Table of Contents
- What is a scholarship?
- 7 common scholarship scams
- Ask these questions before you apply
- Warning signs of a scholarship scam
- Where do legitimate scholarships come from?
- Searching for scholarships online
- What information do scholarships request?
- Using the FAFSA to securely share information
- What if a scholarship asks for financial information
- Sharing grades and academic information
- Wrap up: Scholarship application safety tips
What is a scholarship?
The U.S. Department of Education defines a scholarship as a gift offered through “schools, employers, individuals, private companies, nonprofits, communities, religious groups, and professional and social organizations.” In many situations, these scholarships can be applied directly to the cost of tuition or books or help to cover room and board at an accredited college or university. Being a "gift," a scholarship does not require payment by the recipient.
You can find legitimate scholarships on your own or with the assistance of your college’s financial aid office. Financial aid team members often have insights into scholarships and grants available from the college, alumni and corporate partners. As a result, this provides students with a trusted avenue to search for tuition assistance. Additionally, there are a number of trusted and reputable websites specializing in scholarship information.
However, not every scholarship opportunity is real, and scams do exist. Below are some of the most common scholarship scams to know about.
7 common scholarship scams
The Federal Trade Commission (FTC) and state Attorney General offices investigate scams that defraud students and their families. Students applying for scholarships face risks linked to identity theft and fraud. Losses may include being scammed out of money, time or personal information.
Although every situation is different, there are seven common types of scholarship scams every student should know about and avoid at all costs. These may include, but are not limited to:
“The scholarship sweepstakes”
This scam informs students by phone or email that they've “won” a fantastic scholarship. But, before you can claim your funds, you must either provide bank account information or pay a “disbursement fee.” If you don’t pay right at that moment, you're told you could lose out on the funds.
Scholarship application fees
This type of scholarship scam requests an application fee to cover “costs associated with the scholarship.” These fees can run from $5 upwards to nearly $50. A legitimate scholarship opportunity will never request students to put money forward in order to earn money.
Scholarship matching services and websites
These services guarantee to find at least one paying scholarship for students who pay a one-time or recurring monthly fee. This usually amounts to getting scammed out of money upfront. Or, at best, you pay for free information already available online and at your school. With this scam, student information may also be sold to third-parties, putting you at additional risk.
The “payment due” scholarship
Students are targeted to pay up for scholarships that do not exist in this scam. The student receives an official-looking award letter, a check and instructions to cash the check and send back an acceptance fee. The check often bounces, leaving the student without a scholarship or the money they forwarded.
Every year, students are invited to “free” seminars where they can learn how to get to the front of the line for scholarship money. Once there, they often find the seminar doesn’t actually go over scholarship strategies but instead tries to sell another product.
Financial aid filing services
In this scam, students with limited experience or no background in applying for financial aid are approached with services offering help applying for aid in exchange for a fee. Generally, this amounts to paying for services that are free to anyone. The Free Application for Federal Student Aid (FAFSA) costs nothing to file, and your school's financial aid office and other free resources are available if you need help completing the FAFSA.
Financial aid taxes due
The financial aid default scam works as a phone call where someone claiming to be the IRS, FBI or another government institution. The caller claims that there are problems with the student's financial aidd or that the student owes taxes on financial aid they've received. The caller insists that the payment must be made immediately or face additional fines or even jail time.
Questions to ask yourself before you apply
There are many organizations that truly want to help make post-secondary education accessible for all. And, most of the scholarships you come across while searching will not be scams. Before applying for that scholarship though, start by answering these three key questions to protect yourself and get informed about the process.
What do I know about the organization?
If you come across an organization you've never heard of, do your due diligence. Research the company, organization or scholarship sponsor. An online search can often provide information about the organization. If a scholarship is offered by a company, search the Better Business Bureau website to find out if it's a real and reputable company.
What are the scholarship requirements?
Legitimate scholarships will often judge students on a number of criteria, including educational merit, financial need or extracurricular activities. If the requirements include fees, upfront payments or other criteria that deviate from common requirements, then it may not be a legitimate scholarship.
