College students and their parents are feeling the sting of scholarship scams more often.
As the cost of attending a college or university rises, students and their parents are turning to alternative funding sources to pay for their education. But with an explosion of alternatives come scams and fraud, financial aid experts said.
According to the College Parents of America (CPA), a group that advises parents on a variety of issues, 50,000 people are conned each year by scholarship fraud. Students and parents may lose up to $5 million per year as a result.
According to finaid.org, a Web site that publishes information on scholarships and financial aid, many companies falsely intimate that they are related to the federal government, using words in their company names such as “national,” “federal” and “administration.” Students should be skeptical of scholarships that have an application fee and beware of sales pitches that are concealed as some sort of financial aid seminar, according to finaid.org.
CPA President Richard Flaherty said his group’s goal is to help educate parents and students about the dangers of different types of bogus scholarship programs.
CPA joined with the Federal Trade Commission to crack down on cases involving fraud and scams. Both groups launched ongoing attempts to alert consumers regarding many different types of scams.
Dan Small, GW’s director of Student Financial Assistance, said he is familiar with several types of scholarship scams. Small said that a company recently told a student that GW would have to pay $200 to the company in order for the student to receive the scholarship. The case was referred to the Department of Education.
Asking for up-front fees is just one instance of a scholarship scam. Flaherty said some companies will offer services to consumers even though consumers can get the same information for free through other means. For example, he said one woman paid $85 to a service to receive regular information regarding scholarships. She could have gotten the same information free from the Internet, Flaherty said.
Many companies might guarantee or promise scholarships, according to the FTC.
“Many use high pressure sales pitches at seminars where you’re required to pay immediately or risk losing out on the `opportunity,'” the FTC’s consumer alert noted.
Flaherty also said many of these companies offer things they cannot deliver.
“Some of them are just promises made by overzealous salespeople,” Flaherty said. In other instances, a company may continue to offer a legitimate scholarship though the deadline date for eligibility has passed, Small said.
Small said he has seen a rise in the number of agencies that offer assistance to students in filling out their financial aid forms. These agencies may intentionally lie on the forms, without the knowledge of parents, he said.
The FTC came out with a list of six items that consumers should be aware of regarding scholarship scams. First, consumers should be skeptical if a scholarship is “guaranteed or your money back.”
Small said people should be aware of the costs of applying for a scholarship and what applicants are promised in return. Next, the FTC advises consumers to never give a credit card number out if asked by one of the companies. Also consumers should be concerned if they are told they are a “finalist” in a contest they never entered.
Flaherty said CPA has been advising college students and their parents for the past two years about scholarship fraud and scams. The FTC advises consumers to report any scams to its Consumer Response Center via the complaint form on its Web site at www.ftc.gov.