Because of the rising costs of financing a college education, parents and students are increasingly relying on scholarships. Scammers are using this need to wheedle money away from students who are looking to get scholarships.

For instance, in Modesto, California, high school seniors are promised scholarship money which they are to receive immediately by simply providing their bank information. Scam artists can bilk the system if they themselves have a few pieces of student identifying information, like birth dates, middle names and as little as the last four digits of their social security number. With an upfront payment as a “processing fee”, a scholarship scammer can walk away with cash that was intended to pay for college.

To help students and their families prevent further fraud, Congress passed the College Scholarship Fraud Prevention Act back in 2000. This law provides stricter guidelines regarding federal aid fraud. As part of the Act, public agencies dedicated to consumer affairs also conducted a nationwide information campaign regarding fraud, and share reported cases of scholarship fraud. Since enforcement of the Act, reports to Congress in 2006 demonstrated that, except for 2004, proportion of complaints regarding fraud have decreased. However, nature of scholarship scams seems to have also shifted. Before, customized scholarship searches were used as a front for fraudulent funding. In recent years, scams were promoted as financial aid consulting services that appeared to be in the interest of students, but were intended to obtain information to promote more fraud.

With that in mind, families should be alert when looking for college aid for their children. They may encounter or become victim to fraudsters that appear to be reputable companies assisting them in obtaining much-needed funding for a college education. Some tactics or claims a questionable agency may make include:

• Higher scholarships/ aid payouts than can usually be obtained without the company’s assistance
• Extremely high success rates of obtaining scholarships (remember, some scholarships are merit or performance-based, limiting the pool of likely awards)
• Millions or billions of unclaimed scholarships, some of which can be provided to the student
• Endorsed or approved by federal or state-based agencies
• Promising scholarship approval with a money-back guarantee
• Claiming scholarship information is available only from the agency (typically, scholarship information is available to the general public.
• Asking for bank or credit card details
• Asking for money upfront prior to giving information about scholarship opportunities
• Being told by a “national foundation” you won a scholarship in a contest you did not enter

Even though complaints of fraud seem to have decreased, it is still helpful to be on guard against suspicious scholarship procedures. We will never know when and where these con artists will appear with a more updated way of pilfering students’ and their families’ hard-earned money.

Sources:

Department of Education, et al. College Scholarship Fraud Prevention Act of 2000 Report to Congress – May 2006.
Digital Federal Credit Union. Streetwise Parents’ Guide to Researching Scholarships.
Federal Trade Commission and College Parents of America. FTC Consumer Alert – Ouch! Students are Getting Stung Trying to Find $$$ for College.
Internet Broadcasting Systems, Inc. High School Students Targeted In Scholarship.