how to avoid the COLLEGE MONEY TRAP Check out these low-cost alternatives before spending a dime on expensive private counselors, test coaches or scholarship search services.

(MONEY Magazine) – The growth of any industry tends to spawn new businesses that feed off it, and higher education, now a $140-billion-a-year enterprise, is no exception. During the past two decades, helping parents and students to calm their getting-into-college jitters has grown from mom-and-pop status into a sizable industry in its own right, encompassing independent admissions and financial aid counselors, Scholastic Aptitude Test coaching schools and scholarship search firms. To help you decide whether you should pay any money for these services, this article explains what they can -- and cannot -- do for your child. And we offer low-cost alternatives that may be just as effective or even better.

INDEPENDENT COLLEGE COUNSELORS Fifteen years ago, private college counselors were a rarity; today there are about 600 of them working full time, and doing rather nicely, thank you. Last year they raked in fees of $400 to $2,000 from each of 20,000 clients. The consultants, often former high school guidance counselors or college admissions officers, spend about 12 to 14 hours helping students draw up a list of realistic college choices and advising them on application essays and other topics. Some families turn to private experts because they need extra help in finding a school for a child who has, say, a learning disability or a special talent in music. Others may believe that they are not getting adequate attention from their school's guidance counselor. (At the least, your child should expect to have a thorough discussion of his or her needs with the school counselor, not just half an hour of stock advice.) And some families welcome extra guidance simply because they feel overwhelmed by aggressive college marketing tactics. Says William Pierce, executive director of the Independent Educational Consultants Association (IECA), a trade group: ''So many colleges send kids mail that parents are hard put to evaluate whether their son or daughter is the next Einstein or if it's all hype.'' Many parents, however, hire an independent admissions counselor simply because they want their children to get into brand-name schools. Indeed, the majority of kids who use private consultants attend tony prep schools or affluent public schools whose own guidance counselors tend to be highly competent and not overburdened. ''Most of the time, parents hire private counselors for social cachet,'' says James Alexander, the college consultant at Highland Park High School in suburban Chicago. ''Some towns, and this is one, have college bumper-sticker syndrome'' -- the parents like to boast about their children's colleges. Alexander and other school counselors believe that most students would be better off making more use of the free guidance services available to them. Well-run high school guidance offices feature the latest college reference books as well as computer programs that generate lists of college choices based on students' grades, college entrance exam scores and other factors. In many school districts, students get advice on writing college application essays in English class, and most teachers are willing to provide pointers one-on-one. Furthermore, a private consultant may not devote more time to your child than would his school counselor. The experience of A.H. Napier, associate director of college counseling at Choate Rosemary Hall school in Wallingford, Conn., seems to be typical. ''I handle 80 kids here,'' he says, ''but I also worked with 70 or 80 families at a time when I was employed by a private counseling firm.'' If you decide that you need a private counselor, the best way to find one is by seeking recommendations from friends. When interviewing prospective counselors, ask for references and written lists of the colleges their recent clients are attending. If your child has a special talent or problem, make sure the consultant you hire has handled students with similar needs. Conscientious counselors visit at least 20 to 30 campuses each year to garner information firsthand. Also look for membership in IECA or the National Association of College Admission Counselors. Beware of consultants who drop the names of Ivy League admissions officers and intimate that their connections will get your kid into, say, Harvard or Yale. You can easily check the validity of such boasts by calling the admissions officers in question. Also steer clear of a consultant who hints that he or she will complete college applications or write essays for your child. ''Making false promises to families and writing students' essays for them are unethical practices,'' says Harriet Gershman of Academic Counseling Services in Evanston, Ill. Finally, IECA chairman Steven Antonoff advises parents to avoid counselors who work with more than 100 families during an academic year. No one with that kind of workload can give you the personalized attention you're seeking.

