The Money Hunt: Ins & Outs of Scholarship Scams

Regardless of how you choose to pay for college, scammers seem to be lurking around every corner, waiting to take advantage of you, your parents, and your need for money. And scholarships are no different.

But what’s the best antidote for avoiding scholarships scams?

You guessed, it; knowledge!

In this article, we’ll take a look at what scholarship scams are, some of the most common ones you’ll come across, as well as some foolproof tips you can use to avoid them.

To get things started, let’s first define exactly what we’re talking about.

What Are Scholarship Scams?

According to Webster’s Dictionary, a scam is a “dishonest way to make money by deceiving people.” As such, a scholarship scam will often promise to help you or your child obtain specific scholarships in exchange for a fee, but ultimately won’t provide you with any value for your hard-earned money. Exactly what HighYa is here to help you prevent.

To help you achieve this, you first need to know what a scholarship scam looks like.

What Does a Scholarship Scam Look Like?

We’ve talked about it in the past, but the sad truth is that there are almost as many ways of perpetrating scams as there are scams themselves. But the good news is that scholarship scams generally follow certain guidelines, so if you know what to look out for, they’ll be that much easier to avoid.

1. The Pitch

Like most types of fraud, scholarship scams will initially appear legitimate. Whether they come through the regular mail, through a high-pressure sales call, via email, or through an online advertisement, their goal is to 1) make you think they’re a reputable company who 2) can help you obtain one or more college scholarships.

If it’s through the mail, this might involve a professionally designed envelope, complete with the organization’s seal and legit-looking signatures. If through email, you might be enticed by the subject line that reads, “Your Scholarship Money is Available for Deposit,” as well as the company’s regal-sounding name.

You might have been convinced to attend a seminar at a posh hotel’s conference room. And in this instance—or if you happened to speak to someone over the phone—you might have found their sale pitch irresistible, and that it seemed impossible to say no.

A scam student loan letter exampleHave you received an email like this recently? Be very careful; it’s likely a scam. Image credit: CollegeMadeSimple.com

2. The Hook

However it’s presented, these companies make many of the same claims:

  • Find out how to get your GUARANTEED scholarship!
  • [Foundation Name] has selected you as the winner of a $10,000 scholarship!
  • We’ll help you get a scholarship—for only $100! Money back guarantee!
  • Final step to confirm your scholarship eligibility: checking account info!
  • Congrats! You’re a finalist for the 2015 [Foundation Name] scholarship!

3. The Scam

Sounds great, right? Not so fast.

In many instances, you might not receive any kind of service once you’ve handed over your money. And by the time you figure out you’ve been duped, the scammers are long gone and on to their next scheme.

Or, you might simply receive a pre-printed list of all available scholarships and little else. Even if you’re eventually able to get someone on the phone, you might find that according to the company’s Terms & Conditions, it’s all but impossible to get a refund. Sometimes they might simply refuse.

Alternately, if you handed over your checking account information, you could be paying steep fees every month, without the ability to opt out.

In any case, these companies appeal to your desire to obtain free money for college, without ever having to lift a finger. After all, there are tens of thousands of scholarships available to college students, so you need help learning which ones you’re eligible for (not to mention completing all the applications), right?

As it turns out, finding and obtaining scholarships might be a whole lot easier than you think. Before we get to that though, let’s use what we’ve learned so far to help you avoid becoming a scholarship scam victim.

How to Identify Scholarship Scams

Although the Scholarship Fraud Prevention Act of 2000 increased the penalties related to scholarship scams, while also making it easier to prosecute the criminals who use them, since 1996, consumers just like you have lost more than $22 million through scholarship scams. So what can be done to protect yourself?

According to the Federal Trade Commission, the easiest way to identify a scholarship scam is any time a company guarantees or promises scholarships—even for a fee. This simply isn’t possible, and anyone claiming otherwise is likely only interested in taking your money and running.

In addition, if a company claims to provide you with a list of scholarships that aren’t available anywhere else, this is another sure sign of a scam (we’ll come back around to this in a moment).

