When Luis Sanchez, one of eight children from a low-income Bay
Area family that earned less than $35,000 annually, approached the
National Student Financial Aid company, he hoped that his dream of
a college education would finally become possible.
After a few seminars with the NSFA and a $1,200 fee that he paid
it for the services it rendered, Sanchez began to realize that the
promise of his dream was vanishing as quickly as it had appeared.
He never heard back from the NSFA, let alone get a single penny out
of the thousands of dollars of scholarship money it had guaranteed
him.
Sanchez’s story is just one of many that the California
Student Public Interest Research Group cites in a report it’s
currently preparing to increase understanding among students of how
fraudulent scholarship companies function.
Legislation passed by Congress in 2000 resulted in the closure
of the NSFA and a refund to the Sanchez family, but the story is
still an accurate reflection of an increasing trend in scholarship
scams.
Fraudulent scholarship companies are making millions of dollars
every year off high school students who are desperately turning to
them in the wake of the increasing costs of a college education,
said Aliya Haq, the campus organizer at CALPIRG’s UCLA
chapter.
Students are paying bogus financial aid companies up to $100
million dollars every year in return for promises that are usually
empty, Haq said.
These companies do little besides filling up students’
FAFSA forms, Haq said, charging them hundreds of dollars for the
rather ironically labeled Free Application for Federal Student
Aid.
“Usually nothing materializes from their promises; they
are simply just scamming the students, nothing else,” Haq
said. “We want to figure out how to effectively stop this, by
alerting every student about these scams.”
In 2000, Congress passed the Scholarship Fraud Prevention Act to
increase the penalty on companies responsible for scholarship
fraud. CALPIRG was one of four groups that testified in order to
bring into effect the legislation, which resulted in the closure of
several companies like the NSFA and the refunding of affected
families.
Nevertheless, the scams still persist, especially among lower
income families who are paying the highest price in their efforts
to cut education costs.
“The reality is that we are only at the beginning stages
of the project,” said Merriah Fairchild, the higher education
advocate for CALPIRG in Sacramento. “Our first priority is to
put together a report with the many different scams that are
around, to warn every student.”
Fairchild herself was the victim of a scholarship scam a few
years ago. “I paid $100 to a company that claimed to find
scholarships worth thousands of dollars for my education,”
Fairchild said. “I never heard from them again.”
The size of CALPIRG’s task is easily understandable given
the number of companies on the Internet that promise financial aid
““ even a simple search on Google for student scholarships
yields no less than 33 million listings.
Kristin Richter, a third-year psychology and communication
studies student who is a recipient of the Regents Scholarship and
California grants at UCLA, identifies with the problems faced by
high school students in locating scholarships for college.
“When you are a senior in high school looking for a
scholarship, you are going to apply for anything you can think
of,” she said.
Richter fortunately acquired her scholarships through the
University of California and her high school, which banished from
her mind any doubts about their legitimacy.
“But for students who search for scholarships online, it
really doesn’t surprise me that they can possibly get
scammed,” she said.
There are several resources available to students to help them
locate legitimate scholarships and even detect fraudulent
companies.
UCLA’s own Scholarship Resource Center was set up in 1996
to serve as the support mechanism that students needed in the light
of widespread scams.
“In addition to helping students find scholarships, the
Center is an advocacy for students to educate them about the
various scams that are out there,” said Angela Deaver
Campbell, the director of the center. “The center is here to
support students and investigate and research scholarships for
them.”
Besides the resources available to students at the center, the
Federal Trade Commission has also set up guidelines to help
students detect fraudulent companies, Campbell said.
Companies that claim to “guarantee” scholarships or
charge “service fees” are usually fraudulent, Campbell
said, as among all certified scholarship agencies search services
are free and “guaranteed” scholarships are virtually
non-existent.
“When they promise you a lot, they usually don’t
deliver anything,” Campbell said. “And if they ever ask
for your credit card information, or promise you that they will
“˜do all the work,’ you should become suspicious. Arm
yourself with information, and simply ask questions about
everything.”
For more information on scholarships and how to detect
fraudulent companies, visit the Scholarship Resource Center at 233
Covel Commons. For information regarding the FTC’s
guidelines, visit www.ftc.gov.