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Can you spot a scholarship scam?

Families eager to find scholarships can become easy targets for financial aid con artists. Here's how to be a smart consumer.

Scholarships are an attractive way to help manage college costs. Your child won't have to repay them (like loans) or work to maintain them (like work-study). Since students and parents are so eager to find these funds, it's no wonder that they become easy targets for financial aid con artists.

Scholarship scams

Many scholarship finders promote the adage that "millions of dollars in private scholarship money goes unused every year." The fact is, nearly all available financial aid comes from the federal government or from individual colleges.

Often private scholarships are slated for very specific applicants, such as students with a particular career interest, or members of a certain church or organization. These institutions have created funds for students, so they are eager to give them to qualified individuals. They are not interested in keeping the money a secret.

You and your child can easily find out about these opportunities by checking with your employer and other appropriate institutions. Have your child make the contact with clubs or other organizations to find out what they seek in an applicant. Your child's high school counselor can also provide information on scholarships.

Telltale signs it's a scam

According to the Federal Trade Commission's Scholarship Scams, if you or your child hears these lines from a scholarship service, you may be getting duped:

  • "The scholarship is guaranteed or your money back." No one can guarantee that they'll get your child a grant or a scholarship. Refund guarantees often have conditions or strings attached. Get refund policies in writing-before you or your child pays.
  • "You can't get this information anywhere else." There are many free lists of scholarships available. You and your child should start researching scholarships at the high school or library before you decide to pay someone to do the work for you.
  • "I just need your credit card or bank account number to hold this scholarship." You or your child shouldn't give out credit card or bank account number on the phone without getting information in writing first. It may be the set-up for an unauthorized withdrawal from your account.
  • "We'll do all the work." Don't be fooled. There's no way around it. Your child must apply for scholarships or grants himself.
  • "The scholarship will cost money." Don't pay anyone who claims to be "holding" a scholarship or grant for your child. Free money shouldn't cost a thing.
  • "You've been selected by a national foundation" to receive a scholarship or "You're a finalist" in a contest you never entered. Before you or your child sends money to apply for a scholarship, check it out. Make sure the foundation or program is legitimate.

Comments from readers

"Tell us how you got scam and what inspired you to provide us (parents of soon to be college students)this information and please be specific on the details. I have a personal trainer for gym and a personal chef that comes to cook so why not pay a proven and professional college consultant to get the most bang out of the invisble $$$ out there for my child. Comment of the lack of counselor in our school systems and how these counselor are now becoming independent business owner doing the college consultantancy work. Take us inside the college finance board room and show us the business of it all. Teach us how to rotate entitlement $$$ these insitutions recieve each day and year in the millions."
"Great information. There are alot of sites sending incorrect info. One doesn't know who is telling the truth. You guys I do trust. Thank you"