Many people get taken advantage of while trying to avoid student loans with scam scholarships

College Lecture Hall / Off to College? Going Back to School? How to Spot Scam Scholarships
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May 16, 2017

In spite of what critics may say, college students often have it tough financially.

College tuition costs have risen by more than twice the national inflation rate over the past twenty years. Right now, undergrads graduate with student loan debt averaging $30,000, and every day an average of 3,000 people default on those loans.

With the cards stacked against them like this, it's no wonder that college students—including adults going back to school as well as kids fresh out of high school—are scrambling to find scholarships that will pay for as much of their college education as possible.

Unfortunately, scammers have noticed this trend too, and they're taking advantage of it to defraud unsuspecting students.

There are more than 1.5 million scholarships available for college students. If you're one of them, make sure you know what to look for so that no one will take your money or sell your personal information.

Scholarship Scam Red Flags

Many scholarship scams advertise supposedly exclusive information about awards and will charge a fee to provide their "expertise." These will usually contact you directly through the mail, email, or ads.

Watch out for the following red flags indicating a scam:

  • Scholarships that have an "application" or "processing" fee attached
  • Free seminars offering financial aid advice when not provided by well-known and reputable organizations—these often turn out to be high-pressure sales pitches about investments, annuities, and insurance products
  • Rewards without entry, such as a postcard or email saying you've won a scholarship that you didn't apply for

The Federal Trade Commission (FTC) also provides information about scholarship scams. The agency warns students to be suspicious of phrases such as these:

  • "The scholarship is guaranteed or your money back"
  • "You can't get this information anywhere else"
  • "We'll do all the work, you just pay the processing fee"
  • "The scholarship will cost some money"

Even the best and most reputable scholarship sites sometimes mistakenly list scam scholarships. Remember these tips when you evaluate potential scholarships:

  • Look for numerous grammatical and spelling mistakes. If the page seems like it a bad translation or like it was written by someone who doesn't know English well, it's probably not legitimate.
  • Examine the rest of the website. Does it provide any good information or is it all written badly?
  • Real scholarships do not use P.O. Boxes as addresses. They will always have a phone number and a business address.
  • Is the organization's social media updated often? Does it post its own content or mainly take from other organizations? Has it posted anything about the scholarship?
  • Some legitimate scholarships do request that you send your application by email. If you're considering this, make sure the organization is legit before you provide any personal information at all.

If you come across any scholarship scams during your search, report them to the FTC and to your state's attorney general.

References: The Penny Hoarder: "Is That College Scholarship Legit? Here's How to Spot the Scammy Ones"