Financial aid scams grew by a whopping 60% in 2006, according to the Council of Better Business Bureaus (CBBB), which is no surprise to ScamBusters.org, a public service website that has been helping people protect themselves from online and offline scams since 1994. "With about half of all college students requiring some form of financial aid, it's a huge opportunity for scammers," says Dr. Audri G. Lanford, Co-Director of ScamBusters.org.
The cost of a four-year degree from a public university now averages $115,000, according to The College Board. "In the face of these staggering fees, it's easy to see how parents could fall for an offer of a 'guaranteed' grant or 'secret insider information' into the financial aid process," says Dr. Lanford.
In one scam reported by the CBBB, a company invited parents to a "free" financial aid seminar -- actually a high pressure sales pitch -- promising to find grants and scholarships for the student. The "free" seminar ended up costing parents between $700 and $1,000. The scammers disappeared with the money and were never heard from again, according to complaints made to BBBs nationwide.
The request for a large, up-front fee for a "guaranteed" scholarship should be a red flag, notes ScamBusters.org. Legitimate scholarship sources never make guarantees -- and they don't require students to pay up front for anything. There are companies that sell lists of scholarship opportunities, but the legitimate ones don't promise that you'll ever be awarded any funding. They simply sell you a list and you'll have to do the legwork of applying on your own.
Another popular scam involves bogus grant checks. Students receive an official-looking notification of a grant award, complete with check. The recipient is told to deposit the check and send some of the award back via a wire transfer. It may take weeks for students (and their banks) to discover that the original check was a counterfeit -- and then students are liable for the full amount they have sent to the scammers.
College students and their parents can find a list of additional financial aid "red flags," as well as tips to help them avoid scholarship scams, by visiting http://www.scambusters.org/.