Scholarship Scams: Avoiding Their Traps
While scholarships are usually a great way to help fund a college education, if one is not careful the pursuit of scholarships could instead result in the loss of funds. As college costs have continued to rise, so have the number of scams trying to take advantage of those looking for help to pay for college. When searching and applying for scholarships, students and their parents need to be aware of the types of scams out there and how to avoid them.
How to Identify Scholarship Scams
- Fees - If a scholarship application requires that the applicant pay a fee by sending money or providing a credit card number, this is a very likely sign of a scam. Institutions that award scholarships have no reason to ask for money; their goal is to give money away.
- Guarantees - If a scholarship service promises a “scholarship guarantee” or “your money back”, stay away as no one can guarantee a scholarship and there should be no money changing hands until an award is given.
- Send Money - If a scholarship check is sent but the award winner is asked to pay back money for any reason, be very wary. These scams may ask for taxes or some type of fee to be paid or they may tell the recipient that the amount sent was incorrect and ask the winner to send back the difference. If the scholarship “winner” sends money before waiting for the scholarship check to clear, they may lose that money.
- Official-Sounding Names - Look out for names of institutions that sound official or have a similar name to a real company, foundation or agency but don’t really provide scholarships. They may even be a real company or foundation but that doesn’t mean they are legitimate. If a scholarship sounds too good to be true or too easy to get, a high-school counselor or college financial aid office should be consulted.
- Unsolicited Scholarships - Unsolicited scholarship phone calls or letters should be met with skepticism. Never give personal information such as social security number, credit card or bank account numbers to anyone over the phone or on an application.
- Too Good to Be True - Services that use the phrases “Guaranteed Winnings”, “Money Back …”, “Everyone is Eligible”, “Unclaimed Money”, “We do all the Work”, “You can’t get this information anywhere else”, are clues that they are not legitimate.
Tips regarding Scholarship Services and Search Tools
- Don't Pay for Free Information - Think twice before paying money for a scholarship search. These services either provide nothing or return a list of scholarships that could be found for free using another scholarship search tool.
- Free Seminars - Be aware that free scholarship seminars may actually be sales pitches for other products that may be overpriced or of questionable value. These seminars may actually offer legitimate scholarship advice but their real purpose may be to entice the attendees to pay for financial aid consulting, insurance, or high-priced private loans.
- Scholarships Information is Readily Available - If a scholarship service says it has information that can’t be obtained anywhere else, it may not be legitimate. Most scholarships are available through any number of search tools or just by doing an internet search.
Other Financial Aid Scams to Avoid
- Fake websites - FAFSA.com is not the official website for completing the Free Application for Federal Student Aid. This site will charge the applicant money after they have entered personal financial information. The official website is www.fafsa.gov and is free. There are other financial aid websites that tempt students to complete the online FAFSA through their site so students must be very careful.
- Loans with up-front fees - Although there are fees associated with legitimate government and private loans, the fee is almost always deducted from the disbursed amount. The borrower should not pay fees up-front without first verifying carefully that the lender is legitimate.
Scholarship Scam Tips
- If it sounds too good to be true, it probably is.
- Scholarships require work – if a service says they’ll do all the work, it is unlikely to be legitimate.
- Scholarships don’t cost money – students should never provide financial information such as credit card or account numbers or send money.
Resources
Federal Trade Commission: Scholarships Scams
U.S. Department of Education: Scholarship Scams
College Board: Can you Spot a Scholarship Scam?
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