Complaints about financial aid fraud have remained fairly constant over the past decade, but financial
aid-related complaints have diminished steadily as a percentage of all complaints, according to the U.S. Department of Education and Federal Trade Commission's (FTC's) annual report to Congress.
The nature of complaints about financial aid has changed over time, shifting from scholarship search services to financial aid consulting services, according to the report. Operators of financial aid scams generally promise their services will ensure that students receive a scholarship or more financial aid than
students and parents could get on their own.
Other typical claims state that:
- millions (in
some cases billions) of dollars of scholarships go unclaimed every year, with promises to get the
student his or her fair share;
- the advertiser has extremely high success rates, including
"testimonials" from satisfied customers; and
- the advertiser is endorsed or approved by a
federal or state agency, a chamber of commerce, or a Better Business Bureau.
In fact, for fees
ranging from $50 to more than $1,000, these operators provide few, if any, services to help
students and their families find financial aid.
The College Scholarship Fraud Prevention Act of 2000 requires that the Attorney General, the
Secretary of Education, and the FTC jointly submit to Congress each year a report on that year's
incidence of fraud by businesses or individuals marketing financial aid assistance services to
consumers.
The Department and FTC also reported that they continue to regularly revise and update their materials, available in both English and Spanish, aimed at teaching consumers how to avoid scholarship fraud. Both agencies use a variety of formats to convey their messages, including Web sites, booklets, brochures, video conferences, flyers, posters, and bookmarks.
In terms of law enforcement, the FTC has continued its Project $cholar$cam campaign
designed to prosecute and prevent financial aid fraud. This year, the FTC obtained an injunction
permanently banning a fraudulent purveyor of college financial aid services from marketing such
services. In addition, the Department of Justice (DOJ) brought several actions against individuals engaged in financial aid fraud. Three of these cases resulted sentencing enhancement, provided by the 2000 fraud act, for fraud in connection with obtaining, providing, or furnishing financial assistance for an institution of
higher education.
The report also notes the recent allegations of financial relationships between student loan companies, college financial aid officers, and others in the financial aid lending industry. The Department and FTC said they will continue to monitor and investigate these developments as appropriate.
The report highlights actions taken in response to the recent allegations including the creation of the Student Loan Task Force. The Task Force will examine issues such as preferred lender lists, financial benefits provided to schools to obtain referrals, and access to the National Student Loan Data System, and advise ED on appropriate regulatory responses. Based on this information and negotiated rulemaking discussions, ED expects to issue regulations, after public comment, by Nov. 1.
Posted 05/25/07 to www.NASFAA.org. Please submit Web Site questions or comments to Web@NASFAA.org
