As students and their families search for ways to pay for the ever-increasing cost of college, they'll find that there are plenty of legitimate sources of funding to help them pay for education costs. And there are legitimate companies that can help with some of the legwork in finding those funding sources.

Unfortunately, the Federal Trade Commission reports that many of these families are falling prey to unscrupulous companies that guarantee or promise scholarships, grants, or fantastic financial aid packages and fail to deliver on their promises.

These companies often use high pressure sales tactics at seminars. They tell you that you must act immediately by paying a fee. And they try to scare you into believing you'll miss out on the "opportunity" if you don't take advantage of their offer right away.

Some of these scam companies guarantee they can get scholarships on behalf of students, or award them scholarships in exchange for an advance fee. A money-back guarantee is typically promised, but they attach conditions that make it impossible to get the refund.

Other companies will require an advance fee and then provide absolutely nothing in return - not even a list of potential sources. Some of these companies will claim that the student has been selected as a "finalist" for awards that require an up-front fee.

Sometimes these companies ask for a student's checking account information to "confirm eligibility." Then they debit the student's account without the student's authorization. Other companies quote only a relatively small monthly or weekly fee and ask for authorization to debit the account - for an undetermined length of time.

The FTC cautions students to look and listen for these tell-tale lines:

"The scholarship is guaranteed or your money back."
No one can guarantee that they can get you a scholarship or grant. If they do, the guarantee often comes with enough strings attached to make the promise worthless. Get the agreement in writing, and understand the conditions that must be met to receive a refund.

"You can't get this information anywhere else."
That's a lie - there are plenty of free lists available to students. Check with your school's financial aid office or the library before you pay someone to do the work for you.

"I just need your credit card or bank account number to hold this scholarship."
Don't give your bank account or credit card number without getting the information in writing first. It may be a set-up for unauthorized withdrawals.

"We'll do all the work."
Don't be fooled. You have to apply for scholarships and grants yourself.

"The scholarship will cost some money."
Don't pay anyone who claims to be "holding" a scholarship or grant for you. You shouldn't have to pay for free money.

"You've been selected" by a "national foundation" to receive a scholarship or "You're a finalist" in a contest you never entered.

Check out the foundation or program and be sure it is legitimate before you pay money to apply for a scholarship.


If you attend a seminar on financial aid or scholarships, follow these steps:

• Take your time in thinking out the details. Don't be rushed into paying at the seminar. Avoid high-pressure sales pitches that require you to buy now or risk losing out on the opportunity. Solid opportunities are not sold through nerve-racking tactics.
• Investigate the organization you're considering paying for help. Talk to a guidance counselor or financial aid advisor before spending your money. You may be able to get the same help for free.
• Be wary of "success stories" or testimonials of extraordinary success - the seminar operation may have paid "shills" to give glowing stories. Instead, ask for a list of at least three local families who've used the services in the last year. Ask each if they're satisfied with the products and services received.
• Be cautious about purchasing from seminar representatives who are reluctant to answer questions or who give evasive answers to your questions. Legitimate business people are more than willing to give you information about their service.
• Ask how much money is charged for the service, the services that will be performed and the company's refund policy. Get this information in writing. Keep in mind that you may never recoup the money you give to an unscrupulous operator, despite stated refund policies.

The FTC says many legitimate companies advertise that they can get students access to lists of scholarships in exchange for an advance fee. Other legitimate services charge an advance fee to compare a student's profile with a database of scholarship opportunities and provide a list of awards for which a student may qualify. And, there are scholarship search engines on the World Wide Web. The difference: Legitimate companies never guarantee or promise scholarships or grants.
A company charging for financial aid advice is not committing fraud unless it doesn't deliver what it promises. For more information about financial aid fraud or to report fraud, call the Federal Trade Commission toll free at 1-877-FTC-HELP or go to www.ftc.gov/scholarshipscams. The FTC is the nation's consumer proctection agency and works to prevent fraudulent, unethical, and unfair business practices.


Sources:
Federal Trade Commission
mymoney.gov