At some point, “free money” can sound too good to be true. Sometimes, it is. Scam operations pose as legitimate government agencies, scholarship foundations, and official-sounding organizations, luring people in with the promise of scholarships. It’s estimated that 350,000 students become victim to these scams annually, so it’s important to be on alert.
While the College Scholarship Fraud Prevention Act was put in place in 2000, making it harder for these scams to happen, families still lose out on thousands of dollars every year. Here are some red flags to be aware of to keep you from being a victim.
The Scam: Scholarships with Application Fees
While there are some legitimate scholarships that do require a small fee, this is one of the main ways that scammers get you. If they have thousands of applicants, each paying $5-$10 bucks, they cash in big. You may assume that you just didn’t get the scholarship, but the reality is, no one did. They just collected the money and then disappeared.
The Defense: Do some research about the organizations that are offering scholarships. Do they have accreditation, evidence of previous winners, and a legitimate presence in the community? If you haven’t heard of them, or they aren’t clear about where your application money is going, be suspicious.
The Scam: The Bait and Switch
You receive a letter, saying that you’ve won a large scholarship for thousands of dollars! In order to receive the money, you have to pay a “disbursement” or “redemption” fee before you can receive your prize. You send the check, and then nothing happens. Or the scholarship check you receive bounces and you’re left with nothing. It’s not common for there to be a fee associated with the scholarship money. If they’re asking you for money, start investigating!
The Defense: If you are suspicious, you can check The Federal Trade Commission's website. They have a list of reported and alleged scholarship scams. If you’re getting scammed, it’s possible you aren’t the first.
The Scam: Identity Theft
It’s common to have to provide some pretty personal information when filling out scholarship applications. Identity thieves see this as a perfect front to collect your information and steal your identity! They may ask for your social security number in the application or request your bank account number in order to direct deposit the scholarship money. If the questions are getting too personal, it’s time to pump the breaks!
The Defense: Never give out your social security number or bank account numbers, and don’t give out any other personal information until you’ve done your homework. Before providing any information information, do some checking into the organization that’s requesting it. What authority do they have to be requesting this information? What will they be doing with it and how can you be sure the information remains private? Have those answers ready before moving forward. And unlike iTunes or Facebook updates, you really should read the terms and conditions when it comes to free money.
Trust your gut. If you’re feeling uneasy, do some digging or ask around to other trusted people, like a financial aid office or guidance counselor to verify the source of the scholarship. Protect yourself by keeping a thorough record of communication and getting everything in writing, in case things go bad.
It’s very likely that this won’t even be a concern in your hunt for scholarships, but being aware is the best defense. If you do come across something that feels fishy, please report it to the FTC, so that the people responsible can be stopped.