Fraud and Scam Awareness: Scholarship Scams
It's a shame to think that people would try to con your family out of money, but it
happens everyday to hundreds of people. Scholarship scams often appear to be
legitimate scholarship opportunities or matching services. They also usually require
a fee to apply or search for scholarships. These scams deceive thousands of people for
millions of dollars ;every year. Here's what we've found.
Common scholarship scams
Fraudulent scholarships can take many forms; some
of the most common types are presented here.
Scholarships that never materialize
Many scams compel you to send them a
"fee" up front, but provide little or nothing in exchange. Most applicants write off
the expense, thinking that they didn't win the scholarship.
Scholarships for profit
This looks just like a normal scholarship program,
but requires an application fee. Scams of this sort typically receive 5,000 to 10,000
applications and charge fees of $5 to $35. These scams usually pay out a $1,000
scholarship or two and pocket a large profit, if they award any scholarships at all.
The advance-fee loan
This scam offers you an unusually low-interest
educational loan. However, you are required to pay a fee before you receive the loan.
Once the fee is paid, the loan amount is never received. Real educational loans
deduct their fees from the disbursement check. They never require an application
fee. If the loan is not issued by a bank or other recognized lender, it is probably a
scam. Show the offer to a Member Service Specialist at
your local branch if you need advice about a
loan.
The scholarship prize
Scams of this nature tell you that you've won a college scholarship worth thousands of
dollars, but requires that you pay a fee or the taxes before they can release your prize.
If someone says you've won a prize but you don't remember entering a contest or submitting
an application, be skeptical.
The guaranteed scholarship search service
Beware of scholarship matching agencies that guarantee you or your child will win a
scholarship or they'll refund your money. They may take your money and disappear.
If they do send you a report of matching scholarships, you'll find it very difficult to get
your refund.
Free seminar
Many prospective college students may receive a letter advertising a free student aid
seminar or "interviews" for financial assistance. Sometimes the seminars do provide
some useful information, but they are usually turn into sales pitches for financial
aid consulting services, investment products, scholarship matching services and overpriced
student loans.
Protecting yourself from scams
This advice can help prevent you from becoming a victim of a scholarship scam. Here
are some rules of thumb:
- If you must pay money to get money, it is probably a scam.
- If it sounds too good to be true, it probably is.
- Never invest more than a postage stamp to get information about scholarships.
- No one can guarantee that you or your child will win a scholarship.
- Legitimate scholarship foundations do not charge application fees.
- If you're suspicious of an offer, it's usually with good reason.