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***Scholarship Scams***
The Information
Below is the "Ultimate" Scholarship Scam Advice from
http://www.freschinfo.com
Avoiding Scams and
Dubious Offers
Unfortunately, there are a lot of businesses and individuals out there
that do NOT have your best interests at heart.
High school students and the parents of first-time college students are
heavily targeted by scam artists. Scam artists realize that most high
school students do not necessarily have the ability or the experience to
recognize a "scam" when they see one. They also realize that
most parents are in a total state of panic over how they are going to pay
for college. Because of this panic, even the most reasoned and intelligent
of parents are potential victims of scams.
The Federal Trade Commission's consumer alert on
Scholarship Search Scams suggests looking for these six signs that a
scholarship program or scholarship search company might be less than
legitimate:
1. "This scholarship is guaranteed or your money back."
2. " You can't get this information anywhere else."
3. "May I have your credit card or bank account number to hold
this scholarship for you?"
4. "We'll do all the work."
5. "The scholarship will cost some money."
6. "You've been selected by a 'national foundation' to receive a
scholarship, (for just a small handling fee we can send you the
check)" or "You're a finalist in a scholarship contest, (the
handling fee will be...)" and you never entered that scholarship!!
Scams targeting the college student market fall under several basic
varieties: The "Guaranteed" Scholarship, the Fee-based
Scholarship, the Advanced Fee Low-Interest Loan,
and various forms of Financial Planning scams.
I also offer information on some simple ways to research a company on
this page, just scroll way down!
Here is an overview of the most common dubious offers and scams out
there. Click on the "Read More" link in each section if you
would like to learn more.
There are a number of scholarship offers out there that
charge a small fee, usually $2-$50. I call these scholarships fee-based
scholarships or Reverse Scholarships.
The fee is called a different name from offer to offer, but common
names for this fee include:
- entry fee
- judging fee
- processing fee
- application fee
- handling fee
- or other names.
While some of the fee-based scholarships ARE legitimate (they pay out a
scholarship) most of them also happen to be ILLEGAL - they are violating
various contest and sweepstake laws. A large portion of these fee-based
scholarship offers are total scams - they never pay out a dime. Be careful
and check out any fee-based scholarship offer before you pay out that
entry fee!
Many companies target high school and university
students with offers to "search" for scholarships for them for a
fee, usually between $59-$500. Many students have paid the fee just to
receive worthless information or nothing at all!
There is NO reason for you to EVER have to pay to find
scholarship information.
All the information you could possibly want on scholarships can be
found for FREE in your local library, financial aid office, or the
internet. I have a list of
legitimate, FREE scholarship search web sites here - use them all and
maximize your information!
Advance Fee Low-Interest Student Loans offers start
with someone calling you (or mailing you) and telling you that for a small
"advance fee" or "good faith fee," you can receive a
"guaranteed student loan" at a very low interest.
Often, they approach you to apply for the loans while your child is
still a high school sophomore or junior, telling you that you
"must" apply years early in order to receive the student loan.
This is simply NOT true - most student loans require that you actually be
accepted to a school in order to apply for the loan!
Most of these offers are charging between $79 and $259, for a loan
supposedly ranging from 2% to 5% interest.
Here's one problem: While it IS LEGAL for a loan company to charge you
processing fees, etc., they do NOT usually charge them in advance. Fees
are usually taken out of the check you receive when the loan has been
signed.
LEGITIMATE student loans offered through the Federal Government, your
school's Direct Lending Program, your local Bank or Credit Union, and
other registered financial organizations NEVER charge a fee "up
front" to apply. Be VERY careful to thoroughly check out any student
loan offer that charges you a fee up-front!
This area is particularly difficult because MANY of
these offers ARE LEGITIMATE - yet at the same time, they are misleading,
encourage YOU to act illegally, or not of good value.
I've been receiving numerous reports of companies notifying students
that they are a "scholarship winner," and the only way for them
to collect their money is to go to a meeting.
The meetings are held in rooms or banquet halls at local hotels, and
end up consisting of a very strong sales-pitch for financial aid services.
Some of the "services" offered include $129 fees to fill out and
file your FAFSA form (which is FREE to file!!), or "guaranteed"
scholarship applications for $59, and other offers.
While not necessarily a scam - there is no law against charging someone
to fill out FAFSA or scholarship application fees - these are services
even the worst of students are quite capable of doing themselves - for
FREE.
