Money Management

How to Avoid Scams When Searching for Scholarships

May 2008

With scholarship dollars hard to come by, and parents anxious to get them, it’s no surprise that scholarship fraud is on the rise. In fact, people taken in by scholarship scams lose a total of $100 million annually, according to the college planning site FinAid.org. The good news, according to Pennsylvania Institute of Certified Public Accountants (PICPA), is that there are steps you can take to avoid becoming a victim.

QUESTION ALL FEES
As a general rule, you should not have to pay an application fee to qualify for a college scholarship or an education loan. Sometimes parents are taken in by non-existent scholarships that require a fee to apply. Parents pay the fees, then, when they don’t get the scholarship, simply assume that their child did not qualify.

The Federal Trade Commission, which has studied scholarship scams, cautions that some legitimate companies may charge fees to search for scholarship information. If fees are required, find out in advance what they cover and if refunds are available. Get this information in writing before handing over any money, even a small amount.

Be wary of programs that request fees and claim to “handle all the paperwork for you.” Legitimate scholarships generally require the student or parents to file the application, so this claim is a red flag.

ASK FOR HELP
If you have doubts about any scholarship or funding program, consult with your child’s high school guidance counselor or another financial aid expert. In some cases, legitimate scholarship advisory groups may offer to sell parents information about funding opportunities, but experts in the field may be able to guide you to the same information for free.

DON’T BELIEVE IN “GUARANTEES”
Legitimate scholarship programs do not guarantee that anyone will qualify for any of their offerings. If a group does promise that you will receive funds, it’s very likely that the organization is not trustworthy. Be wary, too, if there is a lot of hype surrounding the scholarship or if you are pressed to apply immediately to qualify.

DON’T SHARE PERSONAL INFORMATION
A legitimate scholarship program should not require you to share your credit card number, bank account number, or other critical financial information. Scam artists, on the other hand, will tell you they need your personal data to confirm that you’re eligible. They can then use this information to help themselves to funds from your bank account, run up bills on your credit card, or commit identity theft.

CONSULT THE EXPERTS
Web sites such as www.FinAid.org and www.collegeparents.org offer information you can use to learn more about securing the education funds you need without falling victim to a scholarship scam. Also, your local CPA can offer expert advice on the best ways to pay for those high college tuition expenses. Whether you have young children and want to begin planning early or you are looking for ways to cover a teenager’s looming tuition costs, a CPA can help. To find one in your area, visit www.INeedaCPA.org.
                       

Founded in 1897, the Pennsylvania Institute of Certified Public Accountants is a professional association of more than 19,000 CPA practitioners in public accounting, industry, government and education. PICPA is the second oldest state CPA organization in the United States. Use PICPA's CPA Locator to find a CPA in your area.