By Herb Weisbaum ConsumerMan
msnbc.com contributor
updated 8/14/2007 7:23:30 PM ET 2007-08-14T23:23:30

College costs are staggering. According to the College Board, the average annual cost (tuition, fees, room, and board) of attending a four-year public college is nearly $13,000. For private schools, the average cost is more than $30,000.

This is the time of year when families scramble to assemble the funds to pay for the fall semester. “People are desperate for money,” says Jim Boyle, president of College Parents of America. “They’re looking for help wherever they can find it, which makes them especially vulnerable to scholarship scams.”

The National Council of Better Business Bureaus warns college-bound students and their parents to be wary of financial aid fraud. “There are companies out there that will promise big bucks for college,” says spokesman Steve Cox, “but ultimately they take your money and leave you with nothing.”

The Better Business Bureau says consumer complaints against scholarship, loan, and grant services jumped 60 percent last year. Many of those complaints deal with a company that often uses the name College Money Matters.

“We know that there are at least hundreds of victims all across the country,” says Jane Driggs, CEO of the BBB in Utah. "Most paid $795 or more,” she says, “and got absolutely nothing in return.”

Because the last known address for College Money Matters was in Utah, the BBB office there is handling most of the complaints. But Driggs says the company does not respond anymore.

I tried, unsuccessfully to reach the company for a comment. The e-mails all bounced back and most of the phone numbers were either disconnected, or constantly busy. I did leave a message on one answering machine, but my call was never returned.

Last year, Michelle Black received a postcard from College Money Matters when her daughter, Korrina, was a high school sophomore. The seminar was being held at a nice hotel in downtown Houston, so she figured, it had to be on the up-and-up.

Black says the company made some promises that were mighty appealing. “They would help us get grants and help with the whole application process,” she told me. “They knew things that most people didn’t know about and they could do for us things we couldn’t do for ourselves.”

The company wanted $900 for its “insider” tips. Black was able to put $100 down and agreed to pay off the rest via automatic billing to her checking account.

Six days after the seminar, Black called College Money Matters to ask a question. The phone numbers she had been given were all disconnected and the company’s Web site was down.

Realizing she’d been scammed, Black went to her bank and closed her checking account. That’s when she started getting phone calls threatening to send her to collection. “It got real nasty,” she told me. After many heated arguments, the company finally backed down and stopped calling.

Dr. Abul Kashem, an anesthesiologist in Brooklyn, N.Y., attended a free College Money Matters seminar with his 13 year-old nephew, Meraj. For $1,000, they promised to help his nephew prepare for the SATs, find a good college, and get the best scholarships when the time came.

“The speeches and videos were highly professional,” Kashem says. “They were so organized and so articulate, that it was hard to suspect there was anything wrong.”

He called the company shortly after the seminar, but always got an answering machine. Then the number was disconnected. Luckily, Kashem paid by credit card and was able to challenge the charge.

Spotting the scams
Financial aid scams don’t always involve seminars. Some con artists simply contact families of students headed to college and tell them they’ve been “selected” or “awarded” a scholarship. The money is “guaranteed,” they say, if you provide us with your bank account or credit card number.

“No one can guarantee you scholarship money,” warns Greg McBride, Senior Financial Analyst at bankrate.com. “If somebody requires you to cough up some money first, in order to either qualify for a scholarship or be given a list of potential scholarships, that’s a big red flag that somebody is trying to take you for a ride.”

Many of these fraudulent scholarship operations use official-sounding names to seem legitimate. They often include the words “federal” or “national” to seem like they’re a government agency. But names don’t mean a thing.

For example, back in 1998, the Federal Trade Commission shut down the National Scholarship Foundation of Delray Beach, Fla. The commission says the company cheated 15,000 people out of $2.8 million.

Some financial aid companies are total scams — they take your money and run. Others simply fill out the paperwork for you, although their sales pitch makes it seem like they will do a whole lot more.

Where to go for legitimate help
There is a large amount of scholarship money available to students from both private and public sources. You don’t need to pay anyone to find this money or to apply for it.

Your best bet it to check with a high school guidance counselor or contact a local college financial aid office. “They can give you all of the information you need for free,” says Kay Lewis, Director of Student Financial Aid at the University of Washington in Seattle.

Lewis also suggests going online tofastweb.com or finaid.org. They have comprehensive information about financial aid, scholarships, and loan programs. Again, it’s all free.

Is this something you can do yourself? After getting burned by College Money Matters, Michelle Black did it on her own. “The forms are not that complicated,” she says. “It takes a little bit of time, but it’s not rocket science.”

By the way, Black’s daughter, Korrina, starts college this week. She’s going on a scholarship.

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