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Financial-aid scams

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In an effort to find creative ways to finance a college education, many students and their families fall prey to scholarship and financial aid scams. The National Association of Financial Aid Administrators estimates that each year more than 350,000 people fall for these scams and lose as much as $5 million.

According to the Federal Trade Commission these scams may include guarantees or promises of aid, high pressure sales tactics at seminars and fraudulent scholarship searches. The FTC and College Parents of America, a non-profit education and advocacy group, caution students to beware of these six signs of a scam:

"The scholarship is guaranteed or your money back." No one can guarantee that they can get you a scholarship. Often, there are so many conditions attached to the money-back guarantee that it is impossible to get a refund. For example, for a fee ranging from $10 to $400, consumers are promised scholarship money. The company then sends a list of 50 scholarships and application addresses. Then to get any money back, you are required to send a letter of rejection from all of the 50 on the list, an impossible task because some of the list no longer exist.

"You can't get this information anywhere else." Many free lists of scholarships are available. Check with your school or library before you pay for information that can be easily obtained elsewhere.

"May I have your credit card or bank account number to hold this scholarship?" Some companies may debit a student's account without permission; others may quote a small monthly or weekly fee and then ask for authorization to debit your checking account -- for an undetermined length of time. Legitimate organizations will not require money to hold a scholarship.

"We'll do all the work." There's no way around it -- you must apply for a scholarship yourself. No one can do it for you.

"The scholarship will cost some money." Sometimes there is an application fee, designed to show that you are serious about wanting to go to a particular school, but there should not be any holding fees or other strings attached to the scholarship itself. Free money shouldn't cost anything.

"You've been selected" by a "national foundation to receive a scholarship." Or, "you're a finalist" in a contest you didn't enter. Before you send money to apply for a scholarship, check it out. Make sure you are dealing with a legitimate program. Don't fall for this variation on the old "you are a winner" contest scam.

If you attend a seminar on financial aid or scholarships, advises the FTC, be sure to take your time; don't be rushed into paying at the seminar. Investigate the organization you're considering paying for help. Be wary of extraordinary "success stories." Instead, ask for a list of at least three local families who've used the services in the past year.