Financial Aid Scams

Beware of Financial Aid Scams!!!

If you have to pay money to get money, it's most likely a scam!

Every year, thousands of students and parents are defrauded by scholarship scams. It is estimated tat the victims of these scams lose more than $100 million annually. Scam operations most often imitate legitimate government agencies, grant-giving foundations, education lenders and scholarship matching services, using official-sounding names containing words like "National," "Federal," "Foundation," or "Administration." In general, be cautious of scholarship applications that require an application fee, scholarship matching services who guarantee success, advance-fee loan scams and sales pitches disguised as financial aid "seminars".

Remember filing for federal and Tennessee state aid is free. Complete the FAFSA at

Be careful not to go to .com or .org sites. These sites charge for filing your FAFSA.


Below is a list of common scams:

Scholarships that Never Happen

Many scams encourage you to send them money up front, but provide little or nothing in exchange. Usually victims dismiss the expense, thinking that they simply didn't win the scholarship.


Scholarships for Profit

This scam looks just like a real scholarship program, difference being they require an application fee. The typical scam receives 5,000 to 10,000 applications and charges fees of $5 to $35. These scams can afford to pay out a $1,000 scholarship or two and still pocket a nice profit, that is - if they award any scholarships at all. Your odds of winning a scholarship from such scams are less than your chances of winning the lottery.


The Scholarship Prize

This scam tells you that you've won a college scholarship worth thousands of dollars, but requires that you pay a "disbursement" or "redemption" fee or the taxes before they can release your prize. If someone says you've won a prize and you don't remember entering the contest or submitting an application, be suspicious.

A common variation the sponsor sends the student a check for the scholarship, but requires the recipient to send back a check for the taxes or some other fees. Or the sponsor sends a check for more than the scholarship amount and asks the recipient to send back a check for the difference. The scholarship check ultimately bounces, as it is a forgery, but by then the recipient's funds are long gone.


The Guaranteed Scholarship Search Service

Beware of scholarship matching services that guarantee you'll win a scholarship or they'll refund your money. They may simply pocket your money and disappear, or if they do send you a report of matching scholarships, you'll find it extremely difficult to qualify for a refund.


Investment Required for Federal Loans

Insurance companies and brokerage firms sometimes offer free financial aid seminars that are actually sales pitches for insurance, annuity and investment products. When a sales pitch implies that purchasing such a product is a prerequisite to receiving federal student aid, it violates federal regulations and state insurance laws





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