Wednesday, March 2, 2016

Don't Fall for These Common College Scholarship Scams

For students, knowing the difference between legitimate scholarship opportunities and scams can sometimes be overwhelming and confusing. Every year an estimated 350,000 students and families are victims of scholarship scams, costing more than $5 million annually. Free scholarship money is always great, but sometimes offers are just too good to be true.

When conducting your scholarship search, be on the lookout for these five common scams, so you can protect yourself and your money.

1. Cash up front: If you see a scholarship offer that requires you to send in an application or processing fee, this so-called "scholarship" is almost always a scam. Even if the offer adds a disclosure statement that guarantees a refund, money you send up front is almost never returned.

Application fees are unfortunately one of the most popular scams and deceive thousands of students each year. To protect yourself from these scams, just remember four magic words: never pay a fee!

Scholarships are charitable contributions that are supposed to help your financial status—not hamper it. Also, beware of loan opportunities that offer a very low-interest loan in return for a small up-front fee. These loans almost never materialize.

2. Free seminar: You may get an invitation or E-mail inviting you to attend a free seminar offering advice on financial aid and providing other helpful knowledge. While this may sound appealing, it's often a trap.

Instead of providing you with credible information, the seminar turns out to be a crafty sales pitch that tries to sell you insurance, annuity, and investment products. Worse, these seminars may try to rope students into overpriced student loans or expensive scholarship matching services.

In order to prevent being sucked into this trap, do your homework and always research the seminars. If you are unsure about the legitimacy, call the company or your college financial aid office. If there is no number listed for the company hosting the seminar, this is a huge warning sign.

Also, beware of scholarship matching services that guarantee you'll win a scholarship or you'll get your money back. These are most likely not legitimate and should be ignored. Save your time and money and research scholarships and financial aid with people you trust.

3. Rewards without entries: You may have seen pop-up ads that scream, "Congratulations! You have just won a $10,000 scholarship to college! To obtain your reward, please send in a $100 processing fee." If you did not apply for a scholarship or enter in a specific contest for this money, this is probably a scam.

Never send in a processing fee to a questionable source. Scholarships are rewards for those who do the work, not prizes for doing nothing. As my economics professor always says, "There's no such thing as a free lunch."

If you did not work hard to apply for this scholarship, but it still offers thousands of dollars in cash just for sending in a processing fee, it should not be taken seriously.

4. Time-sensitive scholarships: Time-sensitive scholarships do not mean scholarships with deadlines. Nearly all scholarships have a certain date by which an applicant must complete and submit their application. In contrast, time-sensitive scams are on a first-come-first-served basis.

Most of the time these scholarships claim to be available only for the lucky applicants who get in first, and are paired with unsolicited offers of scholarship money—a sure sign of a scam. If it's a legitimate scholarship, all of the applicants are applying on a level playing field at one time.

In addition, time-sensitive scholarships often lure students in by claiming you are "pre-qualified" based on certain criteria such as family income, academic achievement, cultural background, community service, handicaps and disabilities, or religious affiliations. While this may sound legitimate, it's not.

Legitimate scholarships have so many qualified applicants that they almost never extend offers to people who did not search them out initially. Make sure to do your research when checking how you may "qualify" for a scholarship.

5. Sweeping claims: Lastly, be aware of scholarship offers that make sweeping claims. If you see an offer that declares any of the following, stay away.

• "The scholarship is guaranteed or your money back." In life, and in the financial assistance realm, nothing is guaranteed. Do not let this line fool you!
• "You can't get this information anywhere else." If you can't get information about this scholarship anywhere else, then chances are it is not legitimate. Popular search sites such as Fastweb and CollegeNet are databases filled with scholarships. If the scholarship isn't listed on one of these resources, then be very cautious.
• "To hold the scholarship for you, I need your bank account number or credit card." Legitimate scholarship funds are usually paid by check or sent directly to your college. Providers should never need this information.
• "This scholarship will cost you some money." No, it won't! Scholarships are supposed to be giving you money for college, not taking it away.

Don't be discouraged—there are thousands of legitimate scholarships and sites that are dedicated to helping you. Just make sure to always research the scholarship to which you are applying, never send in money, and be cautious of offers that seem too good to be true. For even more information, turn to the U.S. Department of Education's Federal Student Aid Office for an excellent article on avoiding scams.

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