Scholarship Scams

Perhaps you've seen the ads and heard the sales pitches:

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

High school and college students get many offers such as these. With families struggling to pay the cost of higher education, these sales pitches may seem hard to pass up. But as the old saying goes, if it sounds too good to be true it probably is.

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

Here are some tactics and claims you should watch out for:

1. For a fee (ranging from $50 to $1,000) the company provides you with a list of scholarship possibilities. You apply to the ones for which you might qualify. If no awards are received and you attempt 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, your request for a refund is denied.
2. Some companies will claim that their information is not available anywhere else. The fact is that they often use the same scholarship databases that you can use for free, including our scholarship search right here in EducationPlanner.
3. Some companies will request a credit card or bank account number to "hold" financial aid dollars for the student. You and your parents should never give out this information unless you know that the company or organization you 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 they are 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 often lead to 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 is this: "Don't pay for what you can get for free." Check with your Guidance Office for information on local scholarships, check with the Financial Aid Office at the college(s) you are considering, and look for scholarships on your own using free scholarships searches on the web.

And when it comes to the kinds of offers described here, keep one thing in mind: "If they want you to pay, walk away".

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

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.