The Federal Trade Commission is cracking down on what it says are unscrupulous companies that bilk students and their families of millions of dollars annually through fraudulent guarantees of college scholarships.
In unveiling the campaign here last week, the agency said it had filed civil complaints against five businesses, securing a temporary restraining order against each. The assets of each company have been frozen, and the FTC said it was seeking court approval to return some lost money to families.
The federal officials said that the companies advertise themselves as “scholarship search services,” sending letters to families guaranteeing that, for a fee, they can match students with valuable scholarships. Often, though, the information the companies provided was outdated or easily available for free, the FTC said.
Investigators estimate that the five companies have cheated victims out of $10 million, mostly during the last year, and experts believe as many as 200 such scams are operating across the country.
“We try to warn families that if it sounds too good to be true, then it probably is,” said Dallas Martin, the president of the National Association of Student Financial Aid Administrators, who attended the FTC news conference here. “But unfortunately, many people are very desperate for financial aid for school, and so are willing to take a chance.”
Mr. Dallas recommended a simple test for any solicitation: If the scholarship offer comes with a request for money, consider it suspect.
Specific Majors Targeted
The FTC said the five businesses it has lodged complaints against are: Career Assistance Planning Inc., of Atlanta; Student Assistance Services Inc., of Plantation, Fla.; College Assistance Services Inc., of Sunrise, Fla.; Student Aid Inc., of New York City; and Christopher Ebere Nwaigwe, a Baltimore man whose company has operated under a half-dozen names.
None of the companies could be reached for comment late last week.
Janet Seydel, of Grants Pass, Ore., who also spoke at the news conference, said she fell victim earlier this year after Student Assistance Services sent her son, Jason, a postcard claiming he was eligible for a scholarship.
Ms. Seydel said she called the company, and was promised that her son would receive at least $1,000. She paid a $179 fee and was told she’d get a full refund if her son didn’t receive the guaranteed scholarship.
What he received eight weeks later, however, was a listing of about 36 scholarships, most of them useless. Either the deadlines had passed or he wasn’t eligible.
Ms. Seydel said that when she complained, a company representative told her she could get a refund only if her son collected denial letters from each of the listed scholarships.
Investigators explained that by obtaining mailing lists and student phone books from colleges, some companies can target students who are majoring in specific subjects.
Mr. Nwaigwe, the investigators said, has alternately labeled his business the “National Health Scholarship Program, Division of Nursing,” and the “National Science Program, Division of Biological Sciences.”
His solicitations give the appearance of coming from a foundation that offers scholarships or grants to students in particular majors, FTC officials said. But many individuals who paid a $10 fee received either a list of scholarshipsmany of them outdated--or nothing at all.
The federal agency, which pursues civil rather than criminal cases, is seeking permanent injunctions to keep the five businesses from operating. Officials hope to recover some of the lost money and return it to victims.
But most families will be lucky to get 10 or 20 cents for each dollar they lost, said Heather Hippsley, a senior staff lawyer with the FTC.
“The problem,” she said, “is you’re dealing with companies that spend money as fast as it comes in.”
