With tuition skyrocketing, students nationwide are forced to look for financial aid alternatives. But some companies use misleading tactics to take advantage of students — making promises they don’t keep.
Recent allegations of consumer fraud against companies offering financial aid and scholarship services are evidence that college funds cannot be guarded too carefully.
Minnesota Attorney General Mike Hatch filed a lawsuit Wednesday alleging College Resource Management Inc., also known as College Financial Aid Services of America, failed to find aid or reduce college costs for students as advertised.
The lawsuit states clients paid an upfront $595 fee for a guaranteed return of $2,500 in financial aid. It also alleges CRM used high-pressure tactics to ensure sales.
“CRM attempted to sell financial aid services based upon deceptive and false claims,” said Assistant Attorney General Trisha Matzak. She said the attorney general filed a suit after numerous complaints flooded his office.
Carl Wieman of Owatonna, Minn., is one such complainant.
The Wieman family received a personalized letter from CRM two years ago. The thought of saving money on their oldest son’s education piqued their interest in the offer.
The Wiemans attended an Albert Lea, Minn., seminar where they watched a testimonial-laced video and then met with an adviser from CRM. The family said the adviser pressured them to make a decision because CRM wouldn’t be coming back to Minnesota for another year. Wieman then paid the $595 fee.
Following the seminar the family received confusing correspondence from the company, Wieman said. One letter stated CRM couldn’t help the Wiemans until they placed all of their money and assets into a grandparent’s account — so the government couldn’t track the money to the immediate family, thereby ensuring more financial aid.
The only problem was that transferring the money would not help the eldest son because he was to enter college the next fall.
Tired of the hassle, Wieman sought help from Hatch’s office.
“I feel that they really abused the public,” Wieman said. “We were trying to get the best education possible for our son, and they really took advantage of that.”
Matzek said the goal of the lawsuit is to change the CRM’s business practices and to fully refund money to unsatisfied clients.
CRM attorney Paul Lester said the company has no comment regarding the charges.
In a related story, the U.S. House of Representatives passed a bill Monday giving the federal government the authority to pursue criminal charges against fraudulent scholarship search companies.
U.S. Rep. Fred Upton, R-Mich., sponsor of the bill, said the legislation is imperative at a time when college costs are increasing and people are seeking ways to finance an education.
“Unfortunately, there have been a growing number of con artists who want to take advantage of vulnerable students in need of financial aid,” Upton said. “These deplorable actions are clearly aimed at preying on the hopes and dreams of students who desire to improve their life through higher education.”
In a testimony before the Senate last October, U.S. Rep. Dale Kildee, R-Mich., said an estimated 350,000 students and their families lose more than $5 million per year in scholarship fraud.
Under the bill, those convicted of scholarship fraud could suffer penalties equal to those suffered by people who falsely claim to work for a charitable organization or government agency, with jail time of 10 to 16 months and fines of up to $500,000.
The legislation also restricts con artists from declaring bankruptcy to avoid paying court-ordered penalties.
And the Federal Trade Commission and the education department will be required to collaborate on a Web site designed to educate students and parents about scholarship fraud.
“This bill sends a strong message that we are taking scholarship fraud very seriously,” Ashe said. “This will hopefully serve as a strong deterrent against trying to run these kind of scams.”
The FTC has been pursuing the termination of scholarship fraud since 1996 and has successfully brought charges against eight companies, Ashe said.
“Students should be wary of any company using high pressure tactics,” Ashe said. “A legitimate company will let you take your time and look over your options.”

Jessica Thompson welcomes comments at (612) 627-4070 x3232.