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How to Avoid Scholarship Scams

Lurking around every turn, there seems to be a crook waiting to jump on an opportunity to snuff a quarry out of a few hard-earned bucks. It shouldn’t surprise you then, since the nineties, their evil eyes have shifted upon schemes to line their pockets with large amounts of cash by luring eager students into fake scholarships.

Fraud Facts

Scholarship fraud reared its ugly head the form of bogus scholarship search companies. These companies would claim a certain “guarantee,” charging an advance fee and then provide no list of scholarships or any service for the monies paid. This practice is still exists today.

Unfortunately, for years there had been little legislation to protect victims. However, in 1996, the Federal Trade Commission enacted a campaign in its fight against scholarship fraud called Project Scholarscam. Its purpose was to integrate consumer knowledge and education along with federal lawsuits to bar any fraudulent company or individual to continue in their practices. In an article by The National Association of Student Financial Aid Administrators, it was reported that “as a result of the Federal Trade Commission’s actions, more than $560,000 has been refunded to consumers or disgorged to the U.S. Treasury.”

In 2000, Congress passed the Scholarship Fraud Prevention Act which put into place more rigid criminal sentencing legislation and saddled the Department of Justice and the Federal Trade Commission to implement more public understanding and to report annually any degree of fraud by organizations or individuals.

Real Scholarship Search Companies vs. The Hoax

A real scholarship search company most often does not require a registration fee. They will require you to provide your student profile, i.e., scholastic background, your preferred major, career goals, etc., and will then offer you a list of available scholarships that match your needs. What a legitimate company will not do is guarantee you a scholarship.

Remember, that scholarships come with the price of achievement. Athletic, scholastic, musical, whatever the case may be, no “free money” would ever be blindly guaranteed to a student, deserving of it or not.

The Hoax: What To Look For

You will find that most of the phony scholarship offers will come to you via the internet or telemarketing. The common thread among consumer education for scholarship fraud is an offer that sounds too good to be true and requires money up front.

Below are extremely helpful examples to spot deception:

1. “The scholarship is guaranteed or your money back.”
2. “You can’t get this information anywhere else.”
3. “I just need your credit card or bank account number to hold this scholarship.”
4. “We’ll do all the work.”
5. “The scholarship will cost some money.”
6. “You’ve been selected by a ‘national foundation’ to receive a scholarship” or “You’re a finalist” ( Resource: Federal Trade Commission)

Another helpful recommended resource:

Protect Yourself From Scholarship Scams

How To Report Fraud

If you suspect that a scholarship offer is fraudulent, there are a few things you can do. Here are some options:

1. Notify your guidance counselor and take with you printed matter and any communication with the company. Your guidance counselor will have information that can verify the legitimacy of the offer.
2. Make a formal complaint with an anti-fraud agency. Give as much detailed information as possible.

Anti-Fraud Agencies

National Fraud Information Center National Fraud Information Center, 
PO Box 65868, Washington, DC 20035, 1-800-876-7060 toll free hotline

Federal Trade Commission Correspondence Branch,
 Federal Trade Commission Room, 200
6th Street & Pennsylvania Avenue NW
, Washington, DC 20580

Better Business Bureau Council of Better Business Bureaus, 
845 Third Avenue, 
New York, NY 10022

U.S. Department of Education, Office of Inspector General Office of Inspector General, U.S. Department of Education, 400 Maryland Avenue, SW, Washington, DC 20202-1510