Can I reach out for questions?
Most scholarships are managed by a designated person or team in an organization. This point of contact should be available to answer questions and concerns during the application process. If you cannot get a response, it's possible that the scholarship may not exist.
Warning signs of a scholarship scam
According to the FTC, these are some of the tell-tale lines used by scholarship scams:
- "The scholarship is guaranteed or your money back."
- "You can't get this information anywhere else."
- "I just need your credit card or bank account number to hold this scholarship."
- "We'll do all the work. You just pay a processing fee."
- "The scholarship will cost some money."
- "You've been selected" by a "national foundation" to receive a scholarship – or "You're a finalist" in a contest you never entered.
In addition, if you discover any of the following warning signs while researching a scholarship opportunity, you should generally avoid applying.
- No evidence that the sponsor exists -
Fake companies that purport scholarships often use official titles in their name, including (but not limited to) “Federal,” “Foundation,” “Organization” or other similar terms. Just because they purport to be a “Federal” or “National” company does not mean they exist.
- The scholarship has an entry fee -
Legitimate scholarship opportunities will not ask students to submit a payment with their application, nor will they require payment prior to paying out the scholarship.
- Judging requirements are not clearly defined -
Scholarships that do not define guidelines and requirements, such as “sweepstakes” or “contest” awards, may not offer a scholarship at all. Always clarify any questions before applying – if you receive no response to your questions, simply walk away.
Where do legitimate scholarships come from?
Legitimate scholarships may be offered by schools, governments as well as a wide range of external sources. There are some important differences between these scholarship sources and the precautions students should take during the application process.
- External scholarships are offered by a number of companies, community organizations and social organizations every year. These scholarships are often judged on multiple criteria, including academic performance, community service, financial need and educational goals. Be sure to ask the appropriate questions and vet out an organization before applying for an external scholarship.
- School-based scholarships are offered only to students who attend the college or university offering the award. When you submit your FAFSA application, you may be automatically applied for some school-based financial aid. However, many school-based scholarships often have additional requirements to apply. If a separate application is required, work with the financial aid office or the department offering the scholarship to securely submit the application materials.
- Federal scholarships and grants are available from the U.S. government. Federal grants are most often need-based, and all federal scholarships and grant require you to fill out and submit the FAFSA.
- State scholarships and grants are offered by individual state governments. These programs often have residency requirements, and many state scholarship programs are either merit- or need-based. States typically have unique financial aid applications, which students must submit in addition to the FAFSA.
Searching for scholarships online
Online scholarship search engines and scholarship information websites make it easy for students to quickly find and apply for scholarships. Though there are certainly many reputable scholarship websites out there, some sites may present safety risks for students.
Some scholarship websites may promise “exclusive” or “time-sensitive” information, but require students to sign up before they can see opportunities. Students may be required to offer up phone numbers, email addresses and college information to sign up. The reality is that the same information is likely available on similar websites that do not require you to offer up your valuable contact information.
Where to find free scholarship information, no sign-ups required
Some examples of websites that offer free scholarship information (with no contact information required) include:
- Federal Student Aid Office: The Federal Student Aid Office provides students with information on federal grants and scholarships, loans and other types of financial aid, as well as resources on applying for financial aid with the FAFSA.
- CollegeBoard.org: College Board offers resources to help prospective and current students explore options and plan for paying for college. It also has a free scholarship search engine students can use to find scholarship opportunities.
- Goodcall.com: GoodCall offers a free scholarship search engine, with no personal information or account sign-up required to access the scholarship database.
What information do scholarships request?
Within the categories of external and school-based scholarships, students going to college are often eligible for multiple types of scholarships, depending on their background and experience. The focus of the scholarship will often dictate the type of information that it normally requests.
Here are some common types of scholarships along with the kind of information they may typically request during the application process.