The biggest concern to me of these sales pitches is the tendency to
tell students and parents that there "is no other way to file your
FAFSA" or that they are "authorized by the Federal Government to
file your FAFSA" or that there is "no other way to find or win
scholarships, this is the ONLY way you can get one." I would strongly
caution students and parents to "read the fine print" and be
cautious.
Another method I have been hearing a lot about has to do with
"taking advantage of loopholes" when filing your FAFSA.
While it IS true that loopholes exist, some of the methods that are
recommended are illegal.
For example, it is illegal to claim less income or assets on your FAFSA
form than you really earn. Some of these financial aid planners and/or
seminars will recommend to you to "not claim" your IRAs, stocks,
savings accounts, or other assetts "because you don't claim them on
your income tax, so therefore you don't need to claim them on your FAFSA."
This is WRONG, and knowingly withholding income and asset information on
the FAFSA form could actually land you in jail!
By NO means am I suggesting that ALL financial aid seminars
and/or financial aid planners are dubious or scams. What I do
want to emphasize though is what I have said before on this page: Be
smart, be careful. Check them out THOROUGHLY.
And follow your instincts. If something doesn't "feel right,"
avoid it. Say NO.
- Are they claiming that they are an IRS 501(3)c non-profit
organization?
All non-profit organizations are required to register with the
IRS and file certain financial records that become "public
record." The easiest way to verify if a organization is truly a
non-profit is to go to Guidestar
and look them up.
You can also call your state's Secretary of State office and ask
if the organization is a registered non-profit organizations. All
states require non-profits to register with them.
Worst case - call the IRS directly. You'll sit on hold forever,
but you will get an answer!
- Is their address a "real" address, or simply a PO box or
paid mail drop? Is the address a BUSINESS address, or a RESIDENTIAL
address?
Do a reverse-address lookup on their address. If the address
turns out to be a "Mail-Box Etc." type of company, be
cautious.
The best places to do reverse address and phone number look-ups
are Infospace and the GTE
SuperPages
If their address is a Post Office Box, call the Post Office that
the box is located at. Ask the clerk for the "street address of
the business using P.O. Box number (whatever the PO box number is.)
The Post Office is REQUIRED to release, upon request, the REAL
street address of any *BUSINESS* that is using a post office box. If
the post office box is registered to an INDIVIDUAL, they are
FORBIDEN from releasing that same real street address information.
What this means is this: If the Post Office won't or can't
release the street address information, then the box is not
registered to a business. You are probably dealing with an
individual, and I would suggest extreme caution.
If the box is actually listed to a Business and the street
address is in a different state, especially if it's in Nevada, I
would also suggest exercising caution.
- Is the phone number a BUSINESS phone number, or a RESIDENTIAL
phone number?
Call Information (411 or 1-(area code)-555-1212) and see if there
is a listing available under the business name.
If there is no listing, do a Reverse Phone Number lookup. The
best place to do this is at Infospace
and the GTE SuperPages
If the phone number turns out to be listed to an individual or a
residential address, I suggest caution.
- Is there an open investigation on this company at the Attorney
General's office? Call the state Attorney General's office to find
out if there is currently any open investigations, a history of
complaints, or a history of actions against the company in the past.
- Check and see who their web site, if any, is really registered to.
Be wary if the billing/administrative addresses and names are
someone other than they claim to be. You can do this at Internic.
- Contact the Better Business Bureau in the area that the
organization/company is located and see if there are any complaints
about the organization.
National
Better Business Bureau Reliability Reports Search Form allows
you to search online for reliability reports in about 20 different
states.
You can also search for "Better Business Bureau" on Yahoo!
to find the home pages of individual Better Business Bureaus.
- Contact the local authorities (varies from city/state to
city/state) to find out if they have a business license.
While it is true that in this day and age, many people ARE running
legitimate businesses out of their home, any legitimate company of any
size will have at least registered as a LLC, a Coporation, or a Non-Profit
with their Secretary of State.
Remember: Think Logically. Most companies will have a phone number
listed in the company name - otherwise how else will potential customers
find them?
First off, make a fuss, get loud, complain a lot, but
at the same time, be prepared to "chalk it up to experience." If
you have indeed been scammed, the odds of you getting your money back are
less than the odds of winning the Lotto.
Of course, there are some actions you should consider spending some
time on!
- First, gather all information you have. Find all receipts and
paperwork and get them organized. Write down NOW as much as you can
remember about all your phone and "in-person"
conversations. This is known as "ammunition" :)
- If you gave your credit card number to this company, and your
complaint is that you were charged for services not provided,
contact your credit card company and complain.
