With the recent changes to the FAFSA, scam artists are targeting students who need help filling out the form. The Consumer Financial Protection Bureau recently initiated claims of $5.2 million in damages against one company, Student Financial Aid Services, Inc., alleging that they promised students free help but then charged recurring fees to their credit cards.1,2 Unfortunately, this is only one example of numerous scams currently targeting students.
There is some good news, however: Most of these scams share several common traits, making them easy to avoid if you know what to look for. In your role as a school counselor, be sure to make your students and their families aware of such scams by sharing the following warning signs with them:
Common Financial Aid Scams
Typical scams fall into a few major categories:
- One type guarantees finding a student a scholarship in exchange for an upfront fee. This type of scam usually offers a money-back guarantee, but the fine print includes conditions that make it practically impossible for victims to get their money back. In some cases, students will get a list of scholarship sources in exchange for their money, but other times they get nothing.
- In another common scam, students are told they've been selected as a finalist for a scholarship and that they can become eligible to win by paying a processing fee. The scam company often asks for the student's bank account information "to confirm eligibility," and then debits money without the account owner's consent. Sometimes the perpetrator tricks the victim into authorizing the deduction of a small weekly or monthly fee for an indeterminate length of time.
- Another scam tactic is offering a program to help students become eligible for financial aid in exchange for an upfront fee to cover paperwork costs. The victim pays the fee but gets nothing in return.
Warning Signs: What to Look For
One thing all these scams have in common is that they ask for money upfront. This should immediately raise a red flag for students. Other warning signs include:
- Offering to do all the work in exchange for a processing fee
- Stating that a scholarship will cost money
- Asking for a bank account or credit card number to hold a scholarship
- Guaranteeing aid
- Offering a money-back guarantee
- Claiming that the information offered isn't available anywhere else
- Claiming that a student is a finalist in a contest he or she never entered
- Claiming that a student has been selected by a foundation to receive a scholarship
Students should also be on the lookout for financial aid seminars and webinars that use high-pressure sales tactics. During these events, students are told if they don't buy now, they will lose the opportunity. It's an effort to manipulate them into paying right away. Warn students that some seminars are scams, and encourage them to talk to their guidance counselor or another qualified advisor and get all the information they need before signing anything.
Finally, make sure your students know that fake testimonials are often used to make a program sound legitimate and that they should investigate companies online to see if there are any complaints.
How to Report a Scam
If you suspect a student has been victimized by a scam, set up a meeting with the student and his or her parents. Advise them to immediately stop paying money to the company in question, and point them to the FTC's Complaint Assistant to file a complaint.3 The FTC can’t resolve individual cases, but filing a complaint helps them detect patterns of fraud.
They may also wish to contact also contact their state attorney general's office, a relevant consumer organization or their local consumer protection offices for assistance. They can visit USA.gov to access a database of these organizations.
Sources of Legitimate Help
There is lots of legitimate help out there. The following reputable resources can help your students get financial aid for college:
- Their first step should be to visit the FAFSA website, where they can fill out the FAFSA form for free and find related resources.4
- The Department of Education's Federal Student Aid website provides a free online guide that walks students through the financial aid process.5
FinAid is another good website that offers students free financial aid information.6 They can also use it to search for legitimate scholarships on the site and learn about the different types of loans.
Recommended for You: How to Help Parents and Students Navigate the FAFSA Process
Resources: Photo credit. (1) 100,000 Financial Aid Customers Illegally Billed (2) Consumer Financial Protection Bureau v. Student Financial Aid Services, Inc. (3) FTC Compliant Assistant (4) FAFSA (5) FAFSA Student Aid FAQ (6) FinAid SmartStudent Guide to Financial Aid