Students and parents warned about private loan “scams” on Web

Kristyn Soltis

More than 600,000 consumers cheated

How to spot a scam

Both the FTC and the BBB offer a list of warning signs students and parents should look for when searching for grant information. According to the BBB’s Web site, it’s probably a scam if a company:

•Guarantees a scholarship or “your money back”: Grants or scholarships are awarded based on performance or qualifications. No one can be guaranteed they will receive one.

•Claims scholarship information can’t be found anywhere else: Free scholarship information is available to everyone with Internet access. School libraries, federal, state and local governments and private companies also carry information about financial aid.

•Wants a credit card or bank account number for an application fee or to hold scholarships: Never give credit card or bank account numbers over the phone. Free money shouldn’t cost anything and most legitimate companies don’t charge application fees.

•Claims that “you’ve been selected” or that “you’re a finalist” for a scholarship or grant you’ve never applied for: Students and parents must search for grant or scholarship money themselves. It won’t come looking for them.


The government is giving away millions of dollars, for free. Funds are limited though, so hurry or you’ll miss out on the “opportunity.”

According to, a Web site offering $2,500 for free, “every year, millions of dollars are required to be given away by the federal government and private foundations.”

It’s simple. Provide an e-mail address, follow the step-by-step directions and behold, a list of thousands of “hard to find” private foundations willing to give away money are at the customers’ fingertips.

That is, after they pay $2.29 for a compact disc and seven-day trial membership. If customers fail to cancel, they will then be charged $39.95 a month. Also, by purchasing the product, they agree to enroll in trial memberships to the Search Market Members Site and Network Agenda, where they will be charged an additional fee of $7.95 and $9.95 per month if they do not cancel within the specified trial period. Once customers are members, the company also reserves the right to sell personal information to third parties.

“No one should have to pay to get information about grants and scholarships,” said Jim Boyle, president of College Parents of America.

Boyle said the biggest warning sign of a scam is when consumers are asked to pay for grant information.

“The information abounds for free on the Internet so there should really be no reason to pay for it,” Boyle said.

Federal Trade Commission reports indicate more than 600,000 people have been cheated out of $300 million in recession-related scams.

The Better Business Bureau gave an “F” rating in its Reliability Report. The rating is based on the lack of credibility and understanding of the business.

Boyle said students searching for additional grant aid should begin searching within their own financial aid office to research what state and federal grant information is available.

“Once those resources are exhausted and the student still needs additional money to pay for college, then the student should look for grant aid basically in their own backyard,” he said. “In the town they’re from, there may be scholarships available from local businesses or community organizations, so there should be no reason to pay an organization to search for grant aid.”

Boyle also advises students searching for additional grant and scholarship aids to look into their special talents or interests, such as music, as opposed to academic scholarships.

Contact principal reporter Kristyn Soltis at [email protected].