Watch Out for Scholarship Scams - COLLEGEdata - Pay Your Way

Watch Out for Scholarship Scams

You've probably seen ads promising to help you find "free money for college," but be wary. Here's how you can tell if a scholarship is phony or legitimate.

The U.S. Federal Trade Commission has outlined six telltale signs of a scholarship scam. Look for advertising lines like these:

"This scholarship is guaranteed, or your money back." No one can guarantee that you'll get a scholarship or grant. If the company promises to refund your "processing fee" if you don't receive a scholarship, you will probably have to jump through impossible hoops to get it.

"You can't get this information anywhere else." The Scholarship Finder provides just about all the information you'll need—for free. Libraries, publications, and other websites offer much of the same information at no cost.

"I just need your credit card or bank account number to hold this scholarship." If you hear this, it is time to hang up the phone, delete the e-mail, or otherwise walk away.

"We'll do all the work." "All the work" could be a few minutes of searching that you could do yourself. Even if a company finds potential scholarships for you, they usually don't fill out the scholarship applications, which is the more time-consuming part.

"The scholarship will cost some money." No legitimate scholarship charges a fee to apply. Nor do you have to pay to find scholarships. As college financial aid expert Mark Kantrowitz says, "Never invest more than a postage stamp to get information about scholarships."

"You've been selected by a national foundation to receive a scholarship." If you hear from an unfamiliar organization that you won or are a finalist for a scholarship that you don't recognize, be suspicious. If you don't remember contacting the organization or entering the contest, you probably didn't.

Other Scholarship Scam Tip-offs

Official-sounding names and offers too good to be true. Watch out for web addresses that sound as if they are related to the federal government, or guarantees no one could possibly fulfill.

Membership fees. "Societies" with prestigious-sounding names recruit students (and parents) with the lure of exclusive scholarships—for the price of membership. While this may seem tempting, your time and money are better spent looking for awards you are more likely to get—for free.

High-pressure tactics. If someone contacts you by phone, or you attend a "seminar" on how to win scholarships or increase financial aid, don't allow yourself to be rushed into a decision or payment. Be skeptical of "testimonials" from others in the audience. They may be actors.

"Billions of dollars in unclaimed scholarships." The "billions" of dollars in scholarships that supposedly go unclaimed are mostly awards for the children of the sponsoring companies' employees—awards no one else is eligible for.

The Facts

There are legitimate companies providing scholarship searching or matching services for a fee, but they don't guarantee that you'll receive a scholarship. Just as with any chore, you can always pay someone else to do the heavy lifting—or roll up your sleeves and do the job yourself.

What's Next?

Note: Financial information provided on this site is of a general nature and may not apply to your situation. Contact a financial or tax advisor before acting on such information.