graphic
Personal Finance
College scholarship scams
June 22, 1999: 6:22 a.m. ET

Don't get taken by con artists offering 'guaranteed' financial aid
By Staff Writer Nicole Jacoby
graphic
graphic graphic
graphic
NEW YORK (CNNfn) - Eager to find new ways to fund your child's college education? Don't fall prey to college scholarship scams and seminars promising big payoffs and access to millions of dollars worth of unclaimed grants.
     About 350,000 Americans are duped by such scholarship cons each year, with about $5 million lost to fraud, according to the National Association of Student Financial Aid Administrators.
     "As the cost of higher education increases, parents are very anxious to find outside sources of financing," said Richard Flaherty, president of College Parents of America, an organization that guides parents through the financial aid process.
     Consequently, many parents turn to scholarship search services or other companies that take advantage of consumers by guaranteeing often impossible results.
     "Many (of these) services are legitimate," Flaherty said. "But some have overzealous salespeople making promises that aren't realistic and some are outright scams."

    
The con

     Financial aid cons vary, but one characteristic shared by most scam operations is their ability to present themselves as official organizations. Fraudulent companies often refer to themselves as foundations or administrations, and contain words like "national" or "federal" in their titles. But don't be fooled by prestigious-sounding names.
     Among the more common financial aid scams are those asking for advance fees. A company may offer an unusually low-interest educational loan provided a fee is paid up front. Others may require applicants pay a processing fee to apply for a scholarship.

    
Quote

     Some illegitimate companies tell students they've been selected as finalists for awards in contests they never entered, but fees or tax payments are required before the funds can be released.
     In most cases, the scholarship or loan never materializes. That's because legitimate scholarship sponsors rarely require application fees and legitimate loan providers typically deduct such payments from disbursement checks, not in advance.
    
Deceiving seminars

     Aggressive sales pitches disguised as seminars are another common way con artists lure in prospective victims.
     These sessions may be run by legitimate -- but overzealous -- salespeople, as well as con artists, who contact local parents and invite them to meetings where they can receive free information. Though the sessions usually include real facts regarding financial aid, the data rarely differs from information provided by the university's financial aid or guidance offices.

    
List

     The seminars often include high-pressure sales tactics which involve telling parents they will lose out on once-in-a-lifetime opportunities if they don't put down money immediately. In some cases, seminar operators aim to sell equities, insurance or student loans under the guise of giving financial aid advice.
     These seminars may also include testimonials declaring extraordinary success, as fraudulent businesses may have paid people to give glowing reviews.
     If you are genuinely interested in a service offered by the company sponsoring the seminar, "get a list of customers with phone numbers in the local area and confirm that they were satisfied with the service," recommends Flaherty.

    
Red flags

     There are tell-tale lines that can alert parents and students to potential scams, says the Federal Trade Commission.
     For instance, a company that claims a scholarship is "guaranteed or your money back" is likely a fraud, since no one can guarantee they'll get you a grant or scholarship.
     A company that insists "you can't get this information anywhere else" is also suspect, as a wide range of free lists of scholarships are available in libraries, books and on the Web.
     Don't be fooled by companies that say they will do "all the work." Scholarship paperwork and related essays always must be written by the applicant.
     Finally, beware of any organization that asks for sensitive credit card or bank account information, especially over the phone. It could be a set-up for an unauthorized withdrawal from your account.

    
Protecting your money

     In all cases, get offers and agreements in writing - especially refund policies -- before you pay. Some companies offer a "money back guarantee," but attach conditions that make it impossible to get the refund. Also keep records of all your dealings with the company.
     Get an opinion from an outside source, such as a guidance counselor or a librarian. If the offer involves a loan, show a copy of the offer to a lending institution to see if they think it's legitimate.
     To investigate a company or report a scam, contact the National Fraud Information Center, the Federal Trade Commission, the Better Business Bureau or your State Attorney General's Office. These organizations may be able to tell you if certain companies have had other complaints filed against them.

    
Alternative resources

     While many scholarship search companies are legitimate, they often do little you can't do yourself, says Flaherty.
     "These search services -- even the legitimate ones - should be viewed as a supplement," Flaherty said. "If parents and students are willing to do the work themselves, they can find out more about grants and scholarships than any service could."
     High school and college guidance counselors should be able to provide information about outside funding resources, including scholarships, grants and work study, says Flaherty.
     He also recommends a trip to the local library and a thorough Web search. A wide range of books and Internet sites, including fastweb.com, collegeparents.org and finaid.org, list scholarship and grant options free of charge. Back to top

  RELATED STORIES

Financial tips for college students - Jun. 16, 1999

Parents trip on tuition goals - June 10, 1999

11th hour college financing - Apr. 20, 1999





graphic

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.