Not Worth The Price
Don't fork over money for financial aid advice that is available free
In a hotel ballroom in Plano, Texas, last summer, David Zimmerman took what he thought was a smart step toward financing his daughter Cherie's college education. For a fee of $975, the College Funding Center, which runs financial aid seminars around the country, guaranteed it could get the Richardson, Texas, restaurant manager 100 percent funding for Cherie, then a high school senior. He didn't hesitate to sign up. Now Zimmerman faces a $12,000 tab for Cherie's first year at Stephen F. Austin State University in Nacogdoches, Texas. And the College Funding Center? It's been no help at all. "If someone is coming up and offering you 100 percent funding--boy, I'm not the only one that jumps at something like that," says Zimmerman.
Indeed he's not. As college tuitions jump, a host of firms promising to help families pay for college are cropping up all over the country. Some provide a valuable service. But some don't. They charge families up to $2,000, ostensibly to help them navigate the daunting financial aid process. The firms pledge, for example, that their staffers will help parents fill out the Free Application for Federal Student Aid (the form the government uses to determine aid eligibility, also known as the FAFSA), reveal secret strategies about the system, and uncover hidden grants, lucrative scholarships, and easy loans.
Busy, busy. There's definitely a ripe clientele. Last month the Federal Trade Commission announced a settlement with National Student Financial Aid, a Nevada firm it said was making false claims about how much aid it could obtain for students. According to the FTC, the company sold its services to at least 40,000 families, raking in more than $10 million.
Zimmerman says all the College Funding Center provided was information on financial aid that was available elsewhere free, lists of inappropriate scholarships, and faulty advice about student loans. Zimmerman asked for a refund but did not get one. Alan Baron, president of College Funding Center, says his firm acted properly. "We believe that the people that deserved the refunds got them," says Baron. Not everyone thinks so. In May, the FTC sued the company for promising full funding and not honoring money-back guarantees. The case is pending.
In the worse-case scenario, some companies dispense advice that may jeopardize chances of aid. Other outfits file aid forms late, incorrectly, or not at all.
Many firms attract parents to the seminars by sending an official-looking invite that says their child has "been selected" for financial assistance, when in reality the letter is part of a mass mailing. At the seminar, a company representative conducts a spiffy presentation, exaggerating the complexities of the financial aid process and bragging about all the free money it can dig up for its clients. The intimidation factor is hard to ignore. "They made me feel like I would be a total idiot if I didn't sign on," says Melani Howard of Minneapolis, who paid one of these firms $500 in the mid-'90s.
Anyone can fall victim. But often it's low-income families who are most vulnerable. "They tend to be minorities, first or second generation in the United States, and they aren't familiar with the way college financial aid works," says Gregory Ashe, an FTC attorney. "I think the operations know that."
To avoid getting stung, parents should check out the backgrounds of firms with the Better Business Bureau, a state or local consumer protection office, or a college or high school counselor. Many of these experts and organizations also provide free help or can direct you to resources such as the U.S. Department of Education's toll-free hotline (800-433-3243). Bonnie Elbaz-Deckel, a college counselor at Ulysses S. Grant High School in Valley Glen, Calif., for example, frequently steers her students and their parents away from dubious firms. And last year, she helped obtain refunds for three families.
Parents who think they have been cheated can file a complaint with the FTC (www.ftc.gov or 877-382-4357) and their state attorney general. Howard complained to her attorney general about College Financial Aid Services of America; the state sued the Texas-based firm in 2000. It may have been a long wait, but Howard did get her $500 back last year. "To this day," says Howard, "I still don't know how they got my name."
This story appears in the September 8, 2003 print edition of U.S. News & World Report.
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