BBB Tip: Scholarship Scams

For students struggling to pay tuition, a sudden offer of a grant or scholarship can look like a dream come true. But it could be bait for a scam. This con hooks victims with the promise of money, but upfront “fees” never actually materialize into those much-needed funds.

Better Business Bureau (BBB) recommends caution when dealing with companies that offer assistance in finding financial aid opportunities. Students and their families should be wary of websites, seminars, or other schemes that promise to find scholarships, grants, or financial aid packages for a fee.

How the Scam Works:

Scammers typically claim to represent the government, a university, or a nonprofit organization. The details vary, but the con is the same. Using words like “National” and “Federal” to sound more official, the scammer will pose as a financial aid representative. They claim you have won a scholarship or a grant (without ever applying) and ask for payment of a one-time “processing fee.” In another version, the scammer pressures you into applying for a “guaranteed” scholarship or grant. However, there is a fee to apply. Once the fee is paid, time goes by and the money is never sent. When attempting to contact a representative, it is quickly discovered, the company has set so many conditions that it is almost impossible to receive a refund.

In yet another variation, a check arrives for the scholarship and instructions are included to send back payment for taxes or fees. The check turns out to be a fake, and you’re out whatever money was sent.

Legitimate companies are helping students find aid with some results. However, students and parents usually can find the same awards and others on their own by searching online. Prospective college financial aid office can help, as well, especially if it is a college the student is seriously considering attending.

Tips to Spot this Scam:

It is generally free to apply for scholarships.

In Canada visit the Government of Canada website to learn about financial aid programmes available. Each province has its own support organization and opportunities for financial aid. Each application will be reviewed by the relevant support organization and applicants will be matched with loans, bursaries, and grants for which you appear eligible.

In the U.S., More information is available online for the different options available. Even if you don’t think you qualify for financial aid, review the options on the Federal Student Aid website as many colleges and universities use it for non-need-based awards.

  • Beware of unsolicited offers. Typically, it’s not possible to win a scholarship or grant that wasn’t applied for. Ask how the organization got your name, information, contact, and then verify it with the source outside of the email, phone number or website they contacted you.
  • Take your time. Avoid being rushed or pushed into paying for help at a seminar. Use caution if a representative urges you to buy now to avoid losing an opportunity.
  • Ask lots of questions. Be cautious if a company is reluctant to answer questions about the service or the process. If the company or seminar representative is evasive, walk away.
  • Ask your guidance counselor or a college financial aid office whether they have experience with the company.
  • Be skeptical of glowing success stories touted on websites or at seminars. Ask instead for the names of families in your community who have used the service in the last year. Talk to them and find out about their experience with the firm.
  • Ask about fees associated with a professional financial aid search and find out if the company provides refunds. Get the information in writing, but realize the dishonest companies may refuse to provide refunds despite stated policies.
  • Be aware that a check can bounce even after the bank allows the withdrawal of cash from the deposit. Check processing is a confusing business, as is the terminology. Even if a bank representative says that a check has “cleared” it is not certain that it won’t be detected as a fake weeks later. One thing the account holder can be sure of is that they will be responsible for any funds drawn against the amount.

To report a scam, go to BBB Scam Tracker.

To learn how to protect yourself, go to “10 Steps to Avoid Scams”.


Information courtesy of the Better Business Bureau