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Scams Target Students Seeking Financial Aid

College-Bound Students Need to Do Their Homework

February 7, 2007      Spanish version

Student Aid • Grounded Helicopter Students Win Some Financial Relief • Bankrupt Helicopter School Shoots Down Student Aspirations • Student Loan Company Agrees to End Kickbacks to Schools • Nelnet Agrees to End Payoffs to Alumni Associations • Cuomo Corrals More Student Lenders • Johns Hopkins Settles Student Loan Probe • Wells Fargo Agrees to Clean Up Student Loan Practices • New York Sues Drexel Over Student Loans • Sallie Mae Settles Student Lending Probe • Financial Aid Probe Focuses On Johns Hopkins Official • Colleges Agree to Clean Up Student Lending Practices • NY's Cuomo Blasts "Unholy Alliance" of Colleges, Lenders • Scams Target Students Seeking Financial Aid • Cuomo Widens Probe of Student Loan Industry • House Approves Cutting Student Loan Interest Rates • Study Endorses Cutting Student Loan Rates in Half • January is Time to Submit Student Aid Info • Congress Jacks Up Cost of Student Loans • About Student Financial Aid • Timeline --- • Why Does College Cost So Much?

Getting ready for college? Be careful. There are many scam artists offering "insider information" on scholarships and financial aid that is essentially worthless.

The New York State Consumer Protection Board (CPB) warns that there are private companies charging high fees for services that are generally free to the public.

There are also high-interest loans and scholarship scams being marketed to students and parents as their search for college aid kicks into high gear this month.

"You don't have to spend money in order to find money for college," said Mindy Bockstein, the CPB's acting chairperson and executive director.

"Government agencies, as well as colleges and high schools, are offering many free services this weekend, including orientation programs at high schools and colleges across the state.

"The bottom line is: parents and students need to do their homework," she said.

On Saturday, Feb. 10, many State University of New York (SUNY) campuses will have financial-aid experts available to answer questions about how to apply for financial aid from the state and federal governments.

The following day, high schools and colleges across the country will host financial-aid programs in a nationwide program called "College Goal Sunday."

The key to obtaining grants and low-interest loans from the government is the Free Application for Federal Student Aid, commonly known as the FAFSA.

Although FAFSA is free, parents are lured into paying between $50 and nearly $2,000 to a company that will complete the application on their behalf.

Several websites use names very similar to the FAFSA name in order to lure them away from the government website -- www.fafsa.ed.gov where the FAFSA application is available at no charge.

"Ironically, these private services require consumers to fill out an application that is nearly identical to the FAFSA application," said Bockstein.

Students and parents are also invited to "free" seminars where college consulting firms pressure them into buying services they may not need or have trouble accessing.

Consumers have complained that some companies promise to offer "consulting services" to help a student choose a college. Some parents said these consulting services were not as personalized and specific as the companies described in their sales presentations.

Some of these consulting packages can cost $2,000 or more and consumers have found it difficult to get refunds from some of these companies.

Bockstein also noted that parents should be aware and concerned that these private services may be selling information about their customers. This can result in even more companies contacting them with offers, including some financial aid and government-grant scams.

"Scam artists often lure victims with phony guarantees that they can obtain a government grant or a college scholarship," said the acting Chairperson. "Such 'guarantees' are a tip-off that this is a scam."

Other warning signs include:

• demands that you pay an up-front fee;
• requests for credit card numbers or bank account information;
• claims that a company can offer "exclusive" information;
• promises to give you cash if you first pay a registration fee;
• offers for a lower interest rate if you pay a larger fee in advance; and,
• claims that the company will convert a loan into a grant -- but only if you first pay a fee.

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