Federal Agencies Release Annual Report to Congress on Scholarship Fraud

Each year, millions of students seek help in financing their college education, and some fall prey to scholarship and financial aid scams that “guarantee” money for college in exchange for a fee. In 2000, Congress passed the College Scholarship Fraud Prevention Act to help federal agencies crack down on those scams. The Federal Trade Commission, the Department of Justice (DOJ), and the Department of Education (ED) have issued their annual report to Congress describing their continued efforts to combat scholarship and financial aid fraud.

The College Scholarship Fraud Prevention Act of 2000 established stricter sentencing guidelines for criminal financial aid fraud, and charged the FTC and ED with conducting outreach efforts to educate consumers about scholarship scams. The Act also requires the three agencies to submit a yearly report detailing the nature and quantity of scholarship fraud incidents since 2000. The FTC, DOJ, and ED have implemented all the required provisions, and their activities are highlighted below.

The FTC was monitoring and prosecuting financial aid fraud for several years before the Act was passed. In 1996, the FTC implemented “Project Scholarscam,” an ongoing campaign to prevent and prosecute scholarship fraud. To date, the FTC has brought 13 law enforcement cases against alleged scammers. The FTC has also published a variety of consumer education and outreach materials to help consumers avoid these scams. Meanwhile, in 2007, DOJ brought numerous criminal actions against individuals engaged in fraud in the offering of higher education financial aid. Five of these cases resulted in the imposition of the Act’s enhanced sentencing provision.

The FTC and ED continue to regularly revise and update their materials, available in English and Spanish, aimed at teaching consumers how to avoid scholarship fraud. Both agencies use a variety of formats to convey their messages, including Web sites, booklets, brochures, video conferences, flyers, posters, and bookmarks.

The Act also requires the agencies to assess how often financial aid fraud occurs. An analysis of complaints in the FTC’s Consumer Sentinel database shows that complaints about financial aid fraud have remained fairly constant during the past decade. When compared to all of the other types of complaints registered with the FTC, the percentage of financial aid fraud complaints has decreased over time. The FTC continues to monitor these complaints to determine whether law enforcement action is necessary.

The Commission vote authorizing staff to issue the report was 4-0.

Copies of the report are available from the FTC’s Web site at http://www.ftc.gov and 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 and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.