Beware of Scholarship Scams

Scam letter we received (click to enlarge).

If you are the parent of a college student or high-schooler in the beginning stages of selecting a college, one of the most important considerations is how and where to find scholarship money. Skyrocketing costs for higher education have made the quest for financial aid a must-do proposition.

There is, however, a need for caution. Not all college scholarship programs are created equal. Case in point: a letter my son received recently from USA Scholarship, a Washington D.C.-based provider of “assistance to computer students.” The one-page offering looked suspicious from the outset and, as they say during the NFL broadcasts, “upon further review” several red flags appeared.

Flag 1. The mailing label. It was obvious the letter was sent as a mass mailing. Printed on sepia-toned paper, the letter’s stark white computer-generated address label pasted near the top stuck out like a sore thumb. While not all mass mail offers are bogus, this one just didn’t pass the smell test.

Flag 2. The salutation. The letter begins “Congratulations,” – no name used, just a generic greeting. Again, not always a problem, but the offering certainly lacked any personalization. Fishers-based SallieMae, the nation’s leading saving, planning and paying for education company, cites this as a specific caution to avoid online fraud.

Flag 3. The generic field of study. This is where my antenna really started to buzz. The letter claimed my son’s “selection” to receive this offer was “designed specifically for students majoring in Computer in any college or university.” Majoring in Computer? Clearly this was a fill-in-the-blank mass mailing technique. Biology? Sure. Mathematics? Yeah, that’s a college major. But, just plain Computer? Not so much.

Flag 4. The processing fee. After peppering the reader with statistics about how many students they’ve helped, and how much money is available (up to $7,500 is the claim) came this familiar phrase: “There is a $29.00 fee necessary to cover the cost of processing the applications.” High school and college counselors adamantly warn against paying money to receive scholarship information.

Indeed, a closer read of the letter indicates that USA Scholarship is merely providing respondents with lists of available scholarships, not making direct awards. And, the implication is that the information to be provided is customized to the respondent’s unique circumstance. However, a Web search quickly found the story of a student who, after paying USA Scholarship its required fee, “received an envelope with 24 incomplete, photocopied scholarship offers, many with out-of-date information. Sixteen of them had nothing to do with [his major].”

Flag 5. The conditional money back guarantee. The letter reads “students who fail to qualify for at least $1,000 in scholarships may be entitled to a full refund of their application fee. Notice the non-committal “may receive”. And, research of USA Scholarship’s practices found that such refunds require proof of denial for each rejected application.

My online research returned several responses from people disappointed by their experience with USA Scholarship, and included a warning from the Better Business Bureau about the organization’s advertising practices.

The lesson is that there’s no need to pay for such listings of scholarship resources. Plenty are available online free of charge, and school and college counselors have ready access to such materials.

Two additional red flags are worth mentioning. The USA Scholarship’s Web site is spartan at best with few details. And, stamped on the letter in large red letters is “Reply By May 15 2010” – suggesting that immediate action is required. SallieMae’s Web site suggests that consumers “Take a breath before acting on an unexpected email solicitation. Fraudulent emails are written in a way to get you to react immediately” – an admonition that also applies to similar act-now pitches that arrive via U.S. mail.

Paying for college is challenging enough without the distraction of questionable offers that can slow or derail the process.