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Winning Credibility Proves Toughest Pitch For Entrants Into Scholarship-Sales Business

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By Mark Pitsch

Louis R. Napoliello is out to change what financial-aid professionals think about for-profit college-scholarship services--at least what they think about his.

"It is our goal to separate ourselves from some of the other so-called services,'' he says.

Over the last two years, Mr. Napoliello--the president of Sports-Tech International, a Fort Lauderdale, Fla.-based firm that provides videotape-editing systems to professional, collegiate, and high school athletics organizations--has pumped $2 million into establishing the Collegiate Athletic Network. The venture is designed to match above-average high school student-athletes with small- and medium-sized colleges that have difficulty recruiting athletes and that have available athletic scholarships.

To indicate that this is not just another quick-buck enterprise, Mr. Napoliello rattles off a series of undertakings during the development of the network: the hiring of a financial-aid professional to handle parent and student questions; the landing of several high-profile corporate sponsors; the securing of several prominent high school and college coaches for the network's board of advisers; the chats with parents, students, coaches, and counselors before marketing the program; and the field-test of the service last spring.

"From a credibility standpoint, we knew this was an absolute necessity,'' says Mr. Napoliello. "We have our reputations to maintain.''

The network is just getting off the ground, and he knows that many educators, counselors, and financial-aid officers cast a skeptical eye on scholarship services.

"We're battling every day,'' he says.

Educators feel they have been given good reason to be wary. Few students, they maintain, have benefited from using a scholarship service. Most, they say, just feel duped.

"We have never found a for-profit service that has helped anybody,'' says Bob Arnold, the director of financial aid at Earlham College in Richmond, Ind. "We ask [the services], 'How much money have you turned up for students?' The answer is usually a blank stare, or 'We don't know,' or 'None, because we've just started this.' ''

Says Frank Burtnett, the executive director of the National Association of College Admission Counselors: "These people aren't interested in offering financial-aid services to kids, they're interested in selling franchises to people who think they can sell financial-aid services to kids.''

Proliferation Amid Publicity

State and federal investigators provide evidence that helps back up the educators' claims. For example:

  • The U.S. Postal Service has effectively shut down one scholarship company, formerly based in San Diego but using a Washington, D.C. address, because it misrepresented itself to students, and it is investigating others.

In May, James Doyle, the Wisconsin attorney general, filed suit against a California scholarship service that he said had misrepresented the amount of money a franchisee could earn and the ability of the franchisee to help make scholarship money available.

  • In July, the Federal Trade Commission obtained a restraining order against a New Jersey scholarship company that the commission charges is fraudulently attempting to franchise its services.
  • And last week, the New York Better Business Bureau issued a statement warning students away from such companies. It identified 19 such services in New York City, including several affiliated with the company named in the F.T.C. complaint, that allegedly do not provide the kind of service they claim.

Despite the negative publicity, say financial-aid officials, such companies are becoming more and more widespread as college tuitions continually rise and federal financial aid increasingly provides students with loans rather than grants.

"There is just a proliferation,'' says Madeleine McLean, the associate director of communications for the National Association of Student Financial Aid Administrators, a Washington, D.C.-based lobbying group. "It seems that they're just trying to cash in on students who don't have the money to go to college.''

Mike Uran, the assistant director of financial aid at St. Cloud State University in St. Cloud, Minn., says that three scholarship-service companies have emerged in the last two years in that city of roughly 50,000 people. And in the last six weeks alone, three people have called him and asked about the feasibility of starting such a business.

Reed Carpenter, a financial-aid-policy analyst at the University of Minnesota, says he, too, has "seen a tremendous increase in this type of activity over the last year.''

'Nothing More Than a Convenience'

Larry Organ, the owner of College Financial Planning Services, which provides a list of scholarship possibilities to students for $45, and of Educational Services of America, which licenses the College Financial data base to potential franchisees, defends scholarship services as a useful way of providing needed information to students.

He acknowledges that the information is readily available from other sources but adds: "I say the same thing about a gallon of milk. You can go to the 7-Eleven or you can go out and milk a cow. We are nothing more than a convenience.''

Mr. Organ says he also sells his scholarship data base to high schools and colleges, which in turn provide that information to students.

He recognizes he is in a business that will receive scrutiny, and he says the company, based in Northbrook, Ill., updates its data base daily and surveys scholarship sources four times a year for accuracy.

"We expect to have inquiries from now until the end of time. That's good for us and good for the industry,'' he says. "If we have minor problems along the way, I can accept that as long as the integrity of our data base is not in question.''

Mr. Organ also says he recently signed agreements with the Illinois attorney general's office governing the marketing and franchising of the scholarship data base.

Typically, the services work like this: For a fee of between $40 and $200, students are promised they will be matched with scholarships that fit their personal profiles. At the same time, larger companies are selling franchises that use the same aid data base but are able to market locally.

Aid counselors say that rarely are students satisfied with what they reap from the services, which they say often provide a list of obscure scholarship sources, sources that are out of date, or information simply on how to apply for federal aid.

Most of the information, the aid officials point out, is available for students from the federal government, high school or college aid counselors, or other public sources.

The College Athletic Network works in a way similar to other services. With a data base of thousands of college athletic programs, and a corresponding student profile, it will provide students with up to 15 potential schools where athletic scholarships are available.

The fee is $49.95 for students, but college coaches have access to the student profiles for free.

Mr. Napoliello feels the network can work because he has tapped a specific niche and because he has taken steps to avoid being considered just another for-profit scholarship service.

Others remain skeptical. Mr. Burtnett of the admission counselors' group, for example, turned down an invitation to join the network's board of directors.

While he is not ready to lump the athletic network into a category with dubious scholarship-service companies, Mr. Burtnett says, "The young men and women in this country that are going to get athletic scholarships are going to be pursued by those colleges.''

Nevertheless, 600 students participated in the pilot-test of the network last spring. Mr. Napoliello is now surveying those students to see if they were able to obtain athletic scholarships.

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