If a company asks for an upfront “disbursement” or “redemption” fee, requests your bank account or social security numbers, or claims that the scholarship will cost money, turn and walk away.

Legitimate Methods of Finding College Scholarships

Alright. So you know that you should be extremely wary of any unsolicited scholarship offers you receive, whether through the mail or online, especially those asking for money. But are there any legitimate ways of making your scholarship search easier?

Scholarship Search Engine

Perhaps the easiest way to find scholarships is by using a “scholarship search engine,” such as CollegeData, Scholarships.com, and CareerOneStop, which can help you find out about national and state scholarships, since these lists are required to be publically available.

While these options are free, you’ll also find paid options such as FastWeb.com, which provides the added ability to save your searches, create lists, and even apply for scholarships.

In either instance, some of these search engines will offer more features than others, although most allow you to narrow search criteria by GPA, ethnicity, religion, area of study, and more.

Check Locally

However, keep in mind that these search engines generally won’t feature local scholarships; ones that might be offered through your religious community, your or your parent’s employer, or local civic clubs such as the Rotary Club or the Kiwanis.

When searching for local scholarship opportunities, a good place to start would be your high school’s guidance office, or by contacting city agencies or businesses directly in order to find out about any local scholarship opportunities.

Speak To the College

Similarly, if you’ve already been accepted to a specific college, speak with a financial aid counselor about any scholarships they have offer. This way, they can help you sort through all the available options, discern whether or not you’d qualify, and then apply when the time comes. After all, in-school scholarships are the most common type.

Good Ol’ Due Diligence

Lastly, if you decide to attend a scholarship search seminar, remember that you hold all the cards (i.e. your money). As such, take your time before making a decision, ensure all your questions are answered appropriately, take the company’s “success stories” with a grain of salt, and search for them online in order to learn about their reputation (remember: bad experiences spread much faster than good ones).

You can do this quickly by Googling the company’s name, followed by the word “scam.” As we noted previously, if the company has been around for long and is actively defrauding customers, people will quickly start complaining online.

If you don’t find any information about the company through an online search, be sure to double check with the Better Business Bureau and try different variations of the company’s name. (For example, if the company is called “ABC Scholarship Finding Services,” you might try searching for “ABC Scholarship,” “ABC Finding Services,” etc.)

Already a Scholarship Scam Victim?

If you already fell victim to a scholarship scam, don’t despair. As we mentioned above, their marketing pitches are fine-tuned and their promises of easy money can be difficult to resist, which makes this a profitable type of scam this time of year.

Have you fallen a victim of a scholarship scam? This first thing you should do is file a complaint with the FTC, which can go a long way toward letting the proper authorities know what’s going on and getting them involved. Then, be sure to leave a review on as many consumer advocacy websites as you can (HighYa is a great place to start!).

Pro tip: Whether you paid the company a one-time fee or had the money debited from your checking account each month, the likelihood of getting a refund is slim to none. Because of this, we’d recommend saving yourself time and a ton of time and frustration by getting your credit card company involved instead of attempting to contact the company directly.

These are our recommendations for helping you avoid scholarship scams. Now we want to hear from you!

It Takes a Community

In this article, we provided some detailed insight into the world of scholarship scams, including what they are, what they look like, and why (and how!) they should be avoided. You’re now one step closer to finding the money you need for college.

Before you go though, we want to know what you think! Have you fallen prey to a scholarship scam, or do you have any tips on avoiding them? Or, were you able to find numerous college scholarships, and would like to help HighYa’s 1.2 million monthly readers do the same?

Whatever you’ve got to say, be sure to leave your comment below!

See Also: Top Student Loan Scams: Obama Student Loan Forgiveness, Money Up-Front & Other Tricks

Main photo credit: iStock.com/erhui1979


Derek Lakin

Senior Editor at HighYa. With more than a decade of experience as a copywriter, Derek takes a detail-oriented, step-by-step approach to helping you shop smarter. Whether it’s nutritional supplements or new scams, he believes an informed consumer is a happy customer. Connect with him on Twitter: @DALwrites


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