Guide to Financial Aid Scam

If we lived in a perfect world, people wouldn’t try to steal money from others looking for financial aid. But, unfortunately, the world is not perfect, and there are in fact people who create scholarship and loan scams in order to trick others into giving them money. Here are some ways to detect, avoid, and report financial aid scams.

And remember, as www.FinAid.org states as its number one rule, “If you have to pay money to get money, it’s probably a scam.”

How to detect a Financial Aid Scam

Most scam agencies fool students and parents by placing professional looking titles such as “National,” “Federal,” “Foundation,” and “Administration.” However, not every financial aid agency with one of the above titles is a fake. To find out if it really is a scam or not check if:

• They ask for an application fee
• They guarantee you a scholarship or will refund your money
• They offer free or charged seminars
• They ask for a disbursement or redemption fee
• They ask for an advance-fee loan before they give you the loan

If you notice one or more of the above problems with the financial aid agency, report it immediately. Also, make sure that you withheld any important information that could give away your identity to a criminal.

Many people come across scams for the most important and useful financial aid form, the FAFSA. The FAFSA is the Free Application for Federal Student Aid, so if a website or financial aid service asks for a fee to pay for the application, you know it’s a scam. The official application site for the FAFSA is http://www.fafsa.ed.gov/. In general, any financial aid agency does not and should not ask for an application fee. Financial aid is there to help you with monetary problems, not take more money away from you before they guarantee any financial help. Even if the agency sends you a check beforehand, chances are that the check is a fraud and will bounce. So, do not give money to any agency before applying for any type of financial aid.

Though most people who apply for financial aid end up receiving it, financial aid is in no way guaranteed to anyone. So, financial aid agencies cannot guarantee that a person receives a scholarship, grant, or loan from any source. If a website announces that it guarantees that all applicants will receive financial aid, or their money back, the applicants will end up losing money. By planting this seed of confidence in the students and parents, the fraud agencies take the applicants’ money and run. Even if the students and parents receive applications for financial aid, they have little to no chance of getting their money back from the fraud agencies, let alone a scholarship, loan, or grant. So, if a website or company guarantees that you’ll receive financial aid if you pay them money, do not pay them.

When you find that an agency offers free seminars about financial aid, your first instinct is to go, right? Well, fight that urge. Though they advertise that the seminar will consist of tips on how to apply for and receive financial aid, they mostly try and sell products related to financial aid to you. Mostly insurance companies and brokerage firms run these seminars, not financial aid agencies. At the seminars, though they might mention a couple of tips on financial aid, they will also attempt to persuade the attendees to pay for financial aid consulters, investment products, scholarship matching services, and overpriced student loans. Not only are the seminars considered scams, but they also violate federal and state regulations. So, if you hear of or attend a seminar on financial aid, do not buy any of their services and immediately report them to the government.

Like with application fees, financial aid agencies cannot charge disbursement or redemption fees. If you have already paid an agency, and they ask you for a redemption or disbursement fee after, immediately cut contact with the agency and notify a trusted individual or government official who is licensed to deal with scams and frauds.

If you come across a loan that has an extremely low interest rate, unlike other federal or institutional loans, check if they require an advance-fee loan. Official loans never ask for a person to pay a fee before receiving the loan, but minus the fee charge from the loan. So, make sure that a banker or recognizable lender, such as the government or a private organization, is issuing the loan. If the agency asks for an advance-fee loan, immediately cut contact with the agency and notify a bank manager or trusted individual who is licensed to deal with scams and frauds.

For more information: http://www.finaid.org/scholarships/scams.phtml

While watching out for the traps listed above to get you into a scam, also be cautious of the advertisement and communication methods that the agencies use. Scholarships and grants are for students who meet a certain set of criteria, whether it’s academic achievement, athletic ability, etc. So, no scholarship or grant will be available to anyone who applies. If an agency announces that it will apply for a scholarship on the student’s behalf, it is a scam. All students must apply for a scholarship for themselves. If the agency asks for unnecessary personal information, such as your social security number or bank card number, you know it’s a scam.

If you receive a brochure or visit a website from the agency, you must check for certain details that could notify you of a scam. Firstly, check if the company provides a telephone number. If not, it is probably a scam. Secondly, verify if the mailing address is a residential or mail drop address. If so, then it is probably a scam. Thirdly, if a company states that it is federally or otherwise professionally approved, do not take it for granted. Check the government websites to see if the agency’s name is on the list of federally approved financial aid agencies. Also, the government does not sponsor or endorse private entities. If you receive a call from the agency, and feel assaulted by the speaker, then notify a trusted individual and/or government official, because the person is probably from a fraud agency. Always wait for a written confirmation of offers, scholarship awards, or cancellations before sending money to any company. Also, if the agency demands a response in a certain time frame, ignore and cut contact with them immediately.

When unsure, check local and national listings for financial aid agencies, federally approved agencies, professional private organizations, and Directory Assistance. If your search has not aroused any suspicions, then you have avoided a financial aid scam!

For more information: http://www.studentaid.ed.gov/portalswebapp/students/english/lsa.jsp

If you come across a financial aid scam or what seems like fraud, immediately confirm your doubts with a trusted individual who is knowledgeable and influential in the area of frauds and scams. Then, if it involves monetary problems, immediately notify and discuss with your local bank manager, to find options to get your money and information back. Finally, notify the government officials in charge of frauds and scams: The U.S. Department of Education and the Federal Trade Commission.

For their information: http://www.studentaid.ed.gov/PORTALSWebApp/students/english/lsa.jsp#reportfraud