Federal Agencies Release Annual Report to Congress On College Scholarship Fraud

Every year millions of students apply for financial aid and scholarships to help finance their college education. Sometimes they fall prey to scholarship and financial aid scams. To help federal agencies combat financial aid scams, Congress passed the College Scholarship Fraud Prevention Act of 2000. In their third required report to Congress on scholarship fraud, the Federal Trade Commission and the Departments of Justice and Education describe their continuing efforts to combat scholarship and financial aid fraud. The report explains “Project Scholarscam” – the FTC’s ongoing campaign to prevent and prosecute scholarship fraud – and it highlights the FTC’s and Department of Education’s (ED) continuing efforts to find new ways to partner their outreach efforts.

The College Scholarship Fraud Prevention Act of 2000 established stricter sentencing guidelines for criminal financial aid fraud and charged ED and the FTC with implementing national awareness activities. The Act also requires the Attorney General, the Secretary of Education, and the FTC to submit a consolidated report to Congress each year assessing the nature and quantity of scholarship fraud incidents since the date of enactment. The FTC, DOJ, and ED have implemented all the provisions of the Act, and their activities are highlighted below.

ED and the FTC use a variety of media, such as Web sites, booklets, brochures, videoconferences, flyers, posters, and bookmarks, to help consumers avoid becoming victims of scholarship scams. The ED materials also provide information about the major federal student aid programs. They remind students that there is no fee to submit the Free Application for

Federal Student Aid and that free assistance with applying for financial aid is available from ED, high school counselors, and college financial aid administrators. ED’s materials are available at www.studentaid.ed.gov or by calling 1-800-4-FED-AID (1-800-433-3243; TTY: 1-800-730-8913). The FTC’s materials are available at www.ftc.gov/bcp/edu/microsites/scholarship/index. Scholarship information is also available on the FTC’s Spanish language Web site, www.ftc.gov/bcp/conline/spanish.

The report states that after a small downturn in 2000 and 2001, the number of complaints to the FTC’s Consumer Sentinel database again increased slightly in 2003. The percentage of the total fraud complaints in the Consumer Sentinel database attributable to scholarship fraud, however, has continued to decline.

Recent complaints concern financial aid consulting firms that use direct mail solicitation and oral sales presentations to market their services. ED has found a similar trend, with the vast majority of complaints centered around services that claim to help students simplify the process of applying for aid.

Since 1996, Project Scholarscam has resulted in federal court orders against 12 companies and 31 individuals. Two cases were initiated during 2003. The FTC also has monitored the Internet for financial aid fraud and notified 12 sites that their claims were suspect and should be reviewed and revised.

Copies of the report, as well as the consumer education materials and other documents related to Project Scholarscam, are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(Matter No. P994249)