Rip-Off Artists Targeting College Hopefuls

These days, college tuition can cost more than buying a house. And in order to pay for it, millions of families must seek financial aid.

Melonise Wills knew paying for her son's college education would be expensive, so when she received a "special invitation" in the mail offering help with scholarships, tuition discounts and subsidized loans, she thought it was a god-send.

The company that sent out the invitation, College Money Matters, invited the Wills family to a lavish seminar and wowed them with a presentation.

"The thing that got our attention was they said that even Bill Gates' daughter could get financial aid if the paperwork was filled out properly," she told The Early Show consumer correspondent Susan Koeppen.

So Wills paid the company's $795 fee but said she didn't get what she paid for.
Instead of helping, College Money Matters took her money and disappeared. When she tried to call them, the line was disconnected.

"They are no better than your average street scammer," the Council of Better Business Bureaus' Steve Cox said.

Cox says that as college tuitions have skyrocketed, so have complaints about financial aid scams.

"From 2005 to 2006, our numbers increased by 60 percent, and we're on a record pace for 2007," he said.

Cox says many companies lure in students with offers of "guaranteed loans" or "insider information," but buyer beware.

"They are going to prey on trust, they are going to prey on vulnerability, they're going to prey on lack of knowledge, and they're going to take advantage of you," he said.

Now, even legitimate banks and universities are making headlines for shady practices. In his probe of the student loan industry, New York Attorney General Andrew Cuomo found dozens of colleges getting kickbacks from banks to promote their loans.

"It is a consumer fraud," he said. "What we found was, the colleges had their own financial interest. They were getting commissions from the lenders for delivering the student population."

Cuomo's investigation has resulted in settlements of more than $16 million. He wants national legislation to keep lenders and colleges honest.

"The fundamental point is, if a college is going to recommend a lender to a student, it has to be in the best interest of the student, and it can't be a financial relationship with the college," he said.

As for College Money Matters — the company that took Wills' money — the Better Business Bureau has complaints from 11 states and has slapped it with an unsatisfactory rating. Now the company has gone out of business and is being investigated by authorities.

"Be cautious when you sign your paperwork and give your money," Wills said, "because everyone is not honest."