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Warning Signs of a Scholarship Scam

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Certain telltale signs can help you identify possible scholarship scams. Note that the following signs do not automatically indicate fraud or deception; however, any organization that exhibits several of these signs should be treated with caution.

Application fees. Be wary of any "scholarship" which requests an application fee, even an innocuously low one like $2 or $3. Most scams have application fees of $10 to $25, but some have had fees as low as $2 and as high as $5,000. Don't believe claims that the fee is necessary to cover administrative expenses or to ensure that only serious candidates apply or that applicants who do not receive any money "may" be entitled to a refund.

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Loan fees. If you have to pay a fee in advance of obtaining an educational loan, be careful. It might be called an "application fee", "processing fee", "origination fee", "guarantee fee", "default fee" or "insurance fee," but if it must be paid in advance, it's probably a scam. Legitimate educational loans deduct the origination and default fees from the disbursement check. They never require an up-front fee when you submit the application.

Other fees. If you must pay to get information about an award, apply for the award or receive the award, be suspicious. Never spend more than a postage stamp to get information about scholarships and loans.

Guaranteed winnings. No legitimate scholarship sponsor will guarantee you'll win an award. No scholarship matching services can guarantee that you'll win any scholarships either as they have no control over the decisions made by the scholarship sponsors. Also, when such "guarantees" are made, they often come with hidden conditions that make them hard to redeem or worth less than they seem.

Everybody is eligible. All scholarship sponsors are looking for candidates who best match certain criteria. Certainly there are some scholarships that do not depend on academic merit, some that do not depend on athletic prowess and some that do not depend on minority student status, but some set of restrictions always applies. No scholarship sponsor hands out money to students simply for breathing.

The unclaimed aid myth. You may be told that millions or billions of dollars of scholarships go unused each year because students don't know where to apply. This simply isn't true. Most financial aid programs are highly competitive. No scholarship matching service has ever substantiated this myth with a verifiable list of unclaimed scholarship awards. There are no unclaimed scholarships.

We apply on your behalf. To win a scholarship, you must submit your own applications, write your own essays and solicit your own letters of recommendation. There's no way to avoid this work.

Claims of influence with scholarship sponsors. Scholarship matching services do not have any control over the awarding of scholarships by third parties.

High success rates. Overstated claims of effectiveness are a good tip-off to a scam. For example, less than 1% of users of fee-based scholarship matching services actually win an award. If something sounds too good to be true, it probably is.

Excessive hype. If the brochure or advertisement uses a lot of hyperbole (e.g., "free money," "win your fair share," "guaranteed," "first come, first served" and "everybody is eligible"), be careful. Also be wary of letters and postcards that talk about "recent additions to our file," "immediate confirmation" and "invitation number."

Unusual requests for personal information. If the application asks you to disclose bank account numbers, credit card numbers, calling card numbers or social security numbers, it is probably a scam. If they call and ask you for personal information to "confirm your eligibility," "verify your identity" or as a "sign of good will," hang up immediately. They can use this information, in conjunction with your date of birth and the names of your parents, to commit identity theft and apply for new credit cards in your name. They can also use the numbers on the bottom of your checks (the bank routing number and the account number) to withdraw money from your bank account using a "demand draft." A demand draft works very much like a check, but does not require your signature.

No telephone number. Most legitimate scholarship programs include a telephone number for inquiries with their application materials.

Mail drop for a return address. If the return address is a mail drop (e.g., a box number) or a residential address, it is probably a scam. (To verify whether an address is using a mail drop, use this http://www.finaid.org/scholarships/maildropsearch.phtml.)

Masquerading as a federal agency. If you receive an offer from an organization with an official-sounding name, check whether there really is a federal agency with that name. Don't trust an organization just because it has an official-looking "governmental" seal as its logo or has a prestigious-seeming Washington, DC return address.

Claims of university, government, Chamber of Commerce or Better Business Bureau approval. Be wary of claims of endorsement and membership, especially if the recommendation is made by an organization with a name similar to that of a well-known private or government group. The federal government, US Department of Education and the US Chamber of Commerce do not endorse or recommend private businesses.

If a financial aid "seminar" is held in a local college classroom or meeting facility, don't assume that it is university sanctioned. Call the school's financial aid office to find out whether it is a university approved or sponsored event.

Suggesting that they are a non-profit, charitable organization when they are not. Don't assume from an organization's name that it has a charitable purpose. Although it is illegal in most states to use a misleading business name, enforcement of the law is lax. For example, an organization with "Fund" or "Foundation" in its name is not necessarily a charitable foundation and may even be a for-profit business.

Unsolicited opportunities. Most scholarship sponsors will only contact you in response to your inquiry. If you've never heard of the organization before, it's probably a scam.

Failure to substantiate awards. If the organization can't prove that its scholarships are actually awarded and disbursed, be cautious.

Typing and spelling errors. Application materials that contain typing and spelling errors or lack an overall professional appearance may be an indication of a scam. Many scams misspell the word "scholarship" as "scholorship".

Time pressure. If you must respond quickly and won't hear about the results for several months, it might be a scam. A scholarship scam might say that grants are handed out on a "first come, first served" basis and urge you to act quickly. Few, if any, legitimate scholarship sponsors make awards on a rolling basis. Take the time you need to carefully consider their offer.

Notification by phone. If you have won a scholarship, you will receive written notification by mail, not by phone.

Disguised advertising. Don't believe everything you read or hear, especially if you see it online. Unless you personally know the person praising a product or service, don't believe the recommendation. One scam set up its own fake BBB and used it as a reference. Another offered a forged certificate of merit from the local BBB. Yet another distributed a paid advertisement as though it were an article written by the newspaper. A Ponzi scheme gave out a few scholarships initially as "sugar money" to help attract victims.

A newly-formed company. Most philanthropic foundations have been established for many years. If a company was formed recently, ask for references.

Gives you a runaround or nonspecific information. Demand concrete answers that directly respond to your questions. If they repeat the same lines again and again, the caller is probably reading a standard pitch from a boilerplate script.

Abusive treatment. If the caller swears at you or becomes abusive when you ask questions, it's probably a scam.

A Florida or California address. A disproportionate number of scams seem to originate from Florida and California addresses.

 

 
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