for criminal financial aid fraud. The act gives the U.S. Department of Education (DOE) and the FTC the responsibility of implementing national awareness activities, including a scholarship fraud awareness site on the DOE website. The legislation also requires the U.S. attorney general, the secretary of education and the FTC to submit a consolidated report to Congress each year assessing the nature and quantity of scholarship fraud incidents since the date of enactment.

The FTC advises parents and students to be cautious of companies that use phrases like "we'll do all the work," "guaranteed or your money back" or "you can't get this information anywhere else." It also offers the following advice for you and your teen in the event that you attend a financial aid seminar:

  • Take your time. Don't be rushed into paying at the seminar. Avoid high-pressure sales pitches that require you to buy now or risk losing out on the opportunity. Solid opportunities are not sold through nerve-racking tactics.
  • Investigate the organization you are considering paying for help. Talk to a guidance counselor or financial aid adviser before spending your money. You may be able to get the same help for free.
  • Be wary of "success stories" or testimonials of extraordinary success. The seminar operation may have paid people to give glowing stories. Instead, ask for a list of at least three local families who have used the services in the last year. Ask each if they are satisfied with the products and services received.
  • Be cautious about purchasing from seminar representatives who are reluctant to answer questions or who give evasive answers to your questions. Legitimate business people are more than willing to give you information about their service.
  • Ask how much money is charged for the service, the services that will be performed and the company's refund policy. Get this information in writing. Keep in mind that you may never recoup the money you give to an unscrupulous operator, despite stated refund policies.

FinAid offers these additional tips to help you avoid becoming a victim of a scholarship scam:

  • If you must pay money to get money, it might be a scam.
  • If it sounds too good to be true, it probably is.
  • Spend the time, not the money.
  • Never invest more than a postage stamp to get information about scholarships.
  • Nobody can guarantee that you will win a scholarship.
  • Legitimate scholarship foundations do not charge application fees.
  • If you are suspicious of an offer, it is usually with good reason.

Reputable places where you can find alternative sources of financial aid do exist. If your teen is ineligible for federal need-based grants, you should consider applying for merit-based grants, which are based on academic and other non-financial criteria. Officials at the National Association of Student Financial Aid Administrators report that in the past 10 years, merit-based grants have tripled and account for 45% of all grants awarded.

When searching for scholarships online, experts say that it is best to use a personalized search that compares individual backgrounds with a database of awards. FastWeb offers free scholarship searches based on demographic profile and offers similar services that fraudulent companies perform for compensation. The U.S. DOE also has a website that provides federal student aid program information and scam warnings.

 
Resources

College Board
FastWeb
Federal Trade Commission
FinAid
National Association of Student Financial Aid Administrators
San José State University
U.S. Department of Education