Scam to Scram: Avoiding Financial Aid College Cons

By Pamela Rossow

With the U.S. Department of Education estimating around $150 billion in federal student aid and rising tuition costs, it’s no wonder that many students are motivated to complete FAFSAs, spend hours researching scholarships and grants, and do their best to find legitimate financial aid rewards. Fortunately, for many students, they do receive aid and their college experiences are more positive because of the awards. 

However, what about the students who are victims of financial aid scams? What can you do to avoid being conned? Is financial aid information really free? 

Avoiding financial aid scam

Here are some tips to spot a scam!


Advanced-fee loans

If you stumble across a dreamy, low-interest, college loan that necessitates an upfront fee, step away from the computer. Better yet, report the lender to the Better Business Bureau or call the Federal Trade Commission hotline. Legit lenders deduct fees when the disbursement checks are issued—not prior. 

Where’s the number?

If there is no phone number by which you can reach someone to ask questions regarding the aid, be wary. Most companies, in addition to an email address, will provide a phone number so you can contact them. 


“You have been selected as the winner of an incredible scholarship in the amount of ____!” Um—you never entered a contest. Wait, there’s more. You just have to call the provided phone number and pay a small redemption fee. It is very small compared to the amount of your scholarship sweepstakes win so why not fork over the $15? Nooo! Just another scammer . . . . 

First come, first served.

Quick! The sooner you apply and send in your application fee in the amount of $30, the better chance you have of scoring an incredible amount of college cash. Stop—why are you even considering shelling out that $30? Forget about it—time to move on past the con. 

Redemption fees

As mentioned above in the Sweeps scam, a required fee may be referred to as a redemption fee, a processing fee or a disbursement fee. Legit scholarships and grants do not require students to pay to receive an award. Think about it—thousands upon thousands of unsuspecting students paying $30 per person equals a lot of quick cash for the scammers! 

Affiliation claims

The scammer sounds legit and they appear to be endorsed by the state since they throw around terms like federal, national, administration or foundation around. Alert! Just because you spot a Washington, D.C. address somewhere on the flyer doesn’t mean that it is automatically a federal or state agency. Do your homework and first check out the U.S. Department of Education website. 


You pay and you are guaranteed to be awarded a full-ride scholarship. Don’t think so. Read the fine print and remember that there are no guarantees when it comes to financial aid. Again, you should not have to pay a fee to receive a scholarship or grant. 

Unclaimed scholarship money

“2.2 billion in scholarship money went unclaimed last year!” Hmm—no legit financial aid providers would ever make such a statement. Have you ever seen a monetary amount of alleged, unclaimed, scholarship money on a website such as the U.S. Department of Education’s site? Don’t think so. Keep searching. 

Remember, there are lots of financial scams out there. Don’t fall prey to them. When in doubt, report suspicious activity to the FTC (Federal Trade Commission) or the OIG (Department of Education’s Office of Inspector General). 

A great first step to seeing if you are eligible for many different types of federal aid such as grants, loans or work study programs is to fill out a free FAFSA at You should never have to pay a fee to complete the FAFSA.

You can also check out your state grant agency, your financial aid office or legit non-profit agencies for more financial aid information. When in doubt, ask for help from a trusted friend or grown-up when it comes to filling out financial aid forms. Sometimes an extra pair of eyes and ears can help you spot scammers before you become a con artist’s next victim.