How to Avoid Scholarship Scams

Three Methods:Spotting Red FlagsInvestigating Suspicious OffersReporting Shady Companies

With the growth in college attendance and attendant tuition fees, the need for financial aid is greater than ever. Unfortunately, the growth in scams playing upon that need has grown correspondingly. As you prepare to apply for scholarships and financial aid, be sure to learn how to recognize the telltale signs of a scam, investigate organizations arousing your suspicions, and report confirmed scams.

Method 1
Spotting Red Flags

  1. 1
    Don’t buy into claims of “exclusive offers.” The idea that one company would have exclusive information about a secret scholarship is not a credible proposition. All scholarships exist for the benefit of the public, so it doesn’t follow that a scholarship would have any incentive to keep their scholarship under wraps.[1]
    • Furthermore, most aid is Federal Aid, and the second largest source of aid are universities themselves. These are about as far from exclusive as you can get.
  2. 2
    Be skeptical of fees. A number of scams charge an up-front fee to disburse the loan. Almost all legitimate lenders simply take the loan origination fee from the loan itself, so you should be wary of any company that wants the fee up front. What they’re really doing is tricking you into providing your credit card information. They often have no intention of giving you a loan of any kind. [2]
    • There are other companies that simply charge for finding scholarships. While that’s not illegal, it can get unethical. Again, scholarships have no incentive to hide their existence, so it’s usually not too difficult to find a scholarship all by yourself.[3]
  3. 3
    Remember there are no guarantees. Any company offering guaranteed scholarships is being dishonest if not lying outright. The only guaranteed form of student aid is Federal Aid, and it’s the government who is providing the guarantee and not the scholarship search company. Any other kind of financial aid will be subject to some type of conditions, whether it is creditworthiness, age, or income.[4]
    • There are also no real scholarships that give people money with no strings attached. They will at least want to check on an applicant’s grades and hear a bit about their story in the form of a personal essay. Any company that promises to do “all the work” for you for a fee should be regarded with suspicion.
  4. 4
    Steer clear of unsolicited offers. As always, if you get an offer of a scholarship out of the blue, be skeptical. A person will call you up out of nowhere to give you money just about as often as you’ve called someone out of nowhere to give them money. These calls are typically just pretexts for mining your personal information.[5]
  5. 5
    Make sure the proffered service is worthwhile. A lot of dubious companies charge you a fee to find scholarships for which you’re eligible. Others charge for completing forms on your behalf. Most of the time, the information they’re charging you for is widely available to the public. Before you spend hundreds of dollars paying for a similar service, make sure you can’t find the same kind of information yourself.[6]

Method 2
Investigating Suspicious Offers

  1. 1
    Conduct an internet search. Sites like, and offer ratings and listings for a number of companies specifically for the purpose of scam investigation. You can read what other users have to say about the company as well as read aggregate ratings of those organizations. Although this isn’t the most comprehensive way to go about searching for a possible scam, it is one of the easiest. Start here.
  2. 2
    Ask a trusted source. If you're on the fence about a particular scholarship and you can't find much information about it online, talk your school guidance counselor or your college advisor. While they might not be familiar with the specific scholarship, they're probably pretty attuned to noticing red flags and recognizing problematic offers.
  3. 3
    Check with the Better Business Bureau. The Better Business Bureau (BBB) is an organization that collects complaints and reviews about businesses for the purposes of maintaining consumer confidence. The BBB also rates member businesses according to their standards for best practices. The BBB is nonprofit organization funded by member businesses themselves. [7]
    • Search BBB reviews of the organization in question at Stay away from companies with a lot of negative reviews.
  4. 4
    Check if the company is listed in any non-profit directories. If you suspect an organization which is claiming to be a foundation or a scholarship itself is a scam, the best place to verify it is with the IRS or another foundation directory. The IRS keeps a listing of charitable and tax-exempt organization like foundations.[8]
  5. 5
    Look up incorporation records. Most state-level secretaries of state maintain online databases of companies incorporated in their respective states. If you’re trying to do a really deep dive to check into a company’s history, then ask the company where they are incorporated, then check to see if they are actually incorporated with the secretary of state’s office in that state. In addition, most states maintain listings of registered LLCs (another type of business form) as well.[10]
    • You can find a listing of secretary of state websites at the National Association of Secretaries of State’s website, located at
    • A company that claims to be incorporated or a registered LLC but isn’t listed is most definitely a scam.
    • These same directories often will have listings of violations or complaints by that company as well, although this will vary from state to state.

Method 3
Reporting Shady Companies

  1. 1
    Talk with the National Fraud Information Center. The National Fraud Information Center is a project of the Consumer’s League. While it is not a law-enforcement of governmental organization, it does collect information about scams on behalf of and shares information with governmental organizations about common scams.[11]
  2. 2
    Reach out to the FTC. Although the FTC doesn't act as a law enforcement agency, it is a governmental agency. The FTC collects complaints of fraud from consumers and distributes them to the appropriate law enforcement agencies. Report a scam at[12]
    • All you’ll need is your personal information, some details about the scam, and as much information about the company as you can get, including email, web URL, and telephone number and physical address if possible.
  3. 3
    Contact the Department of Education. The Department of Education’s Office of the Inspector General is yet another agency at which you can report a suspected or confirmed scholarship scam. Inspector General’s offices straddle the line between law enforcement and complaint clearinghouses. An Inspector General is an independent office that has the power to conduct wide-ranging investigations, can subpoena documents and witnesses, and issue reports and recommendations to attorneys general.[13]
    • Inspector General’s offices are particularly well-equipped to take complaints from and protect whistleblowers. If you want to report unethical or criminal activity at a place where you work, contact an Inspector General.
    • Report suspected of confirmed fraud at
  4. 4
    Contact your state attorney general’s office. Each state also has a consumer protection agency, which is run from the office of each state's attorney general. If you'd like to file a complaint with the state office of consumer protection, simply perform an internet search for "consumer complaints to [your state's] attorney general" or go to and find the listing for the attorney general in your state.[14]
    • Although each state is going to have different rules and procedures, you’re going to want to have the same kind of information for a state consumer protection agency as you would want to have for the FTC. In addition, it’s best to try and make sure you know how much money you lost on the scam, if any. If applicable, add in the money you would have made while you were being swindled .
    • The biggest advantage of making a complaint to an attorney general’s office is this: and attorney general is an office of law enforcement—the most powerful prosecutor in a state or federal jurisdiction. They can take vigorous action where other organizations cannot.

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Categories: Budgeting and Financial Aid for College | Applying for Tertiary Education