As the name implies, merit-based scholarships are offered to students based on their academic and extra-curricular activities. Students who excel in the classroom, work hard in volunteer experience or have a special talent (such as playing a musical instrument) may qualify for merit-based scholarships offered by their school or external organizations. Submitting grades or transcripts is a fairly commonplace requirement to apply for a merit-based scholarship.
These scholarships are awarded to students who can demonstrate financial need. It is common to submit financial and other personal information for a need-based scholarship. If you're a dependent, you may have to submit your parent's financial information, too. Most scholarships should be able to use your FAFSA information to determine if you meet the financial need requirements.
Individual groups may also offer scholarships based on membership or affinity with a particular group or organization. Students who have served in the military or come from military families, who have family members in trade unions or who are from an underrepresented group may qualify for group-based scholarships. These scholarships may or may not request personal information, including academic or financial.
Using the FAFSA to securely share information
Some scholarship applications – especially those based on financial need – have certain guidelines to determine who receives scholarship awards. As a result, students may be asked to share personal financial information during the application process. Applying for the FAFSA or the College Board's CSS/Financial Aid PROFILE helps students to safely document and share personal and financial information with schools and scholarships.
New and returning students should always begin their financial aid and scholarship applications with the FAFSA, which opens on October 1 to apply for aid for the next academic year. Unlike the FAFSA, which is always free to apply, the CSS/Financial Aid PROFILE is a private product of College Board and there is a fee required to apply. This is not associated with a scam, and the CSS/Financial Aid PROFILE does allow students to apply for fee waivers if needed.
Both of these applications provide scholarship sponsors with information on the expected family contribution (EFC). This information is transferred directly from the U.S. Department of Education or College Board, respectively, to colleges and scholarship sponsors, meaning all data is handled securely and limited to a small list of individuals – keeping your personal information private.
What to do if a scholarship asks for financial information
If a scholarship-awarding organization cannot accept the FAFSA or CSS/Financial Aid PROFILE to determine financial need, vet out the organization and ask for additional information on why this information is required and how it will be used. Do the proper due diligence prior to sending any financial documents. If the scholarship asks for your bank account number, it's very likely a scam. If the organization requests tax returns or pay stubs, it could also be a tell-tale sign of a scam.
Five critical questions to ask about any scholarship opportunity include:
- Who will receive and review my information? And, how will they receive my information -- via U.S. Mail or a 128-bit SSL secure website?
- What will these documents answer that the FAFSA or CSS/Financial Aid PROFILE cannot?
- Where will my personal information be shared, if at all?
- When is the deadline to request my information? And, when will you make a determination on my scholarship application?
- Why are you requesting my personal/financial information? And, how will this information be used to determine my scholarship eligibility?
How to safely share grades and academic information
Grades and GPA are protected under the Family Educational Rights and Privacy Act (FERPA), which means you must give consent to share this information. In certain situations, scholarships may require a minimum grade point average (GPA) as part of the application process. If a scholarship solicits academic data, you should work with the registrar’s office at your school to determine the information needed and the best way to securely send that information.
Depending on the scholarship's requirements and your school, you may be able to send transcripts electronically. This is generally more secure and a better guarantee that only the intended recipient is able to access your academic records.
In addition, some scholarships may accept unofficial transcripts that may not require your registrar's involvement to obtain. Even with unofficial transcripts, you must take the necessary precautions to research who will be receiving your information and how they will use it to review your scholarship application.
Wrap up: Scholarship application safety tips
By identifying the warning signs of a scholarship scam, you can protect yourself from identity theft, fraud and other safety risks during the scholarship application process. Here are some tips to keep in mind when applying for scholarships:
- Don't give out your bank account information.
- Always confirm the organization is real and reputable.
- Avoid scholarships that ask for entry fees.
- Keep track of the scholarships you've applied for.
- Look for clear instructions and judging criteria.
- Watch out for poor spelling and grammar.
Use these tips and the information provided in this scholarship safety guide to help shield yourself from scams and threats related to looking for money to pay for college.