Paying for Free Money

A $300 gift card offer comes with strings attached.


Updated on 1/9/08

My husband received a letter in the mail yesterday with a $300 debit card enclosed. "Congratulations," it read. "You have been pre-selected by NCLI to receive $300.00 at NO COST TO YOU."

It was sent from the marketing department of the National Collegiate Lending Institute. To qualify, he simply had to take advantage of NCLI's "free service" and provide a "brief testimonial" about his experience. The letter promised it would take less than 10 minutes and the money would be processed the following business day.

It turns out—surprise, surprise—that the offer is too good to be true. I called the number listed in the letter and learned that the "free service" is student loan consolidation. The $300 would be handed over only if we consolidated our student loans through the company and then provided a testimonial about it—hardly a 10-minute decision, especially when our student loans are already consolidated at decent interest rates.

It turns out that this very practice—and this very company—is being investigated by New York State Attorney General Andrew Cuomo. Cuomo says that offering gift cards in exchange for testimonials violates the anti-inducement provisions of the federal Higher Education Act.

The investigation, however, has not stopped the company from continuing to mail out such offers. Other bloggers have also received them recently. And the dozens of testimonials on the company's website suggest that some recipients have accepted the deal. (The company did not return repeated calls for comment.)

The lesson: Mail offering free money usually belongs in the trash.

• Readers: Have you ever fallen for an offer that turned out to be too good to be true?


After this blog was published, I got a call from David Tominus, sales manager and part owner of National Collegiate Lending Institute. He says my story is misleading, because the company is not paying students to consolidate their loans but rather for the testimonials that students provide after they have consolidated their loans through the company. To support his point, he says NCLI has paid out $20,000 to students who initiated the consolidation process, provided a testimonial, and then backed out after receiving their $300.

Tominus says that if people who received the letter read the small print on the back of it, they would not be confused. (The small print states that the offer is "contingent upon the completion of a testimonial and application, not a consolidation.") "The problem is everybody reads the front of the letter. They don't read the back," he says.

So why doesn't the company include the information on the front of the letter? "That's why we say, 'Call for details,' " Tominus says. The goal of the letter, he explains, is to encourage potential customers to call the company.

As for New York State Attorney General Andrew Cuomo's investigation into the company and others like it, Tominus says, "He is cleaning up an industry that doesn't need much cleaning up." Tominus suggests that Cuomo is simply trying to garner campaign contributions. "My real question for Cuomo is: Is he out there to clean up industry or to pocket [money] for himself?"

Tominus says NCLI, which processes 70 to 80 student loan consolidations a week, is simply trying to help student borrowers. "We're trying to run an honest business and provide a decent service," he says, adding, "If giving away free money is a crime, then I'm guilty."