Feds Warn Consumers of Scholarship Scammers

The Federal Trade Commission has posted a timely reminder at www.ftc.gov about a disturbing increase in scholarship and financial aid scams targeting high school seniors and their parents. As upcoming grads gear up for college, students and parents both intensify their search for financial aid to pay for high-flying tuition and housing costs. Overwhelmed by the skyrocketing costs, they often become easy victims of scholarship scammers.

College costs money and lots of it - a fact that many unscrupulous companies are exploiting to the detriment of students interested in a good education and the improved career prospects that come with it. A favorite venue for setting the hook seems to be free seminars, where a savvy sales pitch is delivered with the promise of a guaranteed scholarship in exchange for an upfront fee. According to the FTC, students and parents are often lulled into these agreements by a reassuring money-back guarantee, which in fact has so many loopholes that a refund is for all practical purposes impossible to receive. Other scholarship scammers tout "scholarship awards", but require a fee or even access to credit cards and checking accounts in order to verify a student's "eligibility" for the award.

Whatever the scam, students and parents should be aware of warning signs that a scholarship offer isn't legitimate. Any mention of a guarantee, for example, should raise a red flag immediately. Offers requiring an upfront fee, or access to credit card or banking information, have virtually no chance of being legitimate.

The FTC does acknowledge the existence of legitimate companies that match students with real scholarship opportunities for a fee, but here, too, consumers should take care to ask the right questions. Don't fall for overblown success stories. Instead, make a point of asking companies for local references citing real people you can talk to about the quality of service and results. Last but not least, get any fee-for-service agreement in black and white.

The pressure of finding a way to pay for an expensive college education often causes students and parents to overlook one of the best sources for student aid: the Federal government! Each year, the Department of Education distributes some 80 billion dollars in Federal student aid as grants, work-study programs and loans. The opportunities here aren't too good to be true, they're simply too good to be overlooked - and are guaranteed scam-free. For more free information, visit studentaid.ed.gov, the home of Federal Student Aid on the Web!