SAT PREP COURSES For most of the past 54 years, Kaplan Test Prep monopolized the field of standardized-test study courses, which help students prepare for the SAT and other exams. Today, Kaplan competes with the Princeton Review, Sylvan Learning Centers, Huntington Learning Centers and hundreds of smaller companies. Indeed, SAT anxiety is so widespread that each year the parents of about 100,000 high school students (of the 1.8 million who take the exam) willingly pay $400 to $695 for the cram courses. Typically, the schools provide intensive drills in vocabulary and math at six to 14 sessions totaling 24 to 42 hours. But they also teach what they call test-taking strategies -- essentially, tips on using clever guesswork to find the right answer. Those pointers are what most annoy the College Board (an independent association of colleges and high schools that sponsors the SAT) and the Educational Testing Service (which devises and administers the exam). The reason: Such gimmicks defeat the purpose of the test, which is to predict how well a student will perform in college. One standard tip: In reading- comprehension sections, never choose an answer that reflects poorly on women or minorities. As an example, John Katzman, owner of the Princeton Review, points to a reading passage from a recent SAT discussing artwork produced by slaves. Students must complete the following sentence: ''The author cites specific examples of the work of slave artisans primarily to . . . '' Two potential answers, Katzman says, are derogatory and therefore must be wrong: ''indicate the conventional and imitative nature of their work'' and ''explain why they were considered technical experts rather than artists.'' But can a few hours of coaching -- however cunning -- really help kids raise their scores significantly? That question, which has been hotly debated for a decade, is at the heart of an unusual lawsuit. The plaintiff is the father of Brian M. Dalton, 18, of Queens, N.Y. Young Dalton scored 620 (out of a possible 1,600) on his first crack at the SAT in May 1991 when he was a high school junior. After completing a $695 Princeton Review course, he tried again in the fall of his senior year and tallied a respectable 1,030. The ETS accused Dalton of having someone else take the test for him and refused to release his second score to colleges. In August, a judge of the Queens County Supreme Court ruled in favor of Dalton, saying the ETS had not acted in good faith in challenging his score. ETS will appeal; Dalton's college plans are on hold. Princeton Review owner Katzman insists that Dalton is a model client of his $30 million firm and offered to pay half of the Daltons' legal bills. Yet even Katzman, a critic of the college-testing establishment (''They are the major cause of educational decline in this country,'' he says), concedes that Dalton's 410-point jump was unusual. Katzman's advertisements claim that Princeton Review's students gain an average of 150 points. As proof, he cites an assortment of studies, including one by a Harvard Ph.D. candidate and another by Venture, a now defunct business magazine. The College Board, by contrast, contends that 40 hours of preparation results in a far more modest average gain of 35 to 50 points. To support its case, the College Board distributes reprints of the conclusions drawn by Frederick L. Smyth, director of college counseling at the Bullis School in Potomac, Md., from his 1988 and 1989 surveys of 1,132 students at 17 private high schools in the Baltimore and Washington, D.C. areas. He found that the 331 who didn't take commercial SAT prep courses gained an average of 77 points from their junior-year PSAT (a preliminary version of the SAT) to their best SAT scores; the 501 who paid for tutoring mustered only 33 additional points (for a total improvement of 110 points). Admittedly, Princeton Review's and Kaplan's students did even better -- with average gains of 38 and 45 additional points, respectively. Smyth dismisses the studies that Katzman cites, faulting them because they relied on self-selected samples, lacked control groups or had other shortcomings. Katzman disagrees and is equally contemptuous of Smyth's work, saying, ''It's incredibly biased.'' Rather than trying to sort out the conflicting claims, simply remember that there's no telling how much better your child could do if he or she took the SAT again, with or without a cram course. ''Coaching isn't a magic pill,'' says Gregg Driben, national director of undergraduate programs for Kaplan. ''Some of our students' SAT scores rise 200 to 400 points, but others go up only 50 to 70.'' And if your child hates schoolwork and resists studying, he or she isn't likely to get much out of a coaching class. So rather than spending $10 or more for every added SAT point, check out the alternatives. Your child's high school may offer a free SAT prep course. Or you and your child may be able to work together to prepare for the test by studying one of dozens of books that include practice tests based on past years' SATs, including How to Prepare for the SAT (Barron's Educational Series, $11.95) and Preparation for the SAT (Arco, $12). ''Books are certainly similar to our materials,'' admits Ray Huntington, a co-founder of Huntington Learning Centers. Still, he insists that commercial courses offer something you can't get from books. Says Huntington: ''The value of our course comes from the support and pushing that we give kids.'' Also bear in mind that an SAT score is only one factor that will determine whether your child is admitted to a college -- and usually not the most important one at that. Even a very high SAT score won't compensate for a poor grade point average or a lack of other qualities admissions officers look for, such as special talents, participation in extracurricular activities and strong recommendations from teachers. ''Admissions directors don't usually care about the difference between a 1,200 and a 1,300 on the SAT,'' says Daniel Lundquist, dean of admissions and financial aid at Union College in Schenectady, N.Y., one of the few schools that don't even ask applicants for SAT scores. ''They go for the pizazz of a kid who's really different.''

