In recent years, college and university financial aid administrators and admissions personnel have witnessed the growth of an alarming trend--financial aid "consultants" who charge families for services offered for free by on-campus aid administrators. These consultants often exaggerate the complexities of the financial aid process or make promises for things they have no ability to deliver, such as guaranteed scholarship money to students. Staff at IHEs should question such activity whenever they learn of it.
As the financial aid process has become more complex, the number of individuals offering professional financial aid services to students and their families has increased significantly. Some families have had positive experiences with paid financial aid consultants.
But as insiders know, the industry also includes "bad apples" who charge exorbitant fees and do little more than provide information that is readily available for free. Here's the low-down on how some aid consultants may misrepresent themselves to families and what those in higher ed can do to help prevent people from wasting their money.
Generally speaking, aid consultants charge a fee for services such as: preparing the Free Application for Federal Student Aid (FAFSA) and other financial aid forms; approximating family resources; estimating expected family contribution (EFC); assessing financial need; and describing the types of federal, state, local, and institutional aid programs available. Consultants may indicate to families that they know "tricks of the trade" the average aid applicant does not, and that they can better position the student to receive aid.
Families are often unaware that financial aid administrators at their local college campus perform many of these same services, free of charge.
Aid consultants have argued that the FAFSA completion services they offer are no different from those performed by an accountant hired to file taxes for a client, but this is somewhat misleading. Accountants and tax preparers are generally expected to have received specialized training; anyone can use the title "consultant."
IHEs should help parents and students understand that aid consultants are for-profit entities not affiliated with an institution. Aid consultants have been known to use high-pressure sales tactics to drum up business and to scare families into purchasing unnecessary services. They have also been known to rent rooms on campus and use language that gives them the aura of association with the local institution.
A May 1999 Consumer Alert issued by the Federal Trade Commission (FTC) helps families learn what red flags they might look for in marketing materials. Institutions can help get the word out about these phrases, which are signs of an aid consultant families should avoid:
"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."
"The scholarship will cost you."
"You've been selected by a 'national foundation' to receive a scholarship," or "You're a finalist" in a contest that you never entered.
Still, families should be told that, according to the FTC, not every company advertising access to lists of scholarships in exchange for an advance fee, or charging a fee to compare a student's profile with a database of qualified scholarship opportunities, is one to be avoided.
The primary difference, according to FTC officials? Legitimate companies never guarantee scholarships or grants.
Another situation that financial aid and admissions personnel should look out for: one in which aid consultants warn parents against seeking the advice of a college financial aid administrator, claiming that--as professionals paid by the school itself--these people have a fundamental conflict of interest when it comes to distributing aid to students.
For example, a New Jersey newspaper published a story in 2003 about a local financial aid consultant who regularly attended high school financial aid nights in order to warn parents that these events "can be hazardous to your wealth."
"High schools hold these financial aid nights, but parents don't realize that they are usually sponsored by a college," the consultant said. "What I do is basically the same as a financial aid night, but I do it from the perspective of an advocate for the parent. Colleges have a 'parents versus the school' attitude, while high school counselors may just not know what to do because this is not their primary job."
New Jersey financial aid administrators objected to this characterization of financial aid office employees and took measures to counteract the erroneous information.
David Sheridan, former president of the New Jersey Association of Student Financial Aid Administrators (NJASFAA), immediately wrote a guest editorial counteracting the consultant's allegations.
In the editorial, Sheridan noted that the consultant's "free seminar is a sales pitch session, presented to add to his client base. Based on having viewed his now-closed website and reviewed his literature over the years, I believe he preys on anxiety about college costs by painting a misleading picture of how the process works, and then charges clients significant amounts of money for information that is either only partially true or that they can easily obtain for free."
In 2004-05 the New Jersey association launched a project, "Warning! Financial Aid Consultants--Proceed With Caution," to share accurate information. The association sent a letter to every high school principal and guidance director in the state--approximately 500 high schools, in total--explaining the differences between the services of financial aid professionals at a postsecondary school and for-profit financial aid consultants, and what families should watch out for if considering the services of a for-profit consultant.
NJASFAA members wanted parents and students to be aware that assistance with the financial aid process can be had for free and that, although the initial presentations made by for-profit consultants were often free, eventually families could be charged hundreds or even thousands of dollars for what is essentially public information.
In addition to these outreach efforts, NJASFAA has established the Speakers Bureau, an online directory of association members available to lead high school financial aid night presentations. Other financial aid associations across the country have made similar efforts to provide information and counter inaccuracy.
What can individual IHEs do to help? To start, it's important to make clear to all stakeholders--students, families, and high school guidance counselors--what free and accessible scholarship and financial aid services and information are provided by the school to families. Pointing them to legitimate online resources (see box) can also help.
Families can also be told that, even if the student plans to attend another school, the staff in any financial aid office or a reference librarian should be able to provide the same information and assistance that a consultant would provide. College catalogs and websites are also a good way to relay that information.
Institutions can help families, too, by sharing that it's important to: request references; never agree to a fee based on the percentage of aid that is received; never sign a blank form; and keep copies of the FAFSA and other applications for their files (even if someone has assisted in their preparation).
In addition, families who retain the services of an aid consultant and find that the FAFSA is completed incorrectly should know that they can demand a refund of the fee. To help avoid problems, families can be reminded to review the FAFSA thoroughly after it has been prepared, and then sign and mail it themselves. Only then can a family be sure about the completed form's contents.
Likewise, only a school that gets the word out about financial aid facts and fallacies can be sure that families are getting the message.
Elizabeth B. Guerard is the assistant director for communications at the National Association of Student Financial Aid Administrators (www.nasfaa.org).