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Scholarship Scams: How to Protect Yourself

Scholarships are a great way to pay for your education, but you need to be careful when searching for aid. College scholarship scams cost students and families millions of dollars each year.

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Become Familiar with Common Types of Scams

Searching for scholarships can be a time-consuming process that can be made more difficult by having to make sure potential scholarships aren't scams. To protect yourself, read up on the different types of scholarship scams, so you can avoid those during your search. Some of the most common involve the guaranteed scholarship, scholarships for profit and unexpected scholarship prizes.

Guaranteed Scholarships

Legitimate scholarship search services, which are also known as scholarship matching services, do exist. However, there are also a number of unscrupulous companies that guarantee scholarships or offer a money-back guarantee on any fees you pay upfront. These services should be approached with extreme caution. No service can guarantee scholarship money and very few will refund your fees when the scholarship fails to materialize.

Scholarships for Profit

This scholarship scam is tricky because scholarships for profit look just like regular scholarship programs. The difference is that applicants must pay an application fee to be eligible for these scholarships. Fees can range anywhere from $5 to $50, and awards may never be given - particularly if the company does not earn enough profit on application fees to pay out.

Unexpected Scholarship Prizes

This is an old scam that has been adapted to victimize college students. It begins when the scam perpetrator calls you or sends you a letter or an email to tell you that you have won a college scholarship or grant in a contest you don't remember entering. The catch is that you need to pay a small fee (often called a disbursement or redemption fee) to get the prize money. You may be required to send a check or provide bank account numbers. In the end, you'll be out the fee money and the scammer will never be heard from again.

Watch for Signs You are Being Scammed

Although it can sometimes be difficult for students to distinguish a legitimate organization from a fraudulent organization, there are several phrases that should automatically raise a red flag. If you hear any of these things, you are almost certainly being scammed:

  • You must pay a small fee to be eligible for this scholarship.
  • We'll need your credit card number or bank information to hold this scholarship.
  • We'll need your checking account number to confirm eligibility.
  • We can provide a list of exclusive scholarship sources for an advanced fee.
  • This scholarship or service comes with a money-back guarantee.

Remember, scholarships are free money. You should never be asked to pay a fee for free money.

Report Scams to the Appropriate Agencies

If you are a victim of a scholarship scam, you can file a complaint with the Federal Trade Commission (FTC) by calling 1-877-FTC-HELP or by filling out the online complaint form at www.ftc.gov. You can also file a complaint with the Better Business Bureau, the National Fraud Information Center or your State Attorney General's Office.

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