Every year, thousands of unsuspecting families fall prey to fraudulent scholarship companies that pose as legitimate scholarship sponsors, foundations, or search services. These scam artists hook you in by promising “free money for college.” Be wary, these scams are usually advertised in campus newspapers, flyers, direct mailers, and on the internet.
There are dozens of scams based on imitations of legitimate foundation, scholarship sponsors, lenders, and scholarship search services. They may even have official-sounding names, using such words as “National”, “Federal”, and “Administration”. They may have a governmental-looking seal to fool you into thinking that they are federal agencies or grant-giving foundations.
How to Avoid Becoming a Victim of a Scholarship Scam
The Federal Trade Commission’s Bureau of Consumer Protection cautions students and parents to look for any of these tell tale lines:
- “The scholarship is guaranteed or your money back.” No one can guarantee that you’ll get a grant or scholarship. Refund guarantees often have conditions or strings attached. Get refund policies and details on the guarantee in writing before you pay!
- “You can’t get this information anywhere else.” There are many free lists of scholarships currently available. Check with your school guidance counselor or local librarian before you decide to pay someone to do the work for you.
- “I just need your credit card or bank account number to hold this scholarship.” Never give your credit card or bank account number, even if they claim it will “hold” a scholarship for you. Always ask for the information in writing first.
- “We will do all the work for you.” Beware of anyone promising to “do all of the work for you.” You and only you must apply for scholarships and grants.
- “The scholarship will cost you some money.” Do not pay anyone who claims to be “holding” a scholarship for you. Free money shouldn’t cost you anything.
- “You have been selected by a ‘national foundation’ to receive a scholarship.” Get all of the facts first. Do not send money before you find out whether or not the foundation program is legitimate.
Warning Signs of a Possible Scam
- If a scholarship program requires an application, redemption, or handling fee, even a small amount like $5, don’t waste your money. Carefully investigate the background of the offer and the company. More than 99% of legitimate scholarship sponsors do not require an application fee.
- Be wary of loan programs that require an up-front payment, guarantee, or other fees. All federal, state, and private education loan programs deduct loan fees from the disbursement check. No legitimate program requires the fees in advance.
- No sponsor will guarantee that you will win the award, and scholarship search services cannot guarantee that you will win an award. Watch for high success rates. Less than 4% of all students win private scholarships. More than 75% of all student financial aid comes from federal and state governments.
- Many scholarship scams use a mail drop for a return address (sometimes disguised as a Suite), and many do not include a telephone number for questions or concerns. The lack of a listing should make you cautious. If a telephone number is not listed, call directory assistance at 1-800-555-1212 to see if they have a listing.
- Be careful if the announcement has a deadline in only a few weeks and encourages you to respond quickly because the awards are given on a “first-come, first-served” basis. Other cautionary words “free money” or “win your fair share.”
- Do not give out your personal financial information such as credit card numbers, bank or calling card numbers, especially to an unsolicited offer that needs the information for “verification purposes.”
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