Scholarship Scams

You’ve seen the postcards and the ads in the newspapers:

"Billions of dollars in scholarships went unclaimed last year. Send us $79.95 and we’ll guarantee that you get $1,000 or we’ll give you your money back."

This is one case where it pays to believe the old adage "If it sounds too good to be true, it probably is". Your high school students will get many offers such as these. With students and parents struggling to pay the cost of higher education, these sales pitches sometimes seem too irresistible to pass up.

The problem is that many of these offers are not what they seem. Typically referred to as "scholarship scams", they offer the promise of scholarship funding – for a "small" fee – and they "guarantee" the return of this fee if the search is unsuccessful. More often than not, the company makes off with the fee and the student is left with no scholarships other than the ones they found on their own.

Here are some tactics and claims that your students should watch out for:

1. For a fee (ranging from $50 to $1,000) the company will provide a list of scholarship possibilities. Students apply to the ones for which they might qualify. If no awards are received and the student attempts to get a refund, a rejection letter must be provided from EVERY source on the original list. The problem is that students seldom apply to every source, and many sources do not provide rejection letters. Therefore, the request for a refund is denied and the student is out the money.
2. Some companies will claim that their information is not available anywhere else. The fact is that they typically utilize the same scholarship databases that students can research for free, including one right here in EducationPlanner.
3. Some companies will request a credit card or bank account number to "hold" financial aid dollars for the student. Students and parents should never give out this information unless they know that the company or organization they are giving it to is legitimate.
4. Some organizations will try to get you to send them money by claiming that you are a finalist in a scholarship contest. But scholarships are not like sweepstakes – if you have not applied for an award, you are not likely to be a finalist for it.
5. Organizations will often have official sounding names, a fancy seal on their letterhead, and a Washington, DC mailing address. This gives unsuspecting customers the impression that the organization is somehow affiliated with or endorsed by the federal government, when, in fact, no such relationship exists.
6. Free scholarship or "financial planning" seminars often end with a sales pitch to "act now or lose out on this opportunity". This can also include the purchase of various financial products such as insurance. Legitimate organizations do not use these types of pressure tactics.

When it comes to private scholarships, the best advice you can give your students is this: "Don’t pay for what you can get for free." Have them check routinely with your office for information on new awards, check with the Financial Aid Office at the college(s) they are considering, and research scholarships on their own using any one of a number of reputable FREE scholarships searches on the Internet. If they bring you "too good to be true" offers like the ones described here, show them this article and then advise them to throw the literature away.

For more information on scholarship scams or to report a scam, call the Federal Trade Commission, toll free, at 1-877-382-4357.

For brochures that provide information about scholarship scams, call the Federal Student Aid Information Center of the U.S. Department of Education at 1-800-433-3243.