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Types of Scholarship Scams

Thursday, November 19, 2020

There’s no denying that education is expensive. 57 percent of US students graduated with student debt in 2018, with an average debt per graduate of $16,649. Thankfully, for some lucky students, scholarships are available to help offset the costs of higher education. Many assist with pricey tuition fees, while others offer funds toward expenses such as accommodation and school supplies.

Unfortunately, numerous scams making the rounds seek to take advantage of unsuspecting students. Fraudsters prey on needy scholarship applicants and attempt to steal money, banking details, personal information, and more.

Thankfully, there are ways to spot these schemes so you can avoid wasting your precious time and use it to focus on real scholarship applications. But with so many offers of financial aid out there, legitimate and fake, how do know when you’ve hit on the real deal?

In this post, we reveal the types of scholarship scams you may come across and the steps you can take to avoid being duped.

Types of Scholarship Scams

First, let’s take a look at the most common types of scholarship scams circulating online today. Scholarship scams come in many different forms, but often follow the pattern of traditional ruses, such as phishing schemes and overpayment scams. The promise of a scholarship is simply what the fraudster running the scam has chosen as their guise, and they are specifically targeting students.

Phishing schemes

A phishing scheme often starts with an email sent to a large number of recipients, but communication may begin via a phone call (vishing) or SMS message (smishing). The idea is that the scammer is “phishing” for information, such as your name, address, phone number, Social Security number, or banking information.

Here are a few phishing email scenarios:

  • The email requests information such as your address and phone number and promises to send more information about a scholarship.
  • There’s an application form attached to the email that the sender wants you to complete and send back.
  • The email includes a link to an application form on a legitimate-looking website which is actually a “phishing site” designed to steal your information.

In each case, chances are, instead of getting information about or applying for a scholarship, you’re really just sending detailed information that a scammer could use in various types of fraud, even identity theft. These emails could be sent out indiscriminately by the thousands in the hopes that they will trick at least some unsuspecting students. However, in other cases, attacks could be targeted (this is known as spear phishing). For example, a criminal could obtain a student email list for a particular university. They could then craft a very convincing phishing scheme aimed at swindling those students.

One 2016 scheme targeted students at Queen Mary University London. Students received an email purportedly from the schools’ financial aid department (complete with the school logo) offering a government educational grant. They were asked to hand over personal and banking information in order to receive the grant. Thieves then used these details to withdraw funds from at least one student’s bank account.

Advance-fee scams

Similar to a phishing scheme, an advanced-fee scam is often initiated via email. In this case, the scammer will ask for some type of fee to be paid. This could, for example, be in return for more information or for your application to be submitted. This should be a huge red flag. Information about scholarships should be available publicly and for free.

In other advance-fee scams, you’re told you’ve been selected for a scholarship that you haven’t even applied for. There’s often the catch that you need to pay some type of transfer or administration fee before you can get the money. In reality, no money will ever be sent your way. Some fee-based scholarship scammers go to great lengths to make their scheme appear legitimate, often by genuinely awarding a large scholarship. While this might not sound like a scam, imagine that 20,000 people pay an application fee of $10. If the organizers pay out a $40,000 scholarship, they still get to walk away with $160,000 in their pockets. What’s more, their reputation remains intact so they can carry out the ruse over and over, even targeting the same individuals.

Sales pitch schemes

In your quest to find a scholarship, you may be invited to a seminar on the topic. Be very wary of these as they can turn into high-pressure sales pitches. Some scholarship seminars really do stick to the topic of financial aid, but you still need to have your wits about you. There’s a high risk that the organizers will take some type of fee and either walk away with the money, or pay out a nominal amount to make the whole thing look legitimate.

Some organizations purport to be helping people with scholarships, but instead are using the guise to try to sell other products or services. This tactic might be used by firms selling insurance or investment products, usually things you don’t need or want and very likely can’t afford anyway. If you’re invited to a scholarship seminar or one-on-one interview regarding financial aid, there’s a chance that this is where it’s heading.

Overpayment scams

Overpayment scams are very tricky to weed out and can be used for a whole host of products and services, including scholarships. The thing about these scams is they really play on your trust as there is an upfront payment (to you) involved. Here’s the gist:

  • You receive a letter in the mail stating you have been selected for a scholarship. A check comes in the mail with the letter or shortly afterward. Delighted, you deposit the check in your bank account.
  • Very soon after the check arrives, you receive a letter or email, stating that there has been an overpayment of part of the sum.
  • Still content with having received at least some money, you send back the portion that was “overpaid.”
  • The check never clears and you are now out of pocket for the “overpayment.”

Criminals will even set up a legitimate-looking application process before putting the overpayment scheme into action.

Lottery-based scholarships

Lottery-based scholarships are not necessarily scams, but they may be something you want to avoid. The way these typically work is you complete surveys in return for entry into a prize draw (the prize being a scholarship). There are many legitimate lottery-based scholarships out there that do pay out money to the winner.

But there is a catch. No real skill is required to win these lotteries, but rather a winner is drawn at random. The company providing the scholarship is making money off the information you provide when you complete a survey by selling it to third parties. They then pay out a small portion of this profit as a scholarship. This is similar to some fee-based schemes as discussed above. But instead of paying money to enter, you’re giving up your personal information.

In this model, the organization needs a large number of applicants to make the scheme profitable. As a result, your chances of winning are very slim. The odds may be no better (or worse) than when you buy a scratch card from your local convenience store.

One example of this type of scheme is ScholarshipPoints.com where you take surveys to earn points that can be used to enter scholarship lotteries.

 

What to do if you Suspect or Confirm a Scholarship Scam

Despite your best efforts, you may still encounter a scholarship scam in your search for college aid. If you do run into a scam, or what you suspect to be a scam, there are several agencies to which you can report the company:

 

If you are unsure about whether you have encountered a scholarship scam or whether you should report it, talk with a financial aid counselor, guidance counselor or academic advisor at your school for advice.

 

The original blog was written by Taylor J. Valley, a Graduate Assistant in the University Scholarship Office at UNC Charlotte, and a student in the Master of Public Administration program. It was most recently edited by Katie Franck, an Undergraduate Project Assistant in the University Scholarship Office, and a student in the Bachelor of Science Psychology program.