Wednesday, May 7, 2008

Tell-tale Signs of Financial Aid Scams

Career Center - by Carie Bishop

According to FinAid, a non-profit organization, hundreds of students lose over $100 million a year to financial aid scam artists. Scammers sometimes offer scholarship prizes, scholarship-search services, or offers for scholarships with special application or entry fees. Others promise loans following payment of up-front fees and then never deliver on them. Scammers may resemble actual lending or scholarship organizations, but most have common flaws if you know how to look for them.

Here are five red flags:

Suspcious addresses. If an organization offers scholarships, loans, or grant services with a post office box or residential return address, be very afraid. Research the company carefully to determine if there is a company address and verifiable telephone number (call directory assistance).

Loan-application charges. Legitimate financial institutions typically deduct application and processing fees at the time of disbursement of funds.

Claims offering unclaimed loans or scholarships. Loans, grants, and scholarships are always matched with individuals based on need and educational expenses. Be wary of any company that promises to round up unused funds for you. Fee-based matching services are usually scams. It’s a telltale sign when a service wants to collect “origination fees”.

Guarantees. Don’t buy into claims that they’ll get you a scholarship or refund your money. Read the small print on any contract before sending money to anyone. If they need your credit card to “hold your scholarship”, run and hide. Legitimate organizations do not charge fees for processing scholarship applications.

“You’ve been selected to win a scholarship…” No, you haven’t. You’ve been targeted by scammers. To receive a scholarship, you’ll need to complete a number of assessments and submit a completed application. Scholarships do not come looking for you.

If you think you’ve encountered a scam, contact the National Fraud Information Center, your state Attorney General’s Office, or The Federal Trade Commission.