Beware of Scholarship Scams and Financial Aid Consultants

Many scholarship finders promote the old 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 can easily find out about these opportunities by checking with your employer and other appropriate institutions. Make the contact with clubs or other organizations to find out what they seek in an applicant.

So you get an unsolicited scholarship application by email. You appear to have the qualifications, and you have time to apply. But as you are about to dive into the application, something holds you back; something doesn't feel right … How can you tell if a scholarship offer is legitimate?

Be alert for services that solicit money in exchange for guaranteed scholarships. 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:

Tell-Tale Signs It's a Scam:

• "The scholarship is guaranteed or your money back."
  They can guarantee result, but no one can guarantee that they'll get you a grant or a scholarship. Refund guarantees often have conditions or strings attached. Get refund policies in writing—before you pay.
• "You can't get this information anywhere else."
  There are many free lists of scholarships available. You 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 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. You must apply for scholarships or grants yourself.
• "The scholarship will cost money."
  Don't pay anyone who claims to be "holding" a scholarship or grant for you. 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 send money to apply for a scholarship, check it out. Make sure the foundation or program is legitimate.
• "You're a finalist!" or "You've won!" a contest or scholarship you never entered.
  Be wary, especially if they ask you for a credit card or bank account number to hold your "winnings." Don't believe it. You must apply for scholarships first to receive them.
• "First come, first served." While you do need to get your application in before the scholarship deadlines, the “first come, first served” rule does not apply to scholarships.
• "Millions of dollars go unclaimed." Legitimate scholarship awards are predetermined. Sponsors work very hard to find the most qualified applicant.
• "We'll do the work for you, for a fee." The fee may be nominal and the offer may come from someone sounding official. So make sure you do your research before paying anyone to do a search for you.

Bottom line…….If the offer sounds too good to be true, it probably is.

Fight Back

If you or your child suspects a scam, bring a copy of all literature and correspondence to your child's school guidance office or to a financial aid administrator at a local college for advice. You can also contact the Better Business Bureau, your State Bureau of Consumer Protection, your State Attorney General's Office, or report the offer to the National Fraud Information Center.

To check legitimacy of scholarship search services or individuals, for information about financial aid scams, and tips to avoid being scammed visit these Web sites:

• U.S. Department of Education
• Federal Trade Commission
• Better Business Bureau

For More Information

Scholarship Scams from FinAid.org provides advice on how to identify scams, how to distinguish between legitimate and fraudulent organizations, how to protect yourself from scholarship scams, and what to do if you are scammed.

Other Financial Aid Scams

Parents who feel intimidated by the financial aid process often turn to financial aid consultants. But beware, some of these services can be shady, and financial aid officers often resent the intervention of outside professionals in the aid package award process.  Free money shouldn’t cost you a thing.

Do You Really Need a Financial Aid Consultant?

Financial aid consultants advertise their ability to help families through complicated financial aid forms and provide tricks to getting through the system. But financial aid forms are relatively simple, and a high school or college counselor will give you advice for free.

Also, there are not really any tricks to the financial aid system. It is the job of financial aid officers to ensure that once your child is accepted you can pay for the college. They are not trying to hoard money, but give it away. Financial aid officers make funding decisions based on the school's award criteria and funds available. The aid officer is your best ally in this process; no independent service is likely to influence it. Aid officers will also know about state funding and other opportunities to apply for aid.

Financial aid consultants may suggest moving assets around or transacting a major purchase or gift to reduce income and qualify for more aid. This should set off your alarm bells. First, administrators can easily spot this kind of maneuvering. If they suspect they are being deceived, colleges may refuse to consider the financial aid application.

Professionals may also promise to use your child's credentials to bargain for the best deal at various colleges. Colleges usually have strict financial aid award guidelines, and they will not bargain for students with other institutions. If you feel important financial information has been overlooked in your aid award, you and your child should certainly contact the school's financial aid office to contest the award. Financial aid offices are unlikely to be willing to discuss these circumstances with a professional consultant.