Students Beware of Scholarship Scam Artists

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July 21, 2006 10:28 AM

Operators of financial aid scams typically promise that their services identify better college financial aid packages than a student could find on their own.

These companies, that guarantee scholarships and grants, often use costly informational seminars to make sales pitches, enticing students to pay up front or risk missing out on the opportunity.  The services cost anywhere from $50 to more than $1000, and few actually help students find financial aid.

Because of the rising costs of college tuition, students and their families are particularly vulnerable to scholarship and financial aid scams.

"When it comes to college financial aid, you shouldn't have to pay money to get money," said Laura Schneider, an attorney for the Federal Trade Commission, who helped prosecute a recent case to shutdown one such scam.

"If there's a fee involved, be sure you know what you're paying for."

Schneider also warns consumers to be cautious and look for tell-tale lines: “The scholarship is guaranteed or your money back;" or "You can't get this information anywhere else;" or "We will do all the work."

This month, one such fraudulent operation was finally shut down after repeatedly violating court orders. 

The organization, National Student Financial Aid (NSFA), promised clients that their service identified more scholarships than students and parents could locate on their own.  Yet these claims proved to be false, and the FTC succeeded in shutting the group down. But there are many more still in operation.

For more information on scholarship and financial aid scams, visit the FTC's website.