How to Avoid Scholarship Scams

Nearly everyone entering college is aware of the abundance of graduates dealing with student loan debt. After all, the average student loan debt surged over $37,000 per year in 2016 – and could go even higher next year.

Scholarships, like grants, are a way to reduce that debt. Unfortunately, scholarships and grants aren’t all puppies and rainbows. With scholarship opportunities come scholarship scams. Several hundred thousand students and parents are defrauded each year, .

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Before you start your scholarship search, it’s crucial to know what a scholarship scam looks like. Why some scams are obvious, others are cleverly disguised as the answer to your prayers. Here are some of the most common red flags and scam types to watch out for:

  • Any scholarship application that asks for money. This is a red flag. Whether it’s an “application fee,” “processing fee,” or even if you’ve been “selected as a finalist,” scholarships aren’t going to ask you to pay.
  • If you’re sent a check and still asked to pay a fee. There have been reports to the  where a recipient receives a seemingly normal check said to be a scholarship, but is also asked to cash the check and return a portion to the senders. This is a scam.
  • If you don’t need to do anything to apply. Sounds great, right? Well, most scholarships will require some type of application, essay, and/or letters of recommendation, according to Finaid.org. If it seems too good to be true, it very well could be.
  • Any request for personal information. You shouldn’t share any private information, such as your bank account, credit card, or Social Security numbers. This could lead to identity theft. Many scholarship scams say they need this information to “confirm your eligibility” or send the money to you directly.
  • If there is no (or suspicious) information. Do thorough research for any scholarship you apply for to confirm it’s legitimate. Generally, there should be information for you to ask questions.
  • Any unsolicited opportunities. If you receive a letter, e-mail, or phone call saying you’ve been awarded a scholarship that you didn’t apply for, it is a scam.
  • Don’t be fooled by official-looking or -sounding scholarships. Finaid.org says scholarship scams often include words like “foundation,” “federal,” or “national” to sound more authentic.
  • If you can’t confirm a scholarship opportunity’s legitimacy. Read the fine print to each scholarship before you apply. Research the organization, website, or anything else associated with it on the Better Business Bureau and the FTC. You can also ask your high school counselor or, if you’re in college, check with your school’s financial aid department.
  • A scholarship service that offers to apply for you. Besides an actual scholarship, avoid services that offer to apply for scholarships for you for a fee.
  • A scholarship service that offers “exclusive information.” says that if a service is claiming they can offer you exclusive information about a scholarship or an edge for a fee, this is a red flag.
  • To pay a fee for a scholarship search. The many scam sites claim a “money-back guarantee” for scholarship searches. But why pay when there are so many options for free? Check out , , , , , the college you’re attending, official organizations you’re affiliated with that offer scholarships, and your high school counselor.

The Bottom Line

The best way to deal with scholarship scams is to avoid them in the first place. By researching scams and scholarship programs ahead of time, you can know what to look for – and what to watch out for. Remember, not all scholarship scams are obvious. A lot of thieves go to great lengths to get your money, and some of them are excellent at their craft.

If you’ve already become a victim of a scholarship scam, you need to know what to do next. Once you suspect a problem, keep records of any correspondence (e-mails, letters, voicemails, etc.) from anyone you suspect might be connected to a scam. This way, if it is a scam, you can file a proper complaint. If you confirm your suspicions and find you’re a victim of a scam, the , the , or the to report the issue and file a formal complaint.

Scholarship scams have been around for decades and they aren’t going away any time soon. The smartest step to take is to arm yourself with information. By educating yourself on what to watch out for, you can take control of the situation and avoid losing your shirt.

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