Watch out for These Financial Aid Schemes
The increased amount of grants and scholarships offered to college-bound students has also led to the proliferation of financial aid scams.
The U.S. Better Business Bureau (BBB) reports the number of consumer complaints regarding loans and grant services has increased by 60 percent in 2006. And even though these scams look benign, such as financial aid seminars held at nice locations, they will bilk parents out of thousands of dollars and possibly rob their kids of an education.
If you're looking for a grant or scholarship to offset the cost of today's expensive college tuition, you need to be aware the scam artists' game. Here's a look at two of the more prevalent financial aid scams the BBB wants you to look out for:
- College Grant Scams. Scam artists will send consumers an e-mail or letter that will offer "Free Grant Money" — they qualify for private or government grant money as financial aid for debt relief or to help pay off college bills. When victims receive the grant money in the form of a check, they are instructed to deposit the money and then wire a designated amount back to the company to cover processing fees. Even though the checks look professional, it will take several weeks for the bank to realize they're fraudulent. So, as a result, the victim has to pay back the bank for depositing the fake check, but they've also lost the money wired to the scammers.
- Financial Aid Seminar Scams. Parents from all over the United States have contacted the BBB saying they paid a Utah-based company as much as $1,000 for help finding financial aid and never heard from the company again. Parents report their college-bound child received an e-mail from College Money Matters stating they'd been "accepted" to attend a free financial seminar.
How to Avoid Scholarship Scams
Now that you know what to look for, here are some additional tips the BBB offers to consumers to keep you from getting snared in a scam artist's trap:
- If you or your child gets a "scholarship-is-guaranteed-or-your-money-back" promise, run for the hills. No one can guarantee that they will get you a grant or scholarship. And the refund guarantees that are offered usually have so many strings attached that it's impossible for consumers to get their money back.
- Any financial aid organization that says "you can't get this information any where else" is pulling your leg. Scholarship information is widely available in books, from libraries, financial aid offices, or on the Internet.
- Watch out for companies that promise that they will do all of the research and apply to grants and scholarships for you. Only parents and students can really determine and provide the financial information need to complete the forms.
- Any company or organization that asks for your credit card or bank account number to reserve a scholarship is scamming you. This is never a requirement for legit scholarship offers.
- Beware if you're told that "the scholarship will cost some money." Legitimate scholarship offers never require any kinds of payment.