- Spread the word. Tell your friends, tell your neigbors. Tell the
guidance counselor or financial aid officer. Tell everyone you know
about your experience. AVOID EMOTION. Just state the facts. Let the
facts of your experience speak for themselves.
- Then file a complaint with the local Better Business Bureau. If it
turns out that this wasn't really a scam, but more of a
misunderstanding between you and the company you are dealing with,
the BBB can generally help you resolve the problem quite quickly.
It is always a good idea to file a complaint with the BBB also
because all complaints are kept on file for two to three years.
Other people who research that company through the BBB will see that
someone complained, and will therefore have some warning that this
company may have some problems.
- Next, file a complaint with the Attorney General's office in the
state that the company is located in. Also, it wouldn't hurt to file
a complaint with your own Attorney General.
Do not expect any sort of immediate action. The Attorney
General's office is overloaded with work, and generally is not going
to "act" until they have so many complaints about a
particular company they have no choice but to do something!
- Call the National Fraud Information Service at 1-800-876-7060
and file a complaint.
- File a complaint with the Federal Trade Commission. You can File
a Complaint Online.
- If postal mail was involved (you mailed a check for a scholarship
search you never received, for example) call the Postmaster
General's Postal Crime Hotline at 1-800-654-8896
- And finally - this is REALLY nasty *grins* - report the suspected
scam to the Internal Revenue Service. Seriously.
Why? Because if they ripped you off, what makes you think they
are NOT committing tax fraud and ripping off the Internal Revenue
Service! Do you REALLY think that a company that steals hundreds of
thousands of dollars from students, $2 to $5 at a time, is REALLY
paying taxes on all that income?
Obviously, you have no PROOF of tax fraud. But you DO have
SUSPICION of tax fraud. And as the good tax payer that you are, it
is your responsibility to report your suspicions to the proper
authorities.
However, do *NOT EVER* file a complaint or report suspecting tax
fraud on a company ONLY TO BE VINDICTIVE or to "get even."
This CAN backfire and get you in trouble. Be sure you have
REASONABLE suspicion that a company may indeed be "hiding"
their assets, their income, or otherwise perpetuating tax fraud.
The Internal Revenue Service has outstanding investigative
resources. They will take your report seriously, and oddly enough,
never make you feel like your concern is "too small" for
them to be bothered with - even if it is :) If there IS reason to
suspect tax fraud, the IRS *will* investigate and follow up the
report. You will not hear back from them if they do find tax fraud.
You MIGHT read about them being charged with tax fraud in the
Newspaper... but that is about all that you will hear.
Where other agencies do not have the time or resources to follow
up on complaints, the IRS often does. Just remember, reporting
suspected tax fraud is a VERY serious thing.
Last but not least, if you think you have been scammed, Tell
Me. I do not have much in the way of resources to help you, but
depending upon your situation, I might know someone who can help you, and
I might be able to "spread the word" myself to let others know
to be careful!
- FinAid's Scam
Alert - outstanding information! A definete must-read!
- "Scammed!
Student Details Costly Search for Scholarships using Academic
Investment Money," Vermillion Online
- Man
Pleads Guilty in Tax Fraud, Scholarships Scam Article in the LA
Times
- New York
Better Business Bureau Alert about Academic Investment Money (AIM)
Company "guaranteeing" scholarships for $94
- "Guaranteed
Scholarships? Use your Common Sense!" In the FreSch! Forum
- Indictment:
Thousands Fleeced by Scholarship Scam from CNN News Online - more
than 50,000 students ripped off of $10-$100!
- Press
Release from the Federal Trade Commission announcing "Project
ScholarScam"
- Federal Trade Commission Consumer Alert: "Ouch!
Students Getting Stung Trying to Find $$$ for College"
- "Six
Signs that your Scholarship is Sunk from the Federal Trade
Commission
- "Don't
get Scammed on the Way to College" from the Federal Trade
Commission
- Scholarship
Scams Operate Despite Crackdown from The Daily Nebraskan
- Listing of
Actions against companies accused of Fraud on the Federal Trade
Commission. Scroll down (or use your browser to search) and look for
"Scholarship Fraud" - there are 7 or 8 companies listed,
along with details about their agreements with the FTC.
If you have an article regarding advice for
scholarships or financial aid, please send the details to arkscholarships@aol.com
Don't stop here! Read more information about
improving your chances of receiving a scholarship!
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