Unfortunately for prospective scholarship seekers, the private aid sector exists virtually without patterns or rules. Regrettably, the combination of the urgency to locate money, the student's limited time, and a complex and bewildering system has created opportunities for fraud. Although most scholarship sponsors and most scholarship search services are legitimate, schemes that pose as either legitimate scholarship search services or scholarship sponsors have cheated thousands of families.
These fraudulent businesses advertise in campus newspapers, distribute flyers, mail letters and postcards, provide toll-free phone numbers, and even have sites on the Web. The most obvious frauds operate as scholarship search services or scholarship clearinghouses. Another quieter segment sets up as a scholarship sponsor, pockets the money from the fees and charges that are paid by thousands of hopeful scholarship seekers, and returns little, if anything, in proportion to the amount it collects. A few of these frauds inflict great harm by gaining access to individuals’ credit or checking accounts with the intent to extort funds.
The Federal Trade Commission (FTC), in Washington, D.C., has a campaign called Project $cholar$cam to confront this type of fraudulent activity. There are legitimate services. However, a scholarship search service cannot truthfully guarantee that a student will receive a scholarship, and students almost always will fare as well or better by doing their own homework using a reliable scholarship information source, such as Peterson’s Scholarships, Grants & Prizes, than by wasting money and time with a search service that promises a scholarship.
The FTC warns you to be alert for these six warning signs of scam:
1. "This scholarship is guaranteed or your money back."
No service can guarantee that it will get you a grant or scholarship. Refund
guarantees often have impossible conditions attached. Review a service’s
refund policies in writing before you pay a fee.
2. "The scholarship service will do all the work."
Unfortunately, nobody else can fill out the personal information forms, write
the essays, and supply the references that many scholarships may require.
3. "The scholarship will cost some money." Be wary
of any charges related to scholarship information services or individual scholarship
applications, especially in significant amounts. Before you send money to
apply for a scholarship, investigate the sponsor.
4. "You can’t get this information anywhere else."
In addition to Petersons’s, scholarship directories from other publishers
are available in any large bookstore, public library, or high school guidance
office.
5. "You are a finalist" or "You have been selected
by the national foundation to receive a scholarship." Most legitimate
scholarship programs almost never seek out particular applicants. Most scholarship
sponsors will contact you only in response to an inquiry because they generally
lack the budget to do anything more than this. Should you think that there
is any real possibility that you may have been selected to receive a scholarship,
before you send any money, investigate first to be sure that the sponsor or
program is legitimate.
6. "The scholarship service needs your credit card or checking
account number in advance." Never provide your credit card or
bank account number on the telephone to the representative of an organization
that you do not know. Get information in writing first. An unscrupulous operation
does not need your signature on a check. It will scheme to set up situations
that will allow it to drain a victim’s account with unauthorized withdrawals.
In addition to the FTC’s six signs, here are some other points to keep in mind when considering a scholarship program:
• Fraudulent scholarship operations often use official-sounding names,
containing word such as federal, national, administration, division, federation,
and foundation. Their names are often a slight variant of the name
of a legitimate government or private organization. Do not be fooled by a
name that seems reputable or official, an official-looking seal, or a Washington,
D.C., address.
• If you win a scholarship, you will receive written official notification
by mail, not by telephone. If the sponsor calls to inform you , it will follow
up with a letter in the mail. If a request for money is made by phone, the
operation is probably fraudulent.
• Be wary if an organization’s address is a box number or a residential
address. If a bona fide scholarship program uses a post office box number,
it usually will include a street address and telephone number on its stationary.
• Beware of telephone numbers with a 900-area code. These may charge
you a fee of several dollars a minute for a call that could be a long recording
that provides only a list of addresses or names.
• Watch for scholarships that ask you to "act now." A dishonest
operation may put pressure on an applicant by saying that awards are on a
"first-come, first-serve" basis. Some scholarship programs will
give preference to the earlier qualified applications, however, if you are
told, especially on the telephone, that you must respond quickly but that
you will not hear about the results for several months, there may be a problem.
• Be wary of endorsements. Fraudulent operations will claim endorsements
by groups with names similar to well known private or government organizations.
The Better Business Bureau (BBB) and government agencies do not endorse businesses.
• Don’t pay money for a scholarship to an organization that you’ve
never heard of before or whose legitimacy you can’t verify. If you have
already paid money to such an organization and find reason to doubt its authenticity,
call your bank to stop payment on your check, if possible, or call your credit
card company and tell it that you think you were the victim of consumer fraud.
To find out how to recognize, report, and stop a scholarship scam, you may
write to the Federal Trade Commission’s Consumer Response Center at
600 Pennsylvania Avenue NS, Washington, D.C. 20580. On the Web, go to www.ftc.gov,
or call 877-FTC-HELP (toll free). You can also check with the Better Business
Bureau (BBB), which is an organization that maintains files of businesses
about which it has received complaints. You should call both your local BBB
office and the BBB office in the area of the organization in question; each
local BBB has different records. Call 703-276-0100 to get the telephone number
of your local BBB, or look at www.bbb.org
for a directory of local BBBs and downloadable BBB complaint forms.