BBB Scam Alert - Scholarship Scams

If it sounds too good to be true...

A Scam Alert from the Better Business Bureau:

For students struggling to pay tuition, a sudden offer of a grant or scholarship can look like a dream come true. But it could be bait for a scam. This con hooks victims with the promise of money, but upfront “fees” never actually materialize into those much-needed funds.

Better Business Bureau (BBB) recommends caution when dealing with companies that offer assistance in finding financial aid opportunities. Students and their families should be wary of websites, seminars, or other schemes that promise to find scholarships, grants, or financial aid packages for a fee.

How the Scam Works:

Scammers typically claim to represent the government, a university, or a nonprofit organization. The details vary, but the con is the same. Using words like “National” and “Federal” to sound more official, scammers pose as a financial aid representative. They claim you have won a scholarship or a grant (without ever applying) and ask for payment of a one-time "processing fee." In another version, the scammer pressures you into applying for a “guaranteed” scholarship or grant. However, there is a fee to apply. You pay up, but never receive the promised money, and the company has set so many conditions that it’s almost always impossible to get a refund.

In yet another variation, you receive a check for the scholarship but are instructed to send back payment for the taxes or fees. The check turns out to be a fake, and you’re out whatever money you’ve sent.

Legitimate companies can help students find aid, but they will never guarantee results. However, students and parents usually can find the same awards and others on their own by searching online or going to the library. Your prospective college’s financial aid office can be of assistance, as well.

Tips to Spot this Scam:

It is generally free to apply for scholarships. In the U.S., the Free Application for Federal Student Aid (FAFSA) is the only application that determines eligibility for all federal programs and you can complete and submit it for free. More information is available online or by calling 1-800-4-FED-AID. Even if you don’t think you qualify for financial aid, fill out the FAFSA anyway, as many colleges and universities use it for non-need-based awards.

  • Beware of unsolicited offers. You typically can’t win a scholarship or grant that you never applied for. Ask how the organization got your name and then verify it with the source.
  • Take your time. Don’t be rushed into paying for help at a seminar. Be cautious if a representative urges you to buy now to avoid losing an opportunity.
  • Ask lots of questions. Be cautious if a company is reluctant to answer any questions you have about the service or the process. If the company or seminar representative is evasive, walk away.
  • Ask your guidance counselor or a college financial aid office whether they have experience with the company.
  • Be skeptical of glowing success stories touted on websites or at seminars. Ask instead for the names of families in your community who have used the service in the last year. Talk to them and find out about their experience with the firm.
  • Ask about fees associated with a professional financial aid search and find out if the company provides refunds. Get the information in writing, but realize the dishonest companies may refuse to provide refunds despite stated policies.
  • Be aware that a check can bounce even after your bank allows you to withdraw cash from the deposit. Check processing is a confusing business, as is the terminology. Even if a bank representative tells you that a check has “cleared” you can’t be sure it won’t be detected as a fake weeks later. One thing you can be sure of is that you will be on the hook for any funds drawn against the amount. 

To report a scam, go to BBB Scam Tracker.

To learn how to protect yourself, go to “10 Steps to Avoid Scams”. welcomes thoughtful comments and the varied opinions of our readers. We are in no way obligated to post or allow comments that our moderators deem inappropriate. We reserve the right to delete comments we perceive as profane, vulgar, threatening, offensive, racially-biased, homophobic, slanderous, hateful or just plain rude. Commenters may not attack or insult other commenters, readers or writers. Commenters who persist in posting inappropriate comments will be banned from commenting on