Scholarships can be an excellent method to pay for college. However, there are many scholarship scammers out there who target unnoticed students. These scams can take many forms, from providing guaranteed scholarships for an upfront fee to requesting personal and financial information under a promise of helping with scholarship applications.
What is a Scholarship Scam?
A scholarship scam is a fraudulent plan that targets students and families planning for college expenses. In a scholarship scam, the scammer often offers to help you in finding and obtaining a scholarship but instead takes your money. Under the idea of guiding you in applying for a scholarship, the fraudster may want advance money to cover “application costs” or request personal and financial information from you. Instead of helping you, they use this information to steal your identity or harm you in some other way.
Scholarship scams steal hundreds of thousands of students and parents each year. According to various reports, victims of these scams lose hundreds, if not millions, of cash each year. Scammers frequently fake real government institutions, grant-giving foundations, education lenders, and scholarship-matching services by using official-sounding names such as “National,” “Federal,” “Foundation,” or “Administration.”
This article will help you in identifying scholarship scammers, identifying between legit and fake organizations, protect yourself against scholarship scams, and follow what to do if you become a victim of a scam.
Be aware of scholarships that require an application fee, scholarship matching agencies that guarantee success, advance-fee loan frauds, and sales pitches disguised as financial aid “seminars” in general.
Signs of Scholarship Scams
Some of the most common elements of scholarship scams are as follows:
The majority of scholarship scams ask a fee. Scholarship frauds may charge a small, almost reasonable fee, such as an application fee, processing fee, or taxes. However, genuine scholarships do not have fees.
Requesting unusual information:
Scholarships that require your credit card or Social Security information should be avoided. These details are not required for verifying your identity or giving a scholarship. It is important to note that unless there is a fee for services, scholarship providers don’t have to report scholarships to the IRS.
Requesting your bank account number:
Although it may appear unnoticed, a scam artist may empty your bank account using only your bank account number and routing number. They can withdraw money from your account without your signature by issuing a demand draft.
Telling you that you earned a scholarship regardless of the fact that you never applied:
One scholarship scam sends students a letter congratulating them on earning a scholarship but then requests an application fee.
Making a claim to be a foundation or a tax-exempt charity:
Using the Exempt Organizations Select Check tool, formerly known as IRS Publication 78, determine whether the organization is indeed a foundation.
You will receive a scholarship check:
If they appear to have “overpaid” you, do not give them a check for the extra money. The scholarship check may appear genuine, but it is a fake that will bounce once deposited. To make matters worse, your bank will almost certainly charge you for the bounced check.
Giving a Guarantee:
Nobody can promise you’ll receive a scholarship! Making a claim to have exclusive access to scholarships. Some premium scholarship matching providers claim that this information is not available anyplace else. But, when you think about it, that’s insane. Why would a scholarship sponsor want to hide their awards?
A high success rate is advertised:
Scholarship matching companies that charge a fee sometimes claim that many of their clients get scholarships. However, only around one in every eight students receives a private scholarship, and the average amount granted is less than $4,000.
Last year, millions or billions of dollars in scholarships went unclaimed:
The unclaimed aid myth has been around for decades, but it is still as bogus now as it was 40 years ago. Most scholarships have more applicants than funds available. The few unclaimed scholarships cannot be claimed since they have very high eligibility requirements.
Creating an artificial sense of urgency:
Although there are deadlines for scholarships, they are not offered on a first-come, first-served basis.
They claim to have been approved by a reputable institution:
Some scams pretend to be associated with the United States Department of Education or another official body. However, the federal government is not permitted to endorse private firms!
Giving out a free seminar or interview:
One-on-one interviews or free seminars are nothing compared to high-pressure sales pitches for a product or service.
It appears fake or unprofessional:
Scholarship scams offers sometimes involve spelling and language mistakes. They frequently have no phone numbers and may only have a mailing address that is a P.O. Box or a mail drop.
Scholarship Scams and How to Avoid Them
Ignore any fees charged by a scholarship. There are no fees for genuine scholarships! You should also look for scholarships from reputable sources.
Overall, trust your instincts. If a scholarship appears to be too good to be true, inquire with your school counselor or college financial aid coordinator.
Reporting a Scholarship Scam
If you come across a scholarship scam, please report it to the following law enforcement agencies. By promptly reporting a scholarship scam, you may be able to prevent other students from becoming victims as well.
Call the National Fraud Information Center (NFIC) at 1-800-654-7060 or go to fraud to report the scam. The NFIC works together with the Federal Trade Commission (FTC) and the state attorneys general.
You can also contact the FTC directly by filling out a complaint form or calling 1-877-FTC-HELP (1-877-382-4357).
The United States Postal Inspection Service investigates mail fraud, which includes postal mail scams. Use the online complaint form to report such scams. You can also contact 1-877-876-2455 (say “fraud”) or 1-800-654-8896.
To report fraud involving federal student assistance funds, such as FAFSA fraud rings, contact the U.S. Department of Education Office of the Inspector General at 1-800-MIS-USED (1-800-647-8733) or file a report via the OIG Hotline.
The College Scholarship Fraud Prevention Act of 2000 (P.L. 106-420) increased the penalty for scholarship fraud in order to encourage law enforcement to prosecute scholarship scams.
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Scholarship scams steal hundreds of thousands of students and parents each year.
If you complete a financial aid or scholarship seminar, take the following steps:
1. Asking money
2. Requesting unusual information
3. Requesting your bank account number
4. Telling you that you earned a scholarship regardless of the fact that you never applied
5. Making a claim to be a foundation or a tax-exempt charity
6. You will receive a scholarship check
7. Giving a guarantee
8. Making a claim to have exclusive access to scholarships
9. A high success rate is advertised
10. Last year, millions or billions of dollars in scholarships went unclaimed
11. Creating an artificial sense of urgency
12. They claim to have been approved by a reputable institution
13. Giving out a free seminar or interview
14. It appears fake or unprofessional
When applying for a scholarship, students should never give their personal information or banking information. If something appears to be too good to be true, it most likely is! Warning Signs to Watch Out For: Offers a low-interest student loan in exchange for a fee.
Here are the three ways to avoid scholarship scams:
1. Never pay someone to complete or handle your FAFSA. That’s most likely a scam.
2. Contact a high school guidance counselor or the financial aid office.
3. Never pay for financial aid or scholarship seminar.