Scholarship Scams and Fraudulent Grants on the Rise

Federal authorities have issued a report to Congress about a rise in scholarship scams and fraudulent academic grants – just in time for first-year college students headed to institutions of higher education around the nation. The September 2011 report was a multi-agency effort, with the Federal Trade Commission, the Department of Justice and the U.S. Department of Education all teaming up to weigh in on the issue of scholarship and financial aid fraud.

The study found that the majority of consumer complaints about financial aid fraud have been changing in recent years.

A decade ago, in the early 2000s, most complaints involved scam companies offering bogus search services or businesses that forced students and their families to pay an upfront fee for scholarship and grant opportunities.

By the end of the decade, the biggest problems centered on firms offering questionable financial aid consulting and planning services that would allegedly maximize student eligibility.

In the 2011 report, however, authorities said complaints about scholarship scams and bogus grant opportunities appear to be on the rise again. The report covers developments in the 2010 calendar year.

Among the findings they found overall complaints specifically about scholarship scams are down, although the total number of financial aid-related complaints rose in 2010 to 718 complaints from 315 such complaints in 2009. The federally reported numbers about scholarship fraud may be under-reported. The study noted, “The number of complaints contained in the Consumer Sentinel database does not provide a complete picture of the extent of consumer injury from any particular type of fraud because some consumers may complain directly to the company or to law enforcement authorities that do not forward complaints to the Consumer Sentinel database; and some financial aid scams on the Internet are relatively inexpensive and consumers often do not complain when the financial injury is low”

The scholarship and financial aid complaints lodged by consumers involved many different companies and did not indicate a pattern or practice of fraud by any one company

For more information about avoiding scholarship scams, check out the Department of Education’s Office of Inspector General, which hosts a fraud awareness website at www.ed.gov/misused.

The Department of Education and the FTC have also created a 2011–12 Counselors and Mentors Handbook, which includes a fact sheet based on the FTC’s consumer publication, “Don’t get scammed on your way to college!,” in addition to other information sources on sidestepping financial aid scams. Orchard Bank MasterCard - an excellent credit card to build your credit. Prequalify online in just 30 seconds. Start Now.

Finally, the Department of Education’s www.studentaid.ed.gov website and the FTC’s microsite, www.ftc.gov/scholarshipscams, are cross-linked to give consumers the latest, up-to-date information on scholarship scams.