BBB Warns of Scholarship Scams

June 02, 2017

Media contact: Tom Bartholomy, 704-927-8613

High school seniors around the area will be getting their diplomas soon and for those starting college in the fall, the question of how to pay for tuition is looming. A sudden offer of a grant or scholarship can look like a dream come true. But it’s not uncommon for scammers to try to take advantage of a situation like this by requiring upfront “fees” that never materialize into the actual funds needed. Not surprisingly, the Better Business Bureau starts to receive more reports of college scholarship scams this time of year.

The details vary, but the gist is usually the same: someone claims to represent the government, a university or a non-profit organization and they offer you money that they don’t intend to pay out.

They use words like “National” and “Federal” in an attempt to sound more official and pose as a financial aid representative. In one version of this scam, they claim you’ve won a scholarship or grant and ask for a “one-time processing fee” to secure the funds. In another, they pressure you into applying for a “guaranteed” scholarship or grant, which requires an application fee. In these cases, you might pay the fee, but you never receive the promised money.

In yet another scenario, you receive a check for the scholarship and are instructed to send payment for taxes or fees. The check turns out to be fake and again, you’re out the money you provided. Be aware that a check can bounce even after your bank allows you to withdraw cash from the deposit. It sometimes takes weeks for it to be detected as fake, but you will almost certainly still be on the hook for any funds drawn against the amount.

It’s not hard to spot these types of scams if you know what to look for:

It’s generally free to apply for scholarships so any request for an upfront fee should be seen as a red flag. 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.

Additionally, unsolicited offers should also raise a red flag. You typically can’t win a scholarship or grant that you didn’t apply for. When in doubt, ask how the organization got your name and then verify it directly with the source.