Parents and students alike spend many a sleepless night worrying about how they’re going to pay for college. And with widely spread rumor that millions of dollars each year in legitimate financial aid go unclaimed, it does seem possible that scholarship offers might come pouring in. Sadly, this causes an estimated $100 million each year to be stolen from victims of scholarship scams. To arm yourself against being a part of that number, there are a number of things to keep in mind when beginning your financial aid search.
First, you should never be required to pay money in order to apply for a scholarship or to receive the funding once it’s awarded. A number of scams involve informing the student that he’s been awarded a large scholarship or loan, but that he will have to pay a distribution fee or pay the taxes up front. That’s not how financial aid works.
Unfortunately, there are a growing number of scholarship scams that actually involve paying out a small amount to some lucky student. By charging an application fee, the scam makes enough money from its thousands of hopeful applicants to pay a paltry sum to one student. Then the “scholarship” site gets to point to actual students who’ve been award a thousand dollars or so, but the applicants don’t realize that there’s only one winner. This type of scam amounts to basically nothing more than a county fair raffle for your college education.
Even more enticing are the loan scams. By calling it a loan and not a scholarship, consumers are more likely to believe the money is actually there and headed their way. These loans, which offer too-good-to-be-true interest rates and repayment terms, require a nice little application fee, only the money never appears. If you receive an offer of an unbelievably good loan, investigate the lender and take it to your bank for verification. Remember, you should not have to pay money upfront, as the lender will receive their compensation from the payout of the loan.
Possibly the worst scams are the so-called financial aid services that offer to do the legwork for you. By claiming they have an extensive network of financial aid connections that most individuals would never even know about, they charge a processing fee to match you up with practically guaranteed scholarships to apply for. These services pocket your fee, and might even send you a list of scholarships in return, but you still have to do the work of applying. You just paid for information that you could have found for free on Google. How do I know that? Because the scammer just did it, if the information he sent you is even real.
Some of the warning signs of a possible financial aid scam are application fees, odd taxes, “guaranteed” results (some of which actually claim to offer you a money back guarantee), or anything that claims everyone is eligible. Beware of any service or group who offers to “apply on your behalf,” as it will require you to turn over all of your sensitive personal information like bank account numbers and Social Security numbers. Also watch out for names that sound official but really aren’t, and be sure to verify any “national association of money whatevers” before handing over your information.
One of the safest things you can do is to track scholarship offers through agencies like the US Department of Education in order to ensure they’re legitimate. Remember that money will rarely fall in your lap for any reason, so if it sounds too good to be true, it probably is. You should fall victim to a scam, it’s important to report it immediately along with copies of all correspondence to your state Attorney General’s office.