Of course, the same rules should apply to the college decision process as to any other high-cost purchase. Work with people you can trust. Read everything carefully before making any commitment. And of course, if it sounds “too good to be true”, it probably is.
The Financial Advisement Office at SUNY Cortland has compiled this resource guide to help your family avoid the many “scams” that surround the college admission and financial aid processes. We work throughout the year to provide good financial advice, information, and education to our students, their families, and our community. We want to make sure that the scammers don’t steal any part of your family’s “college fund”.
Scholarship Scams:
One of the most common and prevalent scams is the “scholarship scam”. Every year, large numbers of unsuspecting students and families fall prey to fraudulent scholarship companies that pose as legitimate scholarship sponsors, foundations, or search services. These scam artists reel you in by promising free money for college or guaranteeing scholarship dollars later for an up-front fee. How can you tell the good from the bad?
It is important to understand that the philanthropists, foundations, and charitable organizations that provide scholarship money are not engaging in a business to create a profit. They have donated money to help students go to college. Legitimate scholarships never charge students a fee to apply. Any scholarship program that requests a fee for application should be avoided.
Of course, there are a vast number of scholarship opportunities from numerous sources; and it would be hard to find all of the appropriate scholarships on your own. In years past, scholarship search services gathered this information and published reference books, bringing scholarship details and contact information into one convenient location. These books were expensive, and were usually outdated by the time they reached the bookstores. Today, there are several organizations that provide free, up-to-date scholarship information on the internet. The Financial Advisement Office reviews and recommends a number of free scholarship search services in the scholarship section of our website.
There are also “services” that charge families hundreds of dollars for a “customized” scholarship search. Many of these individuals tout the old myth about “billions in unused scholarships every year”. The sad reality is that these individuals charge families hundreds of dollars for scholarship information, while gathering that information from one of the many free web sites available.
Finally, some of these scholarship scams are after more than just a large application fee. Some are actually fronts for identity theft. The rules of good sense apply. Don’t give your personal financial information to a stranger. A legitimate scholarship service might need to know a student’s name, address, age, race, gender, academic history, or other personal information to determine qualification for specific scholarships. However, a legitimate scholarship provider or search service will never ask for a credit card number, bank account number, or social security number.
A Legitimate Scholarship Provider:
- Does not charge a fee,
- Does not refer you to a fee-based, third-party provider,
- Does not guarantee you will receive a scholarship,
- Does not ask for private financial information,
- Does not use high-pressure tactics.
Financial Planners/Financial Aid Consultants:
Legitimate Financial Planners or Financial Consultants help families manage their savings, investments, income taxes, and other financial matters. A competent financial planner can also be valuable to families attempting to navigate through the process of paying for college, particularly in the area of saving/investing in advance for future college costs. As with any business, there are good planners/consultants and there are bad ones.
One of the most common scams is perpetuated by certain unscrupulous financial planners, who sometimes charge families hundreds of dollars (even thousands) to assist in completion of the FAFSA. The FAFSA is actually a very simple form that takes about thirty minutes or less to complete on-line. If you need help filling out your FAFSA, you probably do not need the services of a paid consultant. Many high schools and almost all college financial aid offices run free workshops and offer free telephone help in filling out the financial aid forms accurately. Just call our office at 607-753-4717 if you need help.
Financial consultants/planners often maintain that they can tell you how to take advantage of the loopholes in the application process to maximize your aid eligibility. However, there’s no need to pay a financial aid consultant for help in maximizing eligibility for financial aid. The Financial Advisement Office deals with thousands of applications every year and we are aware of every legal way of maximizing the aid available to you. We are also aware of the deceptions attempted by these consultants, and will always correct those deceptions prior to determining aid eligibility. Therefore, the bad advice of illegitimate consultants (in addition to being a potential crime) does not result in ANY additional aid for the student in question. On the contrary, it usually delays the application process considerably, and costs the family hundreds of dollars that would have been better spent on college expenses.
A frequent tactic of the consultants/planners is to send letters to students and parents advertising a free financial aid “seminar”, usually at the conference room of a local hotel. While the presentation might be free, the services are not. Participants are usually pressured to provide a check, checking account number, or a credit card at the seminar to sign up for bogus services. Participants are often told that specific questions can only be answered once the fee is paid. The seminars are a waste of your time and if you sign up for their services, it will also be a waste of your money. Check with your local high school to see if they sponsor a free financial aid night presentation with real college financial aid professionals.
A Legitimate Financial Planner:
- Charges a reasonable fee for services provided,
- Does not conduct high-pressure seminars or employ hard-sell sales tactics,
- Does not advise families to submit false or misleading information on aid applications,
- Is always willing to sign the FAFSA as a “paid preparer” if he/she helped complete it.
Internet Scams:
While students are usually very “web-savvy”, their parents are often less experienced in navigating the internet and find it more difficult to discern between legitimate and illegitimate web sites. There are many legitimate sources of good financial aid information on the internet, but there are also many sites that are not what they appear to be.
For example, there is a website called fafsa.com (NOT the official www.fafsa.ed.gov site) that charges students a fee to complete their FAFSA online. Since the first “F” in FAFSA stands for “Free”, the Financial Advisement Office at SUNY Cortland feels obligated to remind all new and prospective students that the process of filing the FAFSA is always free of charge.
Another example is a site called financialaid.com, which is owned by a student loan company and is designed to sell student loans to unsuspecting families.
What can you do to avoid these web sites? Our advice is to trust very little of what you see on the internet unless the site was recommended by the college or linked from the college’s website. Further, if the site uses a name that seems intended to mislead about the site content, or if the site does not clearly identify both its owner and purpose, it is probably not a legitimate site.
Direct-To-Consumer Education Loans:
Over the past few years, there has been a rapid growth in private educational lending (also known as “alternative” education loans). These are student loans that are not associated with any government financial aid program, but rather are simply a private consumer loan for educational purposes. Most major lenders (and many smaller local lenders) offer alternative loan programs with competitive rates and features, and most colleges provide families with recommendations for the best alternative lending programs and offers.
However, several lenders (including some major banks) have begun to market alternative loans through television, radio, direct mail and internet. Often the interest rates and fees on these “direct-to-consumer” alternative loans are higher than the equivalent school-recommended products, sometimes more than twice the cost. Even with the same lender, the interest rate on the direct-to-consumer loans is often at least a full percentage point higher than on the school-recommended products. This rate differential exists because colleges actively negotiate for lower rates on loans for their families, and also because the school relationship reduces the lender’s “risk” on the loan portfolio.
Further, there are several new lenders that are not associated with banks, may operate only through the internet, and are not subject to
Generally, lenders with a “brick and mortar” branch presence in the local community are too concerned about their ethics and reputation to engage in such predatory practices. There are also some very legitimate non-bank education lenders that operate very ethically. How can you tell the good lenders from the scam artists?
Good Advice From a Trusted Advisor:
We know this can seem to be a very confusing, overwhelming process. We also know that the world of financial services can be a scary place, particularly in the internet age. The Financial Advisement Office at SUNY Cortland has highly-trained advisors available to help students and families avoid the scams and succeed in paying for college. Just give us a call at 607-753-4717 or e-mail us at finaid@cortland.edu. We’re here to help!