National scholarship "search" agencies that lure students to invest in their "guaranteed, money-back" services generally promise more than they deliver.
The National Association of Student Financial Aid Administrators has said the overall results of these agencies are best described as poor, according to a Brigham Young University press release.Each year the Financial Aid Office at BYU receives inquiries from students and parents regarding these services, which usually charge up-front fees ranging between $50 and $300.
"Interest in the services offered by scholarship agencies has increased because of higher education costs which have continued to increase above the rate of inflation," said Norm Finlinson, BYU financial aid director.
"Students who in previous years were funded through Pell grants and other federal programs are looking for other sources of financial aid," he said.
Some sales pitches claim millions of dollars in unclaimed scholarship monies are just waiting to be tapped. Many ads offer money-back guarantees or $200 savings bonds to students who don't receive either sources or funds.
"These offers for scholarship and grants can look very attractive to students who don't understand financial aid," said a spokesman for the New York City Better Business Bureau. "Unfortunately students are paying hefty fees for sources which typically generate no funds."
According to the Wisconsin Department of Agriculture, Trade and Consumer Protection, Susan Worm, a University of Wisconsin-Oshkosh nursing student, sent nearly $200 to a scholarship search firm that guaranteed in its ad that the scholarship she would receive was worth at least $1,700.
All she received from the company was information about scholarships for graduate students. She is an undergraduate.
Said Finlinson, "We have consistently advised students that the best way to obtain information on financial aid sources is to use college financial aid offices, high school guidance counselors, public libraries or catalogs from bookstores. These sources provide the same information and are free of charge."
This past September, the New York City Better Business Bureau issued a "consumer alert" regarding scholarship search companies. As the report indicated, "few, if any applicants, receive any funds from such companies."
According to the bureau report, one student sent in his money thinking that he was guaranteed a refund if a scholarship was not found. However, rather than finding him the scholarship, the company sent a list of 250 sources to which he could apply.
The student had no luck obtaining money. But in order to get a refund he would have had to apply to all 250 sources, be denied and have some form of verification of all denials - a task that would be nearly impossible. He received nothing back from the company.
Finlinson said there are some companies that will find legitimate scholarships. But he suggested students contact the Better Business Bureau before participating in any such search service.