Beware of Scams
The number of complaints received at the U.S. Department of Education (ED) regarding scholarship fraud has decreased in recent years. In fact, these days, we usually receive complaints about business practices rather than actual fraud. Over the past few years, we have found that complaints generally fall into two categories: college preparation/financial aid advice services, and for-fee FAFSAsSM.
College prep/financial aid advice services
What happens: These services typically send letters to high school juniors or sophomores, inviting them and their parents to events often called "seminars." At the seminar, a representative of the company talks about the difficulties of finding money for college, how complicated the FAFSA process is, and how important it is to get information right on the FAFSA in order to maximize financial aid. At the end of the seminar, each family meets one-on-one with a representative who offers the services of the company for a one-time or yearly fee. According to many complaints, some of these sales people put a lot of pressure on the family, implying that they will not be able to navigate the financial aid search on their own and that they will lose the opportunity for help if they do not sign a contract that day.
Is it illegal?: No, this type of advice service is not fraud unless the company promises something it does not deliver.
What should a student/family do instead?: There is no need for any student to pay for college preparation or financial aid advice. High school counselors, college financial aid administrators, and the Federal Student Aid Information Center all provide help for free. Additionally, there are plenty of free online scholarship searches. We recommend the student visit www.federalstudentaid.ed.gov/lsa for lists of fraud warning signs and free sources of aid information.
What should a counselor/mentor do?: Keep in mind that students and many parents are new at this process, and they don't know whom to trust. Give them information about how to be a wise consumer; and frequently reinforce the idea that you are available to help them. Make them aware of the free resources listed at www.federalstudentaid.ed.gov/lsa, including the free scholarship search at Federal Student Aid's web site.
FAFSA for a fee
What happens: A student wanting to submit a FAFSA online guesses at the URL and ends up at a site that charges to submit the application. The vast majority of complaints ED receives are from students who have already paid one of these sites and then realized that the FAFSA should be free.
Is it illegal?: No, these sites are not fraudulent unless they promise something they do not deliver.
What should a student/family do instead?: Be sure to look for .gov - the official FAFSA URL is www.fafsa.ed.gov.
What should a counselor/mentor do?: Understand that although students spend a lot of time on the Internet, they are not as savvy as one might think. Studies have shown that young people have difficulty distinguishing which are authoritative sites. Teach them that .gov is associated with government web sites; and remind them that the first F in "FAFSA" stands for "Free"!
Other issues to be aware of
In summer 2004, it was brought to our attention that someone claiming to be a representative of ED was calling students, offering them grants or scholarships, and asking for their bank account numbers so a processing fee could be charged. When we learned of this scam, we alerted the Federal Trade Commission, the National Association of Student Financial Aid Administrators, and a variety of listservs for school counselors and other mentors. Many organizations, schools and individuals helped us spread the word, and the numbers of complaints gradually dropped through that autumn. This shows the power of networking - we need your help making students aware of warning signs and the many free options they have.
How can a student report a suspected scam?
A student who believes he or she has been a victim of fraud should take the following steps:
- If the student has revealed bank account information, he or she should immediately contact his or her bank, explain the situation, and request that the bank monitor or close the compromised account.
- Report the fraud to ED's Office of Inspector General hotline at 1-800-MIS-USED (1-800-647-8733) or firstname.lastname@example.org. Special agents in the Office of Inspector General investigate fraud involving federal education dollars.
- Report the fraud to the Federal Trade Commission (FTC). The FTC has an online complaint form at www.ftc.gov/scholarshipscam and a hotline at 1-877-FTC-HELP (1-877-382-4357; teletype for the hearing impaired: 1-866-653-4261). The FTC will investigate if the fraud is deemed widespread; therefore, it is important that every student contacted by the person or people in question lodge a complaint so the FTC has an accurate idea of how many incidents have occurred.
- If the student is a victim of someone claiming to be from the federal government, he or she should notify the police about the incident. Impersonating a federal officer is a crime, as is identity theft.
When filing complaints, the student should provide detailed information about the incident, including what was said, the name of the person or company, and from what e-mail address or phone number the solicitation originated. Additionally, if unauthorized debits have already appeared against the student's bank account, the student should mention this fact in his or her complaint. Records of such debits could be useful in locating the wrongdoer.
For information about identity theft prevention, you and your students may visit www.ed.gov/misused.
College Scholarship Fraud Prevention Act
By 2000, scholarship fraud had become common enough that the College Scholarship Fraud Prevention Act was passed. The Act states that more people should be aware of scholarship scams and asks ED and the Federal Trade Commission (FTC) to step up our awareness efforts. To read the text of the Act, click here. To read the annual reports on financial aid fraud that ED, the FTC and the Department of Justice submit to Congress each May since 2002, click here.