In this new school year, parents of high schoolers face an age-old problem: how to pay for college.
Considering that the bulk of available student aid is in the form of loans — currently, more than $1.3 trillion in sometimes crushing student debt is owed by 44 million U.S. borrowers — many turn a hopeful eye to snagging scholarships and grants that don’t have to be repaid … only to get blindsided.
Each year, some 350,000 students and tab-footing parents lose as much as $100 million to student aid scams that falsely promise scholarships for college-bound seniors or loan forgiveness to those already with student debt.
Here’s what to know to avoid getting schooled:
Who offers the scholarship – and why? Legitimate scholarships make no secret of the sponsor, usually with an About Us page and/or information about the scholarship’s history and past winners. Unrecognized companies and nonprofits (and their addresses) should be verified with an online search; scams may tout official-sounding names with National, Federal, Federation, Foundation and Administration in titles.
Faux application fees. It costs nothing except time and effort to apply for legitimate scholarships; scams require application fees. At $5 to $35, it may seem like a small price to nab an alleged endowment, but the money quickly adds up. The typical scholarship-for-profit scheme — disguised on an official-looking website or arriving via U.S. mail or email courtesy of purchased mailing lists — receives up to 10,000 applications. Even if (and it’s a big “if”) awards are offered, they are few and small — maybe “a $1,000 scholarship or two,” reports FinAid, a leading (and free) website for locating scholarships and other college aid.
“Secret” list scams. These fraudsters allege to have the skinny on little-known or untapped opportunities, but it’s a big, fat lie. There are no “secret scholarship lists.” And for up to $500, typically required upfront, these services do nothing more than what students should do – search no-cost scholarship-listing websites such as FinAid and FastWeb.
Prize lies. In these scams, students are told they have already won a scholarship worth thousands of dollars, but need to pay a “disbursement” or “redemption” fee, or even upfront taxes on that money. These crooks may claim the scholarship is “guaranteed” or promise “your money back.” Or that a credit card is needed to “hold this scholarship" or that your student has been “selected” or is a “finalist” for an award that wasn’t applied for. No matter the language, understand there’s really one word: “scam.”
Also beware of so-called scholarship checks that arrive by mail; the recipient is asked to deposit it and forward a portion to a third party (not the university). What happens? The deposited check proves to be a fake, the forwarded amount is lost, and money drawn from its deposit must be repaid.
Flimflam form fillers. For fees up to $1,000, these self-described “counselors” claim they’ll handle all the paperwork to help students and parents apply for need-based grants, work-study and other financial aid. But the only application that determines eligibility for such programs is the Free Application for Federal Student Aid (FAFSA) — and note the first word. For those interested in any federal and most school-offered aid, FAFSA applications begin Oct. 1 for students planning to begin college in the summer or fall of 2018. FAFSA requires sensitive financial details, another reason for parents to complete it themselves.
Conversely, legitimate admissions consultants work one-on-one with students to provide guidance on other aspects of the admissions process — writing essays, studying for SATs and perhaps helping with other (non-FAFSA) forms. You have to find such consultants, typically through referrals from the child’s high school or intended college. FAFSA fraudsters, however, are more likely to recruit customers on Facebook or through telemarketing and mailed letter.
Loan lies. Attend those financial aid seminars promoted by the high school and you’ll get usable, accurate info on how to apply for student loans — the primary source of aid — through Federal Student Aid , the U.S. Department of Education and other programs offering government-backed student loans (the safest and usually least expensive option). Beware of presenters making unexpected and off-site invitations, pitching insurance products such as annuities, or angling for personal information including SSNs. Steer clear of any loans that require an advance fee for applying or to “qualify” (sometimes hawked as an “origination” or “guarantee” fee); real student loans deduct any fees from the disbursement check and don’t require upfront costs.
Avoid debt relief crooks that charge upfront fees to negotiate a lower loan rate; that’s illegal and easy enough to do yourself, or with help from a student loan counselor certified by the National Foundation for Credit Counseling. And while there are legitimate government programs that can reduce or forgive federal student loans, qualifying criteria are strict, such as college graduates having to work in specific occupations. The “secret” programs and strategies offered by loan forgiveness fraudsters are bogus and costly; use Uncle Sam’s free Repayment Estimator to determine monthly payments and possible loan forgiveness options.
For information about other scams, sign up for the Fraud Watch Network . You’ll receive free email alerts with tips and resources to help you spot and avoid identity theft and fraud. Keep tabs on scams and law enforcement alerts in your area at our Scam-Tracking Map .
Also of Interest
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- Post-disaster scams: Fallout fraud from Hurricane Harvey
- Get help: Find out if you’re eligible for public benefits with Benefits QuickLINK
- Join AARP: Savings, resources and news for your well-being
See the AARP home page for deals, savings tips, trivia and more.