Tens of thousands of students are arriving on campuses this fall with a little college knowledge they would have preferred to avoid -- they were defrauded by companies that promised to help them find scholarships for a fee.
Prompted by the growing number of victims, the Federal Trade Commission yesterday announced lawsuits nationwide against operators of suspect companies, including one in Baltimore.
"It may be even more serious than we hear about," said FTC attorney Alice Saker Hrdy. "This is a transient group of consumers, and it's probably underreported. But students definitely see it as a problem out there."
The economics confronting most families make them easy targets. Since 1980, college tuition costs have risen at nearly three times the rate of household income. Only about half of students receive government financial aid. That means a scramble for the limited number of private scholarships available.
"It's the cost of college, and also the lure of free money," said Mark Kantrowitz, who operates a free, independent service called the Financial Aid Information Page, available through the Internet.
Many legitimate scholarship services have taken root in this climate, but bogus companies costing students tens of millions of dollars a year have thrived, officials said. Among them is a string of companies connected to Christopher Nwaigwe, an Essex resident who operated out of Baltimore and Washington, according to the FTC.
The agency contends that since at least 1991, Nwaigwe has contacted hundreds of thousands of students across the country offering scholarships or scholarship search services for a fee. In most cases, once the fee is paid, the student never hears from him again. Nwaigwe's programs, which are not incorporated or licensed to do business, are registered to at least 13 mail drops -- two of them on Dulaney Valley Road in Towson, and a third on O'Donnell Street in Baltimore, officials said.
Efforts to reach Nwaigwe yesterday at his home were unsuccessful.
In papers filed in U.S. District Court in Baltimore, the FTC accused Nwaigwe of deceptive trade practices and has obtained a temporary restraining order challenging his programs and freezing his assets. The FTC filed similar lawsuits against companies in New York, Georgia and Florida.
Nwaigwe's system involved culling names of potential customers from mailing lists of college students, according to the lawsuit. Depending on a student's course of study, a letter might be sent from an official-sounding group, such as the "National Health Scholarship Program," or the "National Science Program." Applicants were promised scholarships totaling anywhere from $1,000 to $7,500, or the fee would be returned.
Nwaigwe sent out at least 1,000 such letters a day, and probably took in as much as $300,000 in the past couple of years, according to the FTC.
Among the persons he contacted was Lynn Beller, a sophomore studying biology and nutrition at the University of South Florida. dTC For $10, she was assured of receiving $2,500 in scholarships or her money back. Before signing the check, she contacted her father, a Long Island accountant and comptroller.
"For that low fee and a money-back guarantee, I said what do you have to lose?" Jeffrey Beller said he told his daughter.
But, being an accountant, Beller did not forget that $10. Hearing nothing after a few months, he wrote one letter, then another. His sister, a research librarian, could find no record of such a company and there was no phone number to call. Finally, Beller filed a report with his local postal inspector. Bank records verified that the check had been cashed.
"Everything had looked more than legit," he said. "For $10, the average person is going to say 'I don't have much to lose.' That's how I felt also."
Other schemes involve postcards with an 800-number to call for "free money," and through ads and fliers distributed on campuses. When students do receive material, it often consists of scholarships whose deadlines have already expired or for which the student does not qualify.
The typical loss is about $100, but it is not uncommon for students to pay several hundred dollars to apply for scholarships they think are guaranteed, officials said.
"Even $50 for no good purpose is a significant loss to a young man or woman who is trying to pull together college funding, and many schemes charge much more than that," said Jodie Bernstein, director of the FTC's Bureau of Consumer Protection. "You don't need college level math to know that multiplying those fees by tens of thousands of victims adds up to big money for the scam artists."
William Leith, director of student financial aid at the University of Maryland at College Park, has heard the complaints from some of the students and parents who paid and lost.
"We use a search here that's free, so our students hopefully are using that," Leith said.
FTC officials advise students to be wary of any company that promises exclusive information about scholarships since free lists are widely available. And no one can guarantee a scholarship, no matter how high the fee, they added.
Pub Date: 9/06/96