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Personal Finance > College
Scholarship scams on the rise
Families facing steeper tuition costs must avoid con artists and scams. Here's how.
May 6, 2003: 10:47 AM EDT
By Leslie Haggin Geary, CNN/Money Staff Writer

New York (CNN/Money) – All college-bound students, and their parents, know that the cost of a higher education is getting pricier every day.

Now comes a government warning that families have another challenge to contend with: con artists.

According to a report released Monday by the Federal Trade Commission, 482 individuals filed complaints with the agency about scholarship fraud in 2002, up one-third from 322 in 2001.

In fact, that is just a fraction of the families who are misled, said FTC spokesperson Brenda Mack.

According to National Association of Student Financial Aid Administrators, some 350,000 people are cheated out of $5 million in scholarship scams each year.

Many families fall victim because they're so eager to send kids to school that they'll try anything and trust anyone.

Desperate ties, desperate measures

It's easy to understand their desperation. Tuition, fees room and board now average $25,052 a year at four-year private colleges and universities, according to College Board. At four-year public institutions, the tab runs $9,663.

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Scholarship scams have been around for decades. But experts say con artists are getting more sophisticated. Years ago, a family might receive a letter inviting them to send money to obtain scholarship information that never materialized.

Now, such offers are coming over the Internet, through e-mails, and in telemarketing calls.

Families may be invited to attend a free seminar about scholarships only to be pressured to signing expensive contracts -- as much as $200 or more -- to "hire" professionals to help them obtain scholarship dollars. Many times that's the last they hear of operators or, at best, they receive scholarship information they could have obtained for free from legitimate sources.

Another scam? Families are told they will receive guaranteed scholarship money if they provide financial information to obtain it. Experts say you should never give out a credit card or bank account number to "hold" scholarship dollars.

In addition, be wary of any offer saying you've been named as a finalist for scholarships you've never heard of. For more information about common scholarship scams, click here.

Go to legitimate sources

The good news about scholarships is that there are plenty of sources to track down college aid. The bad news is that you'll have to do some homework. In fact, if you get any offer to help you obtain a scholarship from individuals offering to "do all the work," chances are it's a scam, experts say.

However, while you may need to spend time on a scholarship search, it's not impossible to find financial aid -- even if you aren't the class valedictorian or captain of the track team.

Start with filling out the Free Application for Federal Student Aid, or "FAFSA." The form is the key to obtaining about 70 percent of federal student aid that's available to college students. The best news: Once you complete the FAFSA form, you can use it at any college or university to apply for such things as the federal Pell grants, low-cost Stafford loans, or work-study programs.

High school guidance counselors should have the FAFSA application. You also can get it for free from college loan offices, your local library or download the FAFSA form from the Department of Education Web site, where you can download it for free.

Private colleges and universities may accept the FAFSA for their own aid programs, or they may require you to fill out additional forms. Ask their loan offices.

Meanwhile, you can get listings of scholarships that may best suit you from College Board, which maintains a free database of scholarships. Provide personal data – such as information about your academic record, cultural background and extracurricular activities – and the College Board will send you a list of scholarships that match your profile.

You also can search for scholarships for free at Web sites like or by filling out an online student profile at

Employers often give college scholarships for their employees or their children, so check with your human resources department. Ditto for community groups, which award free money to kids in their community.

Finally, be aware that because student loans are inevitable for many students, your best bet is to start saving early for college. Programs like state-sponsored 529 college savings plans have several tax advantages for those stashing cash for college, or consider opening a Coverdell Education Fund.  Top of page

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