As college costs continue to rise, students and their parents search for ways to cover their educational expenses. There are some unscrupulous companies that take advantage of the situation by guaranteeing scholarships and grants in exchange for an advance fee.
According to the Federal Trade Commission (FTC), these unscrupulous companies offer "money back guarantees" but attach conditions that make it almost impossible to receive a refund. Some companies tell students that they have been selected as finalist, but require an up front fee or request authorization to debit the students checking account for an undetermined length of time.
The FTC cautions students and parents to look for these telltale lines:
- "The scholarship is guaranteed or your money back"
- "You can't get this information anywhere else"
- "I just need your credit card or bank account number to hold this scholarship"
- "We'll do all the work"
- "The scholarship will cost some money"
- "You have been selected by a national foundation to receive a scholarship"
- "You're a finalist" in a contest you never entered
Before you do business with any scholarship company, follow these steps:
- Call directory assistance to see if the company is listed or has a toll free number
- Check with a financial aid advisor
- Get any offer in writing
- Ask for at least three local references
- Call the Better Business Bureau for a reliability report
You may receive a letter advertising a free financial aid seminar or interview for financial assistance. Although the seminar may have some useful information, most offers are just sales pitches. Do not pay any money for a scholarship search. Save the money for your education and search yourself. Check the internet or visit business, civic or religious organizations, the public library, or the financial aid office for additional scholarship information.
If you determine you are a victim of a scam, you should:
- Report the fraud to the Department of Education's Office of the Inspector General (OIG) hotline by calling 800-MIS-USED (647-8733) or by emailing firstname.lastname@example.org. Special agents in the OIG investigate fraud involving federal education dollars.
- Report the fraud to the Federal Trade Commission. The FTC has an online complaint form and a hotline at 877-FTC-HELP (382-4375); the TDD number for the hearing impaired is 866-653-4261. The FTC will investigate if the fraud is deemed widespread, so it is important that every student contacted by the person or people in question lodge a complaint. This will give the FTC an accurate idea of how many incidents occurred.
For more information on scholarship scams, check the FinAid Web site.