The college application process is an exciting time for high school students, but often an expensive one. Scholarships, grants, and financial aid are a common element to the process and unfortunately, so are scams. With a new school year around the corner, Better Business Bureau warns college-bound students and their parents to be wary of financial aid fraud.
Last year, consumers inquired about scholarship, financial aid and educational services over 40,370 times. Financial aid scams come in different forms from seminars to awards. Some con artists contact families of potential college students and tell them they’ve been awarded a scholarship. They claim the money is guaranteed if provided with bank account or credit card information. Many of these fraudulent operations use official-sounding names with the word ‘federal’ or ‘national’, but be warned, they are not a government agency.
Scammers also take advantage of students who are working hard to pay off their loans. In many cases, the student loan scammer claims to get rid of your debt, but asks for a fee up front. Students who have a lot of debt and are looking to consolidate may fall victim to this type of scam.
“When you are asked to pay a fee before you get the loan, that's illegal in this country. It's called an advanced fee loan scam," said Jim Hegarty, president/CEO of your Better Business Bureau. “Doing research before agreeing to any loan may prevent students and their parents from becoming victims.”
BBB suggests the following tips to avoid financial aid and loan scams:
Application Fees. Beware of scholarships that charge an application fee, even if the fee is minimal or the foundation claims the fee is to only encourage serious students to apply. Legitimate scholarship foundations do not charge an application fee.
Guaranteed Scholarships. Avoid scholarship services that claim you are guaranteed to receive money. Legitimate scholarship services have no control over who the scholarship foundation chooses to win the grant.
Solicitations. Be wary of letters or phone calls stating you have been selected or are a finalist for a scholarship you never applied for, this is a sign of a scam. Be careful not to send out personal or banking information, or write a check to unfamiliar businesses.
Advance-Fee Loans. Avoid lenders that offer you a strangely low-interest rate for an educational loan and then require an upfront fee before you can receive the loan. Only work with lenders or banks you are familiar with. If you are searching for an educational loan, be aware that real lenders do not charge an upfront application fee, rather they deduct their processing fees from the check before the student receives the loan.
Seminars. If you decide to attend an information seminar on scholarships or financial aid, be aware this is most likely a sales pitch for scholarship services. While at the seminar, do not be pressured into paying for services on the spot. Before you purchase any services, carefully research the organization. Do not give any money if the representative does not directly and fully answer your questions.
For more information you can trust, visit bbbinc.org.