BBB tips to avoid college financial aid scams
The college application process is an exciting, but expensive time for high school students. Scholarships, grants and financial aid are all common elements in the process and unfortunately, so are scams. With a new school year right around the corner, your Better Business Bureau is warning college-bound students and their parents to be wary of financial aid fraud.
Last year on a national basis, consumers inquired to BBB about scholarship and financial aid types of businesses over 57,000 times. Financial aid scams come in different forms, from seminars to awards. Some con artists contact families of potential college students and tell them they have been awarded a scholarship. They claim the money is guaranteed, if the "winner" provides bank account or credit card information first. Many of these fraudulent operations use official-sounding names with the words 'federal' or 'national', but be warned, they are not affiliated with any actual government agency.
Scammers also take advantage of students and even other adults who are working to pay off their loans. In certain cases, a student loan scammer will claim to be able to get rid of debt, but asks for a fee up front, which is illegal. People who have a large amount of debt and are looking to consolidate may fall victim to this type of scam.
BBB suggests the following tips to avoid college financial aid scams:
- Application Fees – Beware of scholarships that charge an application fee, even if the fee is minimal or the foundation claims the fee is to only encourage serious students to apply. Legitimate scholarship foundations do not charge an application fee.
- Guaranteed Scholarships – Avoid scholarship services that claim you are guaranteed to receive money. Legitimate scholarship services have no control over who the scholarship foundation chooses to win the grant.
- Solicitations – Be wary of letters or phone calls stating you have been selected or are a finalist for a scholarship you never applied for, this is a sign of a scam. Be careful not to send out personal or banking information, or write a check to unfamiliar businesses.
- Advance-Fee Loans – Avoid lenders that offer you an unusually low-interest rate for an education loan and then require an upfront fee before you can receive the loan. Only work with lenders or banks that you are familiar with. If you are searching for an education loan, be aware that real lenders do not charge an upfront application fee, rather they deduct their processing fees from the check before the student receives the loan.
- Eligibility – Each scholarship is looking for an ideal candidate that fits their specific criteria. Whether the requirements are the student’s GPA, career interests, athletic involvement or volunteer work, legitimate foundations are looking for students that meet their characteristics. Avoid services that claim every student is eligible to receive the scholarship.
- Seminars – If you decide to attend an information seminar on scholarships or financial aid, be aware this is most likely a sales pitch for scholarship services. While at the seminar, do not be pressured into paying for services on the spot. Before you purchase any services, carefully research the organization. Do not hand over any money if the representative does not directly and fully answer your questions.
For additional information and tips regarding financial aid and loan scams, visit bbb.org.