Every year, millions of high school graduates seek ways to finance the rising costs of a college education, at times falling prey to scholarship and financial aid scams. To help students and their families, on November 5, 2000, Congress passed the College Scholarship Fraud Prevention Act of 2000 (Act) to establish stricter sentencing guidelines for criminal financial aid fraud. The Department of Education (ED), working in conjunction with the Federal Trade Commission (FTC), is charged with implementing national awareness activities, including a scholarship fraud awareness site on the ED website. The Act also required that the Attorney General (DOJ), the Secretary of Education, and the FTC jointly submit to Congress each year a report on that year's incidence of fraud by businesses or individuals marketing financial aid assistance services to consumers. Since last year's inaugural report, ED and the FTC have continued and refined their consumer education efforts. Using a variety of media, the agencies disseminate information to help consumers avoid falling prey to scholarship scams. ED materials provide information about the major federal student aid programs, remind students that there is no fee to submit the "Free Application for Federal Student Aid" and that free assistance with applying for aid is available from ED, high school counselors, and college financial aid administrators. After a small downturn in 2000 and 2001, the number of complaints to the FTC's Consumer Sentinel database increased in 2002. Whether the increase is due to more fraudulent activity or better reporting is uncertain. A review of the complaints received by Consumer Sentinel continues to indicate that the nature of the fraudulent activity is shifting from scholarship search services to financial aid consulting services, a trend that was identified last year. In terms of law enforcement, the FTC has continued its campaign to prevent and prosecute scholarship fraud. Project Scholar scam, formally initiated in 1996, combines law enforcement with consumer education to stop fraudulent purveyors of college financial aid services. This year, the FTC conducted a surf of Internet sites offering scholarship services, and sent warning letters to the operators of 12 websites, advising them to reexamine and/or modify their promotional language or face possible legal action. The FTC continues to monitor the Consumer Sentinel database for new targets and will solicit information from ED regarding its activity. The report concludes by noting that the FTC and DJ continue to coordinate parallel civil/criminal actions in appropriate cases. (Contains 15 endnotes.) [For the 2002 Annual Report, see ED504668.]