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by Mark Kantrowitz [email protected]
Students and parents are often in desperate need for financial resources to help pay for school, making them likely targets of scholarship scams, according to the Financial Aid Information Page on the World-Wide Web.
"Every year tens of thousands of families fall prey to fraudulent scholarship opportunities", said Mark Kantrowitz, maintainer of the Financial Aid Information Page and author of a well-regarded book about financial aid. "If you must pay money to get money, it might be a scam."
Scholarship scams operate by imitating legitimate foundations, scholarship sponsors, lenders, and scholarship search services. They may even have official-sounding names, using such words as "National", "Federal", "Federation", "Division", "Administration", "Scholarship", and "Foundation" to fool unwary students and parents into thinking that they are federal agencies or grant-giving foundations.
Beware of any scholarship that requires an application fee, even an innocuously low one like $2, $5 or $10. If the "foundation" receives a few thousand applications, they can pay out a scholarship or two and still pocket a hefty profit, if they happen to award any scholarships at all. Legitimate scholarship programs do not require an application fee.
Guaranteed winnings and loose eligibility requirements are also good warning signs. "Scholarship sponsors do not hand out awards to students simply for breathing," Kantrowitz explained. "Other tip-offs include typing and spelling errors, use of a mail drop for a return address, and omitting a telephone number for inquiries."
Also beware of low-interest educational loans that require you to pay money up front. Verify the legitimacy of the lender before handing over your money. Real student loans deduct the origination and insurance fees upon disbursement, not application.
Dana Lesemann, a staff attorney with the Federal Trade Commission, adds, "The Federal Trade Commission encourages students to use caution when evaluating any opportunity that requires payment of up-front fees, especially those that guarantee a specific result. These promises sound very familiar to the advanced fee loan scams we saw a couple of years ago. It's important to remember one cardinal rule: If it sounds too good to be true, it probably is."
SCHOLARSHIP SEARCH SERVICES DO NOT AWARD SCHOLARSHIPS
Scholarship search services charge a fee to compare your profile with a database of scholarship opportunities and report a list of matching awards. They do not provide awards directly to applicants, nor do they help you apply for the awards. The guarantees offered by these services are usually worthless, and refunds are often very difficult or impossible to obtain. Read the fine print before paying money for a scholarship search.
Most scholarship search services are franchises of a handful of large national databases. Before using a scholarship search service, ask them whether they compile their own database. If they don't, find out the name of their database provider. If two franchises use the same database, the cheaper one will report the same matches as the more expensive one. Charging a fee of more than $50 for a search is excessive.
The success rates reported by scholarship search services usually refer to successfully finding a match in their database, not successfully winning a scholarship. Ask the scholarship search service how many students have actually won scholarships as a result of using their service, and if they can give references.
"Very few students receive money as a result of using a scholarship search service," notes Kantrowitz. "Less than 1% of the financial aid awarded each year comes from the private sector." He adds, "Don't believe claims that $6.6 billion in student aid go unclaimed every year. Such figures are based on an estimate of untapped employee tuition benefits that was published in a study over ten years ago. These funds went unclaimed because they couldn't be used."
Why pay a scholarship search service to use their database, when you can get the same information for free? The information provided by scholarship search services is available at no cost in your local public library and the financial aid offices of many schools.
WHAT TO DO IF AN OFFER MIGHT BE A SCAM
"If you are suspicious of a scholarship offer, call or visit your school's financial aid office", advises Kantrowitz. "The financial aid staff can tell you whether an offer is legitimate. If you're still in high school, talk to your guidance counselor."
Kantrowitz also suggests contacting the Better Business Bureau (BBB), the State Bureau of Consumer Protection, the State Attorney General's Office, and the State Chamber of Commerce. You may wish to call the National Fraud Information Center at 1-800-876-7060 to report the offer, since they pass their information on to law enforcement agencies. If the problem involves mail fraud, call the Postal Crime Hotline at 1-800- 654-8896.
ABOUT THE FINANCIAL AID INFORMATION PAGE
The Financial Aid Information Page at http://www.cs.cmu.edu/~finaid/finaid.html lets you search several scholarship and fellowship databases online for free, including FastWEB, a database of more than 180,000 private sector scholarships, fellowships, grants, and loans.
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