BBB warns students of scholarship scams

Dr. Abul Kashem, an anesthesiologist in Brooklyn, N.Y., attended a free College Money Matters seminar with his 13 year-old nephew, Meraj. For $1,000, they promised to help his nephew prepare for the SATs, find a good college, and get the best scholarships when the time came.

“The speeches and videos were highly professional,” Kashem says. “They were so organized and so articulate, that it was hard to suspect there was anything wrong.”

He called the company shortly after the seminar, but always got an answering machine. Then the number was disconnected. Luckily, Kashem paid by credit card and was able to challenge the charge.

Spotting the scams
Financial aid scams don’t always involve seminars. Some con artists simply contact families of students headed to college and tell them they’ve been “selected” or “awarded” a scholarship. The money is “guaranteed,” they say, if you provide us with your bank account or credit card number.

“No one can guarantee you scholarship money,” warns Greg McBride, Senior Financial Analyst at bankrate.com. “If somebody requires you to cough up some money first, in order to either qualify for a scholarship or be given a list of potential scholarships, that’s a big red flag that somebody is trying to take you for a ride.”

Many of these fraudulent scholarship operations use official-sounding names to seem legitimate. They often include the words “federal” or “national” to seem like they’re a government agency. But names don’t mean a thing.

For example, back in 1998, the Federal Trade Commission shut down the National Scholarship Foundation of Delray Beach, Fla. The commission says the company cheated 15,000 people out of $2.8 million.

Some financial aid companies are total scams — they take your money and run. Others simply fill out the paperwork for you, although their sales pitch makes it seem like they will do a whole lot more.

Where to go for legitimate help
There is a large amount of scholarship money available to students from both private and public sources. You don’t need to pay anyone to find this money or to apply for it.

Your best bet it to check with a high school guidance counselor or contact a local college financial aid office. “They can give you all of the information you need for free,” says Kay Lewis, Director of Student Financial Aid at the University of Washington in Seattle.

Lewis also suggests going online tofastweb.com or finaid.org. They have comprehensive information about financial aid, scholarships, and loan programs. Again, it’s all free.

Is this something you can do yourself? After getting burned by College Money Matters, Michelle Black did it on her own. “The forms are not that complicated,” she says. “It takes a little bit of time, but it’s not rocket science.”

By the way, Black’s daughter, Korrina, starts college this week. She’s going on a scholarship.

For more information

• Looking for Student Aid
• Scholarship Scams
• Ouch! Students Getting Stung Trying to Find $$$ for College
• The Guide to Federal Student Aid

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