Scholarship Scams Cost Students Millions

How scammers trick scholarship applicants: Internet Scambusters #846

Education is an expensive business — and scholarships often can relieve a big part of the money burden.

But knowing this, scammers have hatched a number of schemes that aim to take your money rather than giving you any.

In this week’s issue, we’ll explain the most common current scams and the 5 key steps you can take to avoid falling victim.

And now for the main feature…


Scholarship Scams Cost Students Millions


Are you, or someone among friends and family, in the running for a scholarship? If so, watch out to ensure you’re not one of the hundreds of thousands of students who get scammed every year.

According to the financial advice site FinAid.org, a single scholarship scam can net up to $300,000 from would-be recipients. The total haul for crooks runs into millions — every single year.

Many of the scams rely on fooling victims into believing they’re official programs by using terms like “national,” “federal,” or “administration” in their titles.

These days, as victims of many other types of scams already know, these terms are meaningless by themselves, so don’t get tricked by them.

And sometimes, many of the scams survive for years, often by operating just inside the law or by occasionally handing out a grant to one or two students, while pocketing the rest of the money they received from applicants.

Scholarships for Profit

These schemes are dubbed “scholarships for profit.” But they’re more like a lottery than a genuine grant program.

They invite applications from students for financial help, charging somewhere around $30 a time as a supposed application and processing fee.

FinAid says these schemes alone pull in up to 10,000 applicants each — hence the $300,000 total.

“These scams can afford to pay out a $1,000 scholarship or two and still pocket a hefty profit, if they happen to award any scholarships at all,” the organization says. “Your odds of winning a scholarship from such scams are less than your chances of striking it rich in the lottery.”

These tricks can run for years since most people don’t realize it’s a scam. They just think they weren’t successful in their application and therefore don’t register a complaint.

Scholarship Prize Scams

Taking this trick one stage further, some scammers actually tell victims they’ve won a scholarship but have to pay an upfront fee or taxes to get their hands on the money.

Sometimes, these scams are pitched at random to students identified in mailing lists that the crooks buy. The lists are compiled both by legitimate marketing organizations and shady groups who trawl the Internet, notably social media, to identify potential victims.

Other scammers actually send out dud checks with the prize announcement, then ask the victim to wire back enough cash to pay these supposed fees.

This is just a traditional advance fee scam. The victim wires back the money then discovers the check is a fake and they’re out the amount they sent to the crooks.

Scholarship Search Services

Another way scammers extract money from their victims is by posing as consultants or specialist search services who offer to track down scholarships for a fee.

There may be legitimate firms that do this but the big red flag that it may be a scam is when crooks say they “guarantee” to find you a scholarship or they’ll refund your money.

No one can make this sort of guarantee so, of course, when the scholarship doesn’t materialize nor do the consultants. Your money, which could run to several hundred dollars, is gone forever.

Plus, you’ve likely provided your credit card information to these crooks and that may be used for identity theft.

“Legal” Schemes

On other occasions, would-be scholarship and student-loan-aid candidates are lured into attending perfectly legitimate seminars disguised as advice sessions.

These usually turn out to be sales pitches for insurance policies or annuities.

“You may receive a letter advertising a free financial aid seminar or ‘interviews’ for financial assistance,” says FinAid.

“Sometimes the seminars do provide some useful information, but often they are cleverly disguised sales pitches for financial aid consulting services (e.g., maximize your eligibility for financial aid), investment products, scholarship matching services and overpriced student loans.”

How to Avoid a Scholarship Scam

Most scholarship scams can be spotted and stopped by spending the time to research awarding organizations and others providing support services.

Here are five simple steps to follow:

1. As a general rule, be wary about paying any type of upfront application fee for a scholarship, grant or loan. Certainly, don’t pay until you’ve done your research to establish if the organization is a legitimate one with a sound track record.

2. Don’t ever believe you’ve won a prize — scholarship or not — in a competition you didn’t take part in.

3. If you receive an unsolicited communication that interests you, ask the organization where they got your name. If you get an offer from someone you’ve never heard of or applied to, it’s most likely a scam. Bin it.

FinAid adds:

4. Get your offer (or terms, if you’re dealing with a search service) in writing before responding. In other words, don’t take a phone call as evidence of anything. Always read the small print in any documents that involve money.

5. Ignore attempts to time-pressure you. If a caller asks you for an immediate answer, hang up.

More guidance here: How to Avoid and Protect Yourself from Scholarship Scams.

With education costs rising, scholarships are a big attraction — not just for students but also for scammers. So, take care!

Alert of the Week

Staying with our student topic this week, colleges in various parts of the United States have issued a warning about calls being made to international students, threatening they’re about to be deported.

The callers claim to be either from government agencies or foreign embassies. They make all sorts of allegations, from not meeting residence requirements to being involved in a crime.

And, of course, they all want money to get victims off the hook. Government and embassies don’t operate this way. You can safely ignore these calls.

Time to close today, but we’ll be back next week with another issue. See you then!