Do your homework to avoid student aid scams

Reputable help for filling out FAFSA forms is available, parasites lurk too

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As July melts into August, many col­lege-age stu­dents are once again turn­ing their thoughts (if they haven’t done so already) to that beast of com­plex­i­ty, the FAFSA form—which stu­dents must fill out if they want to receive finan­cial aid. While there are many rep­utable com­pa­nies that help pre­pare FAFSA forms, there are a num­ber of par­a­sites out there as well.

Adam Levin, chairman and co-founder of Credit.com and IDT911
Adam Levin, chair­man and co-founder of Credit.com and IDT911

Fill­ing out the FAFSA is about as much fun as Thanks­giv­ing din­ner table talk when it turns to the top­ic of col­lege appli­ca­tions. That’s when the mon­ey ques­tions are asked, debt hor­ror sto­ries are shared and guests make groan­ing asides about the 1 per­cent who don’t have to apply for finan­cial aid.

First things first: In the form’s acronym lies the secret to avoid­ing the mon­ey pitfalls—FAFSA is short for “FREE Appli­ca­tion for Fed­er­al Stu­dent Aid.” Yeah, I know, fill­ing it out is time-con­sum­ing, but it’s doable. It’s also com­plex and requires infor­ma­tion that you’re going to have to bird-dog, but it is free.

Secu­ri­ty & Pri­va­cy Week­ly News Roundup: Stay informed of key pat­terns and trends

How­ev­er, the com­plex­i­ty is no rea­son to rush out and hire help. You’re going to be on the phone with par­ents (and step-par­ents) regard­ing ques­tions you can’t pos­si­bly answer, like whether or not they have untaxed por­tions of a pen­sion dis­tri­b­u­tion and if they are reg­u­lar­ly con­tribut­ing to a Keogh. You’re also going to have to ask them per­son­al ques­tions, like how much they earn from work and oth­er mon­ey-relat­ed topics.

Because it’s com­plex, there are those who opt to pay a third par­ty to pre­pare the form, and that’s where prob­lems can arise. The Con­sumer Finan­cial Pro­tec­tion Bureau recent­ly filed a com­plaint against a com­pa­ny that pro­vides this ser­vice, seek­ing $5.2 mil­lion for alleged decep­tive sales tac­tics and recur­ring fees. Accord­ing to the CFPB, 100,000 cus­tomers were billed ille­gal­ly. Mar­ket­watch report­ed, “Com­pa­ny rep­re­sen­ta­tives alleged­ly told cus­tomers that they could enroll in bet­ter pay­ment plans at ‘no cost’ and, instead, charged them any­where between $67 and $85 per year. In addi­tion, the CFPB claims that Stu­dent Finan­cial Aid Ser­vices put cus­tomers in recur­ring billing pro­grams with­out their knowl­edge or con­sent.” In a state­ment pro­vid­ed to Mar­ket­watch, the com­pa­ny denied any wrongdoing.

If it’s not free, you might be wise to leave it be

It bears repeat­ing here: There is no fee for the FAFSA—a fact that is embed­ded in the name of the form. There are a lot of com­pa­nies and scam­mers look­ing to make mon­ey off of the free process of apply­ing for fed­er­al finan­cial aid.

The FTC has pub­lished some rules of the road for spot­ting a finan­cial aid or schol­ar­ship scam:

  • The schol­ar­ship is “guar­an­teed or your mon­ey back.”
  • You can’t get this infor­ma­tion any­where else.”
  • I just need your cred­it card or bank account num­ber to hold this scholarship.”
  • We’ll do all the work. You just pay a pro­cess­ing fee.”
  • The schol­ar­ship will cost some money.”
  • You’ve been select­ed” by a “nation­al foun­da­tion” to receive a schol­ar­ship – or “You’re a final­ist” in a con­test you nev­er entered.

At the end of the day, com­mon sense is your best guide. Don’t sim­ply rush into the arms of the first orga­ni­za­tion that offers you a life raft. If some­one asks for per­son­al­ly iden­ti­fy­ing infor­ma­tion in the con­ver­sa­tion-starter phase of the process—the FAFSA requires a lot of it—that is, pri­or to actu­al­ly work­ing on your appli­ca­tion, be on guard. Giv­ing out your sen­si­tive data to a com­pa­ny with­out know­ing whom you’re deal­ing with is one of the eas­i­est ways to become an iden­ti­ty theft victim.

You can’t pre­vent iden­ti­ty theft—it’s now the third cer­tain­ty in life—but you can take steps to pro­tect your­self. If you think you may have giv­en infor­ma­tion to a scam­mer, keep an eye on your cred­it reports. Any big, unex­pect­ed changes could sig­nal iden­ti­ty theft, and you’ll want to pull your full cred­it reports to con­firm. You may also want to report any poten­tial scams to the FTC.

Search engines can be your best friends—if used properly

When it comes to avoid­ing scams and expen­sive dead-ends, do your home­work. It’s impor­tant to read up on any ser­vice you’re think­ing about using and don’t just look at the first two pages of results on what­ev­er search engine you are using. The neg­a­tive feed­back may be on page 4 or 5, so dig a little.

Anoth­er rea­son to do your home­work is that you will find help­ful tips to increase the amount of mon­ey you may have com­ing to you. Knowl­edge of the way this 10-page maze of a form works and what points mat­ter most to max­i­mize eli­gi­bil­i­ty can be a game chang­er. For instance, with just a lit­tle pok­ing around you might land on this arti­cle that, among oth­er things, relays the fact that retire­ment accounts and pri­ma­ry res­i­dence do not count as reportable invest­ments on FAFSA ques­tions 42, 43, 91, and 92—something many peo­ple do not realize—drastically reduc­ing the amount of mon­ey allot­ted to them.

Oth­er tips

Use your head. If you see suc­cess sto­ries, there’s a mar­ket­ing machine behind them—that doesn’t nec­es­sar­i­ly mean the offer is a scam, but you should be wary and make sure you under­stand what it is you’re buy­ing. The same goes for guar­an­tees. If you decide to use a third par­ty, read the fine print, ask about their refund pol­i­cy. Look for ref­er­ences. Ask for ref­er­ences you can call. Slow and steady wins the race here.

Full dis­clo­sure: IDT911 spon­sors Third­Cer­tain­ty. This sto­ry orig­i­nat­ed as an Op/Ed con­tri­bu­tion to Credit.com and does not nec­es­sar­i­ly rep­re­sent the views of the com­pa­ny or its partners.

Adam Levin is chair­man and co-founder of Credit.com and Iden­ti­ty Theft 911. His expe­ri­ence as for­mer direc­tor of the New Jer­sey Divi­sion of Con­sumer Affairs gives him unique insight into con­sumer pri­va­cy, leg­is­la­tion and finan­cial advo­ca­cy. He is a nation­al­ly rec­og­nized expert on iden­ti­ty theft and credit.

More on stu­dent loans:
How Stu­dent Loans Can Impact Your Credit
How to Pay for Col­lege With­out Build­ing a Moun­tain of Debt
Strate­gies for Pay­ing Off Stu­dent Loan Debt


Posted in Data Security, Identity Theft, News & Analysis