6 Heinous Scholarship Scams

Hold on to your money… Avoid these 6 scholarship scams like the plague.

A four-year college education might be the most important investment you can make in your children. And in many cases, it’ll also be your most expensive. As college tuitions continue to explode, earning a four-year degree from a reputable school can easily cost more than your average three-bedroom house.

Very few families have that kind of money lying around, so it becomes necessary to rely on a combination of student loans and scholarships. Of course, you’ll eventually have to pay off a student loan. So, the more money your child can accrue in scholarship money, the better off you’ll be financially.

But beware. The number of scams out there are on the rise… and they’re getting more clever by the day. Typically they tout themselves as reputable scholarship search or distribution businesses. They even have official sounding names with words like “Federal,” “National,” “Foundation,” or “Administration.” And really they’re nothing more than white-collar crooks just out to steal your money. Knowing what to look for and how to avoid these scams can be your greatest protection.

The FTC has identified six of the most commonly used approaches these hooligans will use in an attempt to steal your money. And this knowledge is your weapon against them. Here’s the low-down:

  1. Never pay a fee to apply for a scholarship. No matter how low or inconsequential it may seem. Some of these frauds ask for “application” or “processing” fees as low as a few bucks and as high as thousands. Some may even tout that those who don’t “win” a scholarship “may” be entitled to a refund. Don’t believe a word. Even if these companies disburse a thousand or two (which some do just to cover their butts) they’ll still make out like bandits. But your chances of getting hit by lightning are better than your chances of landing that money—and you’ll never see a refund of your “application fee” either. The same is true of loans that ask for a fee up front. And legitimate application or processing fees are usually deducted right out of your disbursement check. True loan and scholarship resources will never ask for money up front.
  2. Beware of how much person information you provide on a scholarship application. All scholarships have an eligibility requirement. It might be academic, it might be athletic or it might be some form of minority status. But no legitimate scholarship application requires a check, credit card or banking information. If you’re asked to provide more than your standard contact information and some form of proof that you fit their eligibility criteria, chances are you’re being scammed.
  3. “We do all the work.” It really means, we take all your money and you get nothing. All scholarships require you to submit your own applications, write your own essays—do your own leg-work. Along those lines are companies that accept a fee for filling out and submitting federal student loan (FAFSA) applications. Your child’s high school guidance counselor gets paid to provide that kind of assistance. Often times your child’s school can provide ample assistance with filing for federal student aid, researching scholarships, grants and other relevant loans options…all for free.
  4. There’s no such thing as a guaranteed scholarship. All scholarships have an eligibility requirement and most of them are extremely competitive. Nobody gets a scholarship for their bright and toothy smile. Often times you’re asked to pay a fee for some outfit to send you a report of so-called “guaranteed” scholarship opportunities that your child either isn’t qualified for or that don’t exist outright. And good luck getting a refund. Chances are you’ll never hear from those folks again.
  5. Scholarships will never come looking for you. So when you get that letter in the mail or that phone call or that email telling you that you’ve been “selected” or that you’ve won a prize, beware. If you don’t recall applying, then you’re being scammed. The common scenario is that you’re “awarded” a scholarship, but you’re requested to pay “taxes,” a “disbursement” or a “processing fee.” Other times you’re sent a check for more than the scholarship amount because the “fee” is built in, so you’re asked to mail back a check for the fee amount. Their fraudulent check bounces and they’re free and clear with your money.
  6. “You can’t get this information anywhere else.” Scholarships are not a secret. No legitimate scholarship sponsor will align themselves with any one scholarship matching service. If it’s out there, your high school guidance counselor can find it just as easily as anyone else. Also beware of any outfit claiming a high success rate or that they have “pull” with a given scholarship fund. Less than 1% of people using a matching service ever land a scholarship. And no matching service has control over scholarship sponsor’s awarding criteria. It just doesn’t work that way.

Obviously this list is not exhaustive. There will always be scoundrels building bigger, better and more elaborate scams to get at your money. The bottom line is, always go with your gut. If it smells like a scam, there’s a reason. Never be afraid to ask questions, get claims in writing and do a little research. If a company doesn’t come up on a simple directory search, be wary.  If a company claims a particular affiliation, verify those claims. Check with your local chamber of commerce or the Better Business Bureau.

A little extra diligence and some common sense can go a long way to protecting your money and supporting the most important investment you can make…

Scott Weingold
Publisher, College Made Simple


Related Articles:

What are the Most Common Scholarships?

When, How and Where to Apply for Scholarships

How to Protect Yourself from Financial Aid and College Scholarship Scams

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physical therapistJuly 22nd, 2010 at 12:16 am

nice post. thanks.

ultrasound technicianJuly 22nd, 2010 at 1:59 pm

What a great resource!

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Editor's Note: Scott Weingold has been ranked the #1 “College Financial Aid Expert Worth Knowing About” in the entire country by CollegeStats.org.  He has co-authored the book, “The Real Secret To Paying For College. The Insider’s Guide To Sending Your Child To College – Without Spending Your Life’s Savings.” Scott also publishes a popular free online newsletter, “College Funding Made Simple" which reveals insider’s tips, methods, and strategies for beating the high cost of college.

Scott is the co-founder and a principal of the widely renown College Planning Network, LLC – the nation’s largest and most reputable college admissions and financial aid planning firm. CPN is a proud member of the Better Business Bureau, the National Association of College Funding Advisors, the National Association for College Admission Counseling, the National Association of Student Financial Aid Administrators and the Student Affairs Administrators in Higher Education.

Scott, along with his college funding advisory team, helps thousands of families throughout the country with their college planning needs and offers a series of free educational webinars and workshops on “How To Pay For College Without Going Broke In The Process!” He's been featured or mentioned in The Philadelphia Inquirer, Yahoo News, TheStreet.com, Voice America with Ron Adams, Crains Cleveland Business, and on Cleveland Connection with James McIntyre.  Scott has published numerous articles and is a professional speaker who has addressed thousands of audiences online and offline throughout the United States.  His actionable insights and candid, open approach have earned him & his team numerous media interviews, citations, and speaking opportunities, and his free online video workshop is one of the Internet’s most widely viewed pieces in the college funding space.