Financial Aid Scams

Financial Aid Scams: Every year, families across the U.S. lose millions of dollars to fraud and scams associated with financial aid and scholarships. This particularly insidious practice takes advantage of unsuspecting students and their families who are eager to find sources of aid and do not evaluate the sources in a critical enough manner. The Scholarship Fraud Prevention Act provides some protection for families, but the best protection is to not get suckered in the first place. According to the Federal Trade Commission (FTC), students and their families should be on the lookout for the following specific phrases in scholarship information:

• "The scholarship is guaranteed or your money back."
• "You can't get this information anywhere else."
• "I just need your credit card or bank account number to hold this scholarship."

Another form of fraud that students need to be wary of when involved in pursuing financial aid is identity theft. Identity theft is basically someone obtaining your personal information and using that information to apply for and receive credit cards, merchandise, services, or loans (including student loans). With your Social Security number or driver's license number, they may be able to rack up large amounts of debt in your name. Correcting this type of fraud is a lengthy and complicated process that could take years to complete.

Identity thieves can obtain your personal information from your personal computer if you use online banking or make purchases over the Internet. Using your Social Security number for any purpose can put you at risk. If the information falls into malevolent hands, the consequences could impact your ability to obtain financial aid. It could also mean you end up responsible for Federal Student Loans that are not yours. Here are some basic tips to avoid identity theft:

• Never throw away credit card applications. Shred them or otherwise destroy them so nobody can retrieve the application from your trash.
• Protect your Social Security number. If a business asks you for it, ask them why they need it and what they plan to do with it.
• Unless you originated the contact, never give out financial or personal information over the phone or the Internet.
• If you apply for Federal Student Aid over the Internet, be sure you are using the official government sites. These sites are secure.
• Keep your online student identifier (or PIN) in a safe place and never give it to anyone.