A scholarship scam involves fraud concerning scholarships for school and education. As the costs of education continue to increase, parents increasingly look to scholarship organizations to help them pay for their children's college expenses. However, tens of millions of dollars are lost each year to scholarship scams. On November 5, 2000, Congress passed the College Scholarship Fraud Prevention Act which established stronger sentencing guidelines for such fraud.

What Should I Look Out for?

Scholarship scams typically use a number of slogans that are tell-tale warnings to the wary consumer. These include:

  • "We'll do all the work" - You must usually fill out and apply for scholarships yourself.
  • "You cannot get this information any place else" - There are free scholarship listings from many public sources.
  • "You've been selected by [national organization] to receive a scholarship" or "You've won a scholarship from [national organization]" - Before sending out any fees, look into the national organization or program to make sure it is legitimate.
  • "We will need a credit card or bank account number to hold the scholarship" - Never give this out without all the information in writing first. You may find yourself with an unauthorized withdrawal.
  • "Guaranteed or your money back" - You can never be guaranteed a scholarship. Make sure you receive and read any refund policies.
  • "It will cost some money" - Free money, such as a grant or scholarship, shouldn't cost you anything. Beware of any application fees; most legitimate sponsors will deduct any fees from the disbursement money.

What Should I Do if I Am Confronted with Such a Scam?

If you believe you have been a victim of a scholarship scam, you should contact the Federal Trade Commission (FTC). Under the "Project Scholar scam," the FTC has targeted scholarship scam artists. It has produced court orders prohibiting future fraud against 11 companies and 30 individuals. It has also resulted in refunds to consumers or the U.S. treasury.

Do I Need a Lawyer Experienced with Consumer Fraud Issues?

A lawyer would be able to inform you of your rights and how to spot a scholarship scam. An experienced lawyer may also help you in dealing with the FTC if you believe you have been a victim or you believe you have a claim against a company or individual.