Monday, September 22, 1997 New FTC project will crack down on
scholarship scams Con artists’ empty promises empty students’ bank
accounts
By Meghan Ward
Daily Bruin Contributor
As tuition bills skyrocket and the cost of living soars through
the roof, so do opportunities for scholarship scam artists to take
advantage of students and families in search of financial
assistance – $100 million worth, in fact.
The Federal Trade Commission (FTC) has launched "Project
$cholarship $cam" to file charges against companies involved in
fraudulent scholarship schemes and educate consumers to avoid such
scams.
"They advertise in direct mail or in book inserts and on
bulletin boards," explains Nadine Samter, attorney for the FTC.
"One company claimed they had a 4 to 6 percent return rate on their
‘program,’ which was really a book." This made it sound like the
company had a 94 percent success rate, but most people do not even
attempt to get refunds because the process is so complicated.
Illegitimate or misleading advertisements claim that over $6
billion in scholarships goes unclaimed each year. According to Mark
Kantrowitz, creator of the Financial Aid Information Page on the
World Wide Web (www.finaid.org), this information is based on a
20-year-old study of employee benefits by the National Commission
on Student Financial Assistance.
"At best a handful of scholarships go unclaimed each year
because of poor publicity or very narrow eligibility restrictions,"
asserts Kantrowitz.
These claims are extremely misleading, encouraging students to
spend anywhere from $10 to $179 to apply for scholarships that
appear to be ready for the taking. The truth is, there are private
scholarships available to students willing to research sources and
write the application essays, but as Kantrowitz asserts on his
website, "Scholarship sponsors do not hand out awards just for
breathing."
How common are these scams? Kantrowitz estimates that over
400,000 students are scammed each year, with total losses in excess
of $100 million. Ten organizations have been sued to date, seven by
the FTC and three by various attorney generals.
In the FTC’s most recent lawsuit, Student Aid, Inc. was forced
to pay $7,500 in settlement fees for running a scholarship search
scam. For a fee of $97, they would guarantee that students would
receive a $1,000 scholarship. As is common in these scams, their
refund policy required rejection letters from every sponsor on the
list they provided, even those for which the student was ineligible
and those whose deadline had passed.
Student Aid, Inc. was also charged with the unauthorized
withdrawal of money from their customers’ bank accounts.
Most students receive scholarships through federal agencies or
their university. Only about 4 percent of the student population
receive funds from private sponsors, totaling approximately $1.25
billion per year.
The Citizen’s Scholarship Foundation of America distributes more
private scholarships than any other organization. In 1995, they
awarded $41.7 million and every penny was claimed.
"The least selective programs award scholarships to one out of
every 10 applicants, while the most selective scholarship programs
award money to one out of every 10,000 applicants," Kantrowitz
said.
For those students who are willing to take the time, the UCLA
Scholarship Resource Center (SRC), located at 233 Sunset Commons,
is an excellent place to begin. According to Joletta Yun, the
scholarship coordinator at Student Accounting Services,
approximately 3,000 students who have applied for financial aid
receive scholarships from outside sources. There is no record of
how many private scholarships go to those who do not to apply for
aid.
Gail Ishino, at the UCLA Scholarship Office, says UCLA gives
away about 50 scholarships per year, totaling up to $3,000 per
scholarship. All UCLA scholarships are need-based and are
determined by grade point average.
"The minimum is 3.3," informs Ishino. "We have freshmen coming
in with a 4.78 GPA, so I start at the top and work my way down.
Many of the scholarships are ear-marked for women or other specific
groups, such as religious affiliation. Prop 209 will change all
that."
Ishino’s warning to the students regarding private scholarships
is: "anything that costs money is a scam. UCLA students can go to
the resource center and it’s free. Any student can go to the public
library."
"A lot of students were coming through here who were spending
$50 or $100 for a search service with no results, so we started
offering SRN (the Scholarship Research Network) for free," said
Shauna Swartz, student affairs officer at the resource center. SRN
is a scholarship database on the Internet that can be accessed free
of charge.
The resource center provides access to SRN, a library full of
scholarship books and workshops that help students find and apply
for scholarships and write the application essays. Writing
assistance and a proofreading service are also available – all free
of charge.
"We spend a large part of our workshops warning students about
scams. We have students that come through with letters that say,
‘Congratulations, you’ve won a scholarship – now pay $50.’ Usually,
they are guaranteed to get a scholarship that they’ll never get,
and the only way to get a refund is to apply for the scholarships,
write the essays, then prove that they were refused," relates
Swartz.
Swartz recommends that students stop by the SRC to visit the
library.
"The database is quick and easy, but it’s only one database.
Each book is a whole database and we have about 50 books."
Applying for private scholarships is a lot of work, but worth it
for those like Kantrowitz himself, who financed his undergraduate
and graduate education with $250,000 in non-need-based aid. It is
important to remember, however, that Kantrowitz is the exception to
the rule.
For free scholarship listings, see the SRC; university
libraries; or the websites of FastWEB, SRN, Express, College Board
Fund Finder and Mach 25.
The FTC has filed charges against the following five companies,
freezing their assets and demanding consumer redress:
1. CAP (known as Career Assistance Planning, College Assistance
Planning or College Assistance Program).
2. Christopher Ebere Nwaigwe (also known as Christopher Maige,
Michael Morge and Michael Norge; doing business as Higher Education
Scholarship Program, National Health Scholarship Program, National
Scholarship Program and National Science Program).
3. Student Assistance Services, Inc.
4. College Assistance Services, Inc.
5. Student Aid, Inc.
Other suspicious companies students should avoid include:
National Science Federation, Guilford Scholarship, Olin L. Livesey
Scholarship (also known as Winch Scholarship, OneCard Co. and Theta
Nu Epsilon Society), National Alliance for Scholastic Achievement,
Fame Marketing and Associates, Lighthouse Foundation, National
Scholarship Foundation, Imaginations, Academic Investment Money
(AIM) and Progressive Media, Inc.
If you think you have been scammed, report the organization to
one of the following:
1. Your school’s financial aid office. They can tell you if the
organization is legitimate.
2. The Better Business Bureau. Contact their website for lists
of companies or e-mail them at bbb@bbb.org.
3. National Fraud Information Center at 1-800-876-7060. They
will pass information along to the FTC.
4. FinAid website at SCAMS-L@finaid.org. Insert the company’s
name on the subject line of the message and provide as much
information as possible. FinAid will forward the information to the
appropriate law-enforcement agencies and news groups.
5. FTC’s website at http://www.ftc.gov.