As the June 30 federal Free Application for Federal Student Aid – known as FAFSA – deadline approaches, many students are searching and applying for grants and scholarships to fund their college education. With average tuition increasing, paying for a college degree continues to be a challenging obstacle to overcome for prospective students. A challenge that is made more difficult by scammers looking to take advantage of students and parents searching for financial aid opportunities.
Additionally, policies focused on student loan forgiveness allow fraudulent actors to exploit confusion. Students may be coerced into submitting personal information or paying ‘processing fees’ to apply for forgiveness. Others may not be as wary of high-interest loans because they assume the loan will be forgiven when they graduate. Some financial aid seekers have reported being taken advantage of by businesses that claim to specialize in financial services.
“The business claims to have been around for 14 years, but the website has been up for two,” reported one consumer to BBB Scam Tracker in 2022. “The financial aid workshops are a pitch meeting where they try to get you to pay $2,000 for help with college admissions, but it turns out that help is limited to exchanging text messages with an unknown person. The contract’s fine print states that the person you are texting is not a professional and has no expertise in college admissions or financial aid.”
Due to the sensitive personal and financial information provided for scholarship and grant applications, it is essential to be cautious when choosing one to apply for. Nearly 2.1 million students were awarded financial aid in the 2019-20 school year, with the highest average award coming from institutional grants rather than state or federal.
To protect students and parents searching for financial aid opportunities from falling victim to scholarship scams, Better Business Bureau recommends following these guidelines:
Beware unsolicited offers. It is rare to be awarded a scholarship or grant that was never applied for. If contacted by an organization offering financial assistance, be sure to ask how the organization got the student’s name and verify their claim with the source.
Scholarships or grants should not require a fee. Never pay to apply for a scholarship or grant. Some companies may claim that they can make the student eligible to get financial aid for a processing fee. In many cases, they are filling out a free application on behalf of the student and will often falsify the student’s information to ensure he or she will receive funds. Falsifying personal information on certain applications, such as the FAFSA, is illegal and can carry fines of up to $20,000.
Ask questions. Ask as many questions about a scholarship or grant as possible to help determine its legitimacy. If a company is reluctant to answer or provides vague responses, that is a sign it may be a scam. This is especially important if using a third-party service to locate and apply for scholarships. Be sure to ask pointed questions, such as how much they have awarded in previous years to what type of applicant.
Take your time. Spend time researching an offered scholarship or grant to the fullest extent possible. Use the resources offered at the college or university, such as guidance counselors or financial aid offices, to determine if it is a right fit or if they recognize the company or organization offering financial assistance.
Beware aggressive tactics. No matter the scam, one of the most common tactics scammers use is to pressure victims to make an immediate decision. They may claim that the offer is only available for a limited time and to “apply now or miss this opportunity.” For scholarship scams, con artists may offer false guarantees that the student will get aid if they pay a service fee.
Be skeptical of glowing success stories. While legitimate companies and businesses often use testimonials to demonstrate their successes, they may also be fabricated by scammers. Instead of deciding to use a company based only on testimonials, ask if they have helped anyone in the student’s community in the past year.
Apply for grants and scholarships yourself. Filling out and submitting applications for oneself is one of the best ways to ensure that the information provided is accurate, complete and controlled. Never pay anyone to fill out or process FAFSA; it is most likely a scam. Students and parents can submit a FAFSA application online at StudentAid.gov.
For more information about how to avoid scholarship and financial aid scams, visit https://www.ftc.gov.
For a list of financial aid service companies the U.S. Department of Education works with, visit https://www.studentaid.gov.
For anyone who has been a victim of a scholarship scam, report it to BBB Scam Tracker at https://www.bbb.org/scamtracker. Information provided could prevent another person from falling victim.