FINANCIAL AID ADVISERS Independent financial aid advisers charge families for research that they can do on their own. For $70 to $800, the advisers tell you where and how to apply for grants and loans and -- at the high end of the fee schedule -- help you complete the necessary paperwork. At the same time, however, a few of these consultants may push financial products that earn them commissions. Some sell life insurance or annuities, % for instance, touting them as better than other investments because they don't count as assets under the federal formula that determines financial aid eligibility (see ''The New Rules of Financial Aid'' on page 42). To ensure that the advice you get is untainted by a quest for commissions, work solely with a fee-only adviser who does not sell financial products. A further warning: Aid consultants are about as popular with college financial aid officers as overly clever accountants are with the Internal Revenue Service. ''There's a lot of manipulation going on to artificially inflate students' needs,'' complains Anthony J. Bellia, dean of enrollment management at Canisius College in Buffalo. For instance, several consultants say they offer this advice: When a family wants financial aid for a child who is about to enter college, someone else in the family should sign up for two or more courses in a degree or certificate program at a local college or vocational school. That will allow the family to claim on its financial aid application that it will be paying tuition bills for more than one person. Under the federal financial aid rules, that would cut the parents' expected contribution to college bills in half (entitling the family to additional financial aid), no matter how little it is spending on the other ''student.'' To help college officials spot such maneuvers, a new law, taking effect in academic year 1993-94, requires aid advisers to sign the application forms they complete, just as accountants must flag the tax returns they prepare. You can bet that aid applications filled out by pros will get closer scrutiny than others.

SCHOLARSHIP SEARCH SERVICES You've probably already received mailings from computerized scholarship search services. Typically, they charge $45 to $199 for a list of corporate and foundation grants for which your child may be eligible, based on high school grades, intended college major, ethnic background or other criteria. Toss the missives in your recycling bin, advise college financial aid officers. ''These services provide nothing you couldn't find for yourself in library books,'' says Jerry Sullivan, director of student aid at the University of Colorado at Boulder. ''They just aren't worth the money.'' One reason: Scholarships offered by local religious and civic groups -- the ones your child may be most qualified to win -- are unlikely to appear on the services' lists, which tend to include only scholarships available to students across the country. Many search firms hook kids and their parents with downright misleading mailings, fliers and television commercials. Some ads don't even make it clear that students must complete scholarship applications themselves. For example, as a sophomore at the University of Notre Dame in 1990, William J. Blanford sent $60 to the Academic Council on Financial Assistance in Washington, D.C., thinking that the company would do all the work necessary to get him at least the $300 in scholarships that it promised. ''I thought it would be an easy way to get grants,'' recalls Blanford, now 22 and a graduate student at the University of Arizona in Tucson. About the time he realized that he had to fill out the applications himself, he also discovered that some of the sources of aid on the list sent to him by the search service no longer existed. After Notre Dame complained to postal inspectors on behalf of Blanford and other students, in June 1990 an administrative law judge ordered the firm to stop misrepresenting itself. According to court figures, the company may have raked in as much as $4.2 million from 70,000 students in four months. Another firm combined its questionable advertising claims with a costly 900 telephone number; callers received a five-minute sales pitch for a $199 scholarship search service. Cost of the call: $15. That 900 number is no longer in operation, but others may be. Although there are thousands of scholarship search services, many actually share the same data base through arrangements that resemble franchises. For instance, Educational Services of America in Northbrook, Ill. charges would-be entrepreneurs a one-time fee of $489 to become so-called licensed distributors; more than 2,079 people have signed up since June 1990. These ''experts'' pay $11 each time they tap into the company's data base, which lists 180,000 scholarships. They then sell lists of scholarships to clients for $45 to $65 each. If you are determined to hunt for scholarships electronically, you can hold down the cost by using the Cashe system, which lists 150,000 grants, loans, fellowships, scholarships and work/study programs. Cashe is available at more than 500 high schools and colleges around the country free or for a nominal fee. The University of Maryland, for example, charges its own students $5 and other students $15 to tap into Cashe. Says Ulysses Glee, the university's financial aid director: ''If a student had to pay $75 to $100 or even $40 or $50 for this service, I'd question the investment.'' Keep Glee's advice in mind if you have to choose between paying for a computerized scholarship search service or telling your child to go to the library to do the research himself.