Scholarship Services - Are they all Scams?

5/19/2003

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Billions of dollars worth of scholarships are awarded each year to college-bound students. Some are based on financial need, others are based on a student's interests, academic and extracurricular achievements, ethnicity, religious affiliation or a family's relationship with a certain union, company or other group.

Weeding through the numerous types of scholarship offers can be overwhelming, leading some parents and students to seek help from scholarship services. The Better Business Bureau warns consumer to be careful. Despite their elaborate claims and professional images, many are scams.

Legitimate scholarship services tells students and their families up-front what they can and can not do for them. Typically, they provide students with lists of scholarships, compare their profiles with available scholarships, and provide lists of scholarship awards for which they qualify.

Fraudulent scholarship search services will promise to help you maximize your eligibility for financial aid at a cost of several hundred to several thousand dollars. Some services take your money and never look for anything on your behalf; others provide a list of scholarships for which your child is not eligible. Although some services will come up with a list of scholarships that your child does qualify for, the list is usually culled from information you can get yourself for free.

There are many kinds of scholarship scams. The most common scam is a seminar scam, where you get a letter inviting you to a free financial aid seminar, which turns out to be little more than a high-pressure sales pitch. Sometimes, the promoters will offer to come to your home and meet with you one on one.

Scholarship scams can be hard to spot because promoters often imitate legitimate government agencies, grant-giving foundations, education lenders or scholarship matching services. They may use words like "national," "federal," "foundation," and "administration" in their titles.

The scholarship service may make statements like these:

  • "The scholarship is guaranteed or your money back." In reality no one can guarantee that they will get you a grant or scholarship. And the refund guarantees that are offered usually have so many conditions or strings attached that it is almost impossible for consumers to get their money back.

  • "You can not get this information anywhere else." Actually, scholarship information is widely available in books, from libraries and financial aid offices and on the Internet, if you are willing to search for it.

  • "We will do all the work." In reality, only parents and students can determine and provide the financial information needed to complete the forms. And to apply for scholarships, students must complete the application themselves.

  • "You have been selected by a national foundation to receive a scholarship." If you have not entered a competition sponsored by the foundation, this claim is highly unlikely.

  • "May I have your credit card or back account number to hold this scholarship?" This is never a requirement for a legitimate scholarship offer.

  • "The scholarship will cost some money." Legitimate scholarship offers never require payment of any kind. Free money is free money, unless it is a loan. But if it is not a loan, any fees that may be charged, such as the origination and guarantee fees, are taken out of the disbursement check.

If a company makes these types of claims, steer clear of them. Always check any scholarship services out with the BBB, state or county consumer protection agency and the attorney general's office first. >

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