How to Prevent Scholarship Scams
Every year, several hundred students and parents are defrauded by scholarship scams in the USA and in small incidence here in Jamaica. The victims of these Scholarship Scams lose thousands, if not millions, of dollars collectively on an annual basis according to multiple sources. Scam operations often imitate legitimate government agencies, grant-giving foundations, education lenders and scholarship matching services, using official-sounding names containing words like “National,” “Government of Jamaica,” “Foundation,” or “Administration.”
This article provides advice on how to identify such scholarship scams, how to distinguish between legitimate and fraudulent organizations, how to protect yourself from scholarship scams; and what to do if you are scammed.
In general, be wary of scholarships with an application fee, scholarship matching services who guarantee success, advance-fee loan scams and sales pitches disguised as financial aid “seminars”.
Warning Signs of Scholarship Scams
Certain telltale signs can help you identify possible scholarship scams. Note that the following signs do not automatically indicate fraud or deception; however, any organization that exhibits several of these signs should be treated with caution.
Application fees. Be wary of any “scholarship” which requests an application fee, even an innocuously low one like $20 or $300. Most scholarship scams have application fees of $1000 to $2,500 but some have had fees as low as $50 and as high as $5,000. Don’t believe claims that the fee is necessary to cover administrative expenses or to ensure that only serious candidates apply or that applicants who do not receive any money “may” be entitled to a refund.
Loan fees. If you have to pay a fee in advance of obtaining an educational loan, be careful. It might be called an “application fee”, “processing fee”, “origination fee”, “guarantee fee”, “default fee” or “insurance fee,” but if it must be paid in advance, it’s probably a scam. Legitimate educational loans like the student loan bureau deduct the origination and default fees from the disbursement check. They never require an up-front fee when you submit the application.
Other fees. If you must pay to get information about an award, apply for the award or receive the award, be suspicious. Never spend more than a postage stamp to get information about scholarships and loans.
Guaranteed winnings. No legitimate scholarship sponsor will guarantee you’ll win an award. No scholarship matching services can guarantee that you’ll win any scholarships either as they have no control over the decisions made by the scholarship sponsors. Also, when such “guarantees” are made, they often come with hidden conditions that make them hard to redeem or worth less than they seem.
Everybody is eligible. All scholarship sponsors are looking for candidates who best match certain criteria. Certainly there are some scholarships that do not depend on academic merit, some that do not depend on athletic prowess and some that do not depend on minority student status, but some set of restrictions always applies. No scholarship sponsor hands out money to students simply for breathing.
The unclaimed aid myth. You may be told that millions or billions of dollars of scholarships go unused each year because students don’t know where to apply. This simply isn’t true. Most financial aid programs are highly competitive. No scholarship matching service has ever substantiated this myth with a verifiable list of unclaimed scholarship awards.
We apply on your behalf. To win a scholarship, you must submit your own applications, write your own essays and solicit your own letters of recommendation. There’s no way to avoid this work.
Claims of influence with scholarship sponsors. Scholarship matching services do not have any control over the awarding of scholarships by third parties.
High success rates. Overstated claims of effectiveness are a good tip-off to scholarship scams. For example, less than 1% of users of fee-based scholarship matching services actually win an award. If something sounds too good to be true, it probably is.
Unusual requests for personal information. If the application asks you to disclose bank account numbers, credit card numbers, calling card numbers or social security numbers, it is probably a scam. If they call and ask you for personal information to “confirm your eligibility,” “verify your identity” or as a “sign of good will,” hang up immediately. They can use this information, in conjunction with your date of birth and the names of your parents, to commit identity theft and apply for new credit cards in your name. They can also use the numbers on the bottom of your checks (the bank routing number and the account number) to withdraw money from your bank account using a “demand draft.” A demand draft works very much like a check, but does not require your signature.
Suggesting that they are a non-profit, charitable organization when they are not. Don’t assume from an organization’s name that it has a charitable purpose. Although it is illegal in most states to use a misleading business name, enforcement of the law is lax. For example, an organization with “Fund” or “Foundation” in its name is not necessarily a charitable foundation and may even be a for-profit business.