Avoid Scholarship Scams

Students get lots of offers that promise to save them money. Chances are that you or your parents have received mail from scholarship-search companies claiming that they can get you "free" money to pay for college. But before you sign up, you should know that many of these companies aren't legitimate and won't help you very much.

Most people who run search companies lack experience in financial aid or scholarships, so the information you get may not be worth very much. Companies charge a lot of money (up to $400) for information that you can get for free in libraries, at guidance offices, and on the Internet. What you get for your money is often a list of scholarships for which you may be eligible but for which you still have to apply. (Usually, your chance of being a winner is quite small.) Although the implication is that the company will find scholarships that are exclusive or unavailable to most people based on a certain criterion, some of the "scholarships" listed are federal or state programs or scholarships that are appropriate only for only one individual college. (If you attend that college, you would be eligible for these scholarships anyway.) Some of the listed "scholarships" are in fact low-interest loans, not scholarships at all.

Before you sign up with a scholarship-search company, be sure to ask the following questions.

  • Is the company for-profit? Many scholarship-search companies capitalize on people's desire to get "free" money to go to college, but they offer questionable services in return.
  • Do I need to spend money to learn this information? Much of this information can be found from public resources, which takes a little time and effort but won't cost anything.
  • Is the company a franchise? Many franchises use a national database with listings of thousands of awards, generally the same ones used by the free services. However, many of the listings will not apply to your situation. For example, they may be unique to particular colleges that you will not be attending, they may not match the criteria you specified in your application, or they may be scholarships for which you have to compete.
  • How much experience does the company have with financial aid? Anyone can buy a franchise — whether or not they know anything about financial aid, scholarships, grants, work-study, or loans. Be sure that you are dealing with a financial expert.
  • How complete will the information I receive be? Many scholarship reports don't include vital information, such as deadlines, contacts, or eligibility requirements. Ask to see sample reports before you sign up.
  • Can I contact the company's past clients? Any company should be able to give you a list of satisfied clients. Before you spend as much as $400 for a service, make a few quick phone calls to ask if the quality of the service is worth it.
  • Can I believe the company's guarantee? It's impossible for a company to guarantee that you'll receive a scholarship. Companies can only guarantee that they'll find you sources; you'll then have to apply on your own. Some of the scholarships listed may be based on need, on merit, or on a competition. Some search companies even list loans from banks that are open to anyone who applies.
  • When in doubt, ask an expert Check with your guidance counselor or the financial aid administrator at the college you plan to attend. You can also check with the College Board (the same organization that brings you the SATs and the PROFILE financial aid application) for a free scholarship search and some of the latest information on scholarship-search-company scams. And you should check out the Federal Trade Commission's Web site for information about Project ScholarScam.