Scholarship Scams

Key to know: You're here to make money, not lose it! You should never have to pay for a scholarship – read on to learn how to recognize and avoid some all-too-common scholarship scams:

Eager and sometimes desperate students and families have been bilked out of tens of millions of dollars by operators who take advantage of their desire for an education. The Federal Trade Commission is responsible for protecting the public from such schemes, and they offer the following Public Service Announcement:

“Many legitimate companies advertise that they can get students access to lists of scholarships in exchange for an advance fee that ranges from $10 to $400. Others charge an advance fee to compare a student's profile with a database of scholarship opportunities and provide a list of awards for which the student may qualify. They don't guarantee or promise scholarships or grants.

Some scholarship search services do misrepresent their services, guaranteeing that they can obtain scholarships on behalf of students or actually award scholarships to students for an advance fee. In these cases, consumers receive only a list of scholarships or grants for which they can apply. Usually, all consumers receive the same list, regardless of their qualifications. The search companies that offer a “money back guarantee” usually require students to apply for each scholarship or grant they have listed and then offer proof that they've been denied by each one.

Other fraudulent companies provide nothing for the student's advance fee – not even a list of sources. Still others tell students they've been selected as “finalists” for awards that require fees first. These scams usually ask for the student's checking account to “confirm eligibility for an award,” and then debit the account for large fees. ”

1. “The scholarship is guaranteed or your money back.”
2. “You can't get this information anywhere else.”
3. “I just need your credit card or bank account number to hold this scholarship.”
4. “We'll do all the work.”
5. “The scholarship will cost some money.”
6. “You've been selected by a 'national foundation' to receive a scholarship” or “You're a finalist” in a contest you never entered.

If you hear these marketing lines, run in the other direction and do not under any circumstances give these folks your bank account or credit card information!

According to the FTC, you should avoid these telltale signs of scholarship scams:

Fee Requirement If a scholarship application requires that you 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”, avoid it. 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. You can also see a list of the (very official sounding!) names of defendants on the FTS's Project Scholarship Scam site.

Unsolicited Scholarships Be very suspicious of unsolicited scholarship phone calls or letters. 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.

Go to Scholarship Scams to learn more, including how to file a complaint.