Your kids hit their teens and a thought hits you: How am I going to pay for college?
Millions of parents turn to scholarships and loans. With $154 billion in aid for undergraduates awarded last year, there's money up for grabs.
And money to lose: More than $100 million disappears each year in student aid scams, most of it paid as upfront fees by boomer parents seeking help with college costs. To avoid wearing the proverbial dunce cap, get schooled on these seven common schemes:
1. Filling out forms. With many scholarship deadlines approaching for this year's high school graduates, it's prime season for counselors or consultants who say they'll apply for aid on your behalf.
Typically charging from $100 to $1,000, they may do nothing more than something you can do for free: Fill out the FAFSA, or Free Application for Federal Student Aid (and note the first word). That application is required to get any federal or school-offered aid.
Or they might just take your money and run.
Of course, there are many legitimate aid consultants out there, some of them retired admissions officers. But in general you have to go looking for them. The fraudsters find you, through telemarketing or letter, having purchased student mailing lists.
2. Finding scholarships. These services claim to have lists of "secret" or "guaranteed" awards that they'll match up with your student. Truth is, there are no secret lists; these people just visit the same free websites, such as FinAid and FastWeb, that your student should visit for details of legitimate offerings.
Not one scholarship in the United States guarantees winners, nor is there a pot of unclaimed scholarship money.
Learn more about these schemes at a FinAid web page.
3. Paying for applications. The only cost of a legit scholarship is the time and sweat spent filling out an application or writing a killer essay. No fee is required.
Yet the typical pay scholarship scam — encountered on an official-looking website or in a letter or e-mail — receives up to 10,000 applications and charges fees of $5 to $35. If (and it's a big if) the outfit actually makes awards, they are few and small — maybe "a $1,000 scholarship or two," reports another FinAid web page. The same holds for a student loan — if it's legitimate, you'll never need to pay an application fee in advance. Any fees will be deducted from the loan's disbursement check.
Beware of the "Congrats!" notifications >>
4. Congratulations! These notifications bring happy news: Junior has already won a scholarship that was never applied for. Now, it's true that some scholarships are offered without an application being filed, based on the student's record, but notification will come from the high school or directly from the college — not from a third-party letter or in an e-mail. Ignore any offer when the congrats letter comes with a check and instructions to deposit it and forward some of the money.
5. Phony invitations. A letter invites your student for a personal interview with a third-party "recruiter," "college counselor" or other self-described expert. After some schmoozing, in which the host remarks how impressive the student is, the so-called screening ends and another invite is given, to a seminar, where for-fee services are hawked. You can guess whether those services are worth it.
6. Lies about loans. The biggest form of financial aid is loans provided by the Federal Student Aid program, the U.S. Department of Education and private institutions that administer government-backed student loans. You can get reliable information on these loans at financial aid seminars promoted by your student's high school.
Beware of unsolicited invites to off-site gatherings. They're often a front to sign you up for overpriced loans or to glean personal information such as bank account or Social Security numbers for identity theft.
7. Fraudulent free trials. Trash any CD or kit that offers a free trial of a service that will show you how to get federal grants. The Better Business Bureau warns that some companies hawking the wares will charge you up to $69 in advance — and recipients say that whatever information may arrive is useless to boot.
A high school counselor is a better and free source of this know-how.
Sid Kircheimer is the author of Scam-Proof Your Life, published by AARP Books/Sterling.
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