After a 90-minute sales pitch from a company that promised to increase the financial aid eligibility of her college-bound kids, Corrine Nocerino signed a $1,950 contract on the spot. She would soon regret that decision.
Her son's guidance counselor found out and immediately warned Nocerino, who lives in Spotsyvlania County, Va., that the symposium she attended in November 2003 at a nearby hotel sounded like a scam. The counselor explained that the children's funding eligibility would not suffer if Nocerino filled out the form herself, as the symposium led her to believe, and that free help was available. Feeling betrayed, Nocerino demanded her money back.
"They were not completely honest," she said.
The Federal Trade Commission agreed. Now the agency, which had cracked down on the company once before, is attempting to shut it down and return nearly $2 million to thousands of consumers. Nocerino's story has a familiar ring, educators say, and an important lesson in it for parents: As long as there are college-bound students who need financial aid, there are scammers looking to take advantage of them.
"For the 10 years I've been a guidance counselor, I've seen it every year," said Amy Miller Spavlik of the Franklin Learning Center, a Philadelphia high school.
The rising cost of education and ignorance about the plethora of financial aid readily available and how to apply for it -- for free -- have helped to create a climate in which thousands of financially vulnerable Americans are defrauded every year out of millions of dollars, experts said.
"Be wary of anybody who is claiming to guarantee you a certain amount of financial aid or make you more eligible," said Gregory Ashe, senior staff attorney of the FTC's bureau of consumer protection. Ashe is the lead attorney in the agency's second lawsuit against Integrated Capital Inc., which does business as National Student Financial Aid and ran the symposium Nocerino attended.
"There are legitimate financial aid planners out there," Ashe noted, "but they're not making promises."
Experts said reputable financial aid consultants generally charge one-tenth the amount of scammers, whose fees often exceed $1,000 and whose money-back guarantees may not be as rock solid as they seem.
The FTC accuses NSFA of violating the terms of a previous settlement, reached in August 2003, by falsely representing, as it allegedly did to Nocerino and others, its ability to boost students' financial aid eligibility, as well as the amount of money likely available to them.
The FTC says that over the years NSFA, which agreed in its August 2003 settlement to pay $115,000 and cease making false claims, has defrauded some 40,000 consumers out of $10 million. The FTC also alleges that NSFA lied to consumers who were promised refunds in the event they did not receive aid.
Keith Flicker, a New York attorney representing Integrated Capital, called the FTC's actions "over the top, outrageous and baseless" and said they grew out of unfounded "conceptions about this whole industry."
"I think there is a need for this industry, just as H&R Block provides tax services, which you basically can do for free also," Flicker said. Moreover, Flicker said NSFA has adequately revised its sales pitch with disclaimers and disclosures so as not to mislead consumers.
But Nocerino said "they were not completely honest that this kind of service they offer is something you can get through local school boards and education officials. To me, that was very misleading."
By acting quickly (there was a 3-day period in which the contract could be canceled), Nocerino got back the initial $300 she had paid. And she secured college funding for her son without paying a nickel, by filling out a government form known as the Free Application for Federal Student Aid, or FAFSA.
The number of financial aid-related complaints made to the FTC has increased in recent years, from just above 300 in 2001 to nearly 600 in 2003, according to a May 2004 report presented to Congress. Officials believe that count vastly understates the problem, which they say increasingly affects recent immigrants who may be reluctant to contact federal authorities out of fear of being deported.
The FTC's Ashe said his agency "fights for the consumer regardless of their nationality or citizenship status."
While officials said families with scant financial resources are typically the most vulnerable, the scams do cut across socioeconomic lines.
"Sometimes, both parents work and are therefore willing to pay to get someone to help," said David Hawkins, director of public policy at the National Association for College Admission Counseling. "That would qualify them as pretty susceptible."
Some red flags to watch out for:
* When a company asks for a payment up front. "You shouldn't have to pay money to save money," Ashe said.
* When scholarships or financial aid are promised. "No one can guarantee you aid," Hawkins said.
A classic scheme, Hawkins said, is one in which a company will call promising to conduct a search of all the available sources of scholarships and financial aid in order to match students up with potential fits.
But it's probably a waste of money, he said, because such information is available for free at various Web sites, including the Department of Education's, "where two-thirds of scholarship and aid money is going to come from." The agency intends to provide some $67 billion, or more than two-thirds of all student aid, this year.
Federal financial aid is need-based. Some assistance, such as Pell Grants, do not have to be repaid, while other aid comes in the form of Stafford and Perkins loans, some of which are subsidized, meaning they are interest free until after graduation.
Jeff Sherrill, associate director in the office of student activities at the National Association of Secondary School Principals, cautioned parents against buying into the rhetoric of companies that claim public school guidance counselors are too busy or incompetent to handle the average college-bound students' needs.
"The guidance counselors that you have in schools today are so much more prepared to address college needs than they ever have been in the past," he said. And they know to look out for scams.
In fact, Nocerino said her son's high school had sent students home with warnings to parents before she was ever contacted by NSFA.
So what went wrong? "You know how it is with kids," she said. "It wound up in the bottom of his knapsack."
On the Net:
National Fraud Information Center: 1-800-876-7060