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Top 5 Student Financial Aid Scams & Fraud to Watch Out for


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It’s one of the most exciting times in a young adult’s life – the chance to go off to college on their own. Students put a lot of thought into choosing the right school, then begin to look for ways to pay for and afford college. After all, the latest statistics show that it costs on average of $173, 282  for a four-year degree at a private university.

Unfortunately, this exciting time can turn into a nightmare for students, and their parents, if they’re caught up in one of the many college scholarship or student financial aid scams that are happening now. In fact, according to FinAid, consumers lose about $100 million each year to financial aid fraudsters.

But you don’t have to be a victim. Luckily, there are signs of fraudulence to look for that will help keep your aid and scholarship efforts on track.

Here are five of the most common scams, followed by a few tips to help you find student aid the right way.

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Scam # 1: High Pressure Seminars
This is a particularly nasty scam because it preys on the fear of parents and students who, if they don’t accept the help of the scammer, won’t be able to get financial aid on their own. It all starts when the student receives an invitation in the mail to a free seminar on how to get the best financial aid.  During the presentation, “facts” are shown about the difficulties of getting financial aid that are designed to scare the participants. At the end of the seminar, parents are matched up with an adviser who proceeds to pressure them into paying enormous fees to help them find the financial aid they need. Sometimes these fees can run into the thousands. It’s similar to the high-pressure tactics used by time-share salespeople. In this scam, though, the salespeople are playing on the fears and desires of parents who just want to provide their child a quality education.

Scam #2: Wrong Websites
Submitting a FAFSA form – the required paperwork to apply for student aid – simply requires a trip to the government’s website ( and is completely free. But some crafty people have created websites that make visitors believe they have to pay an application fee to submit the form. Their websites all have the word FAFSA on them and look official, even using terms like “foundation”, “federal”, “national” or “association.” Don’t be fooled – it doesn’t cost anything to submit an application for student aid.

Scam #3: Paying for Nothing
In the same vein, other scammers charge people to help with the process of filling out and submitting the FAFSA application. They claim that it’s simply too difficult for the average person to do, and charge anywhere from $100 to $1,000 for assistance. Although it’s true that it is a complex process and takes a lot of time, it also requires the person filling out the application to be knowledgeable about personal details. Most often, if you pay someone to do it, they’ll simply ask you for the information, then fill in the blanks, getting hundreds for very little effort. At the worst end of this scam are those who ask for the fee upfront, then simply disappear, never even filling out the form.

Scam #4: The Phone Call
Some young adults receive phone calls from callers giving the great news that they have won a college scholarship or have been awarded a grant. Other callers pretend to be with the Department of Education and tell the student that they have been selected to receive a grant that will take care of all of their student loans. They then go on to tell the student (or parent) that they need their bank account information in order to deduct a processing fee. This is a scam. There is no processing fee for a grant or scholarship, and the Department of Education does not have a program to replace loans with grants. The scammer will simply take money out of your bank account, never to be heard from again.

Scam #5: Stealing Your Identity
Sometimes people get letters in the mail telling them that they’ve been selected to receive student financial aid or a scholarship. In order to collect, they are instructed to call a number. Once they do, they’re told that, after paying a small processing fee, they will be awarded the money.  However, these thieves are really after your personal information. They’ll ask for social security numbers, bank account information and driver’s license numbers. As soon as they’re off the phone, they’ll begin taking steps to make you a victim of identity theft.

What to Watch Out for

In addition to the above mentioned scams, there are certain warning signs that will alert you if someone is trying to pull a fast one.  If a company or organization ever does any of these things in relation to student aid or a scholarship, you can be sure that you’re dealing with a scammer.

  • Fees. Don’t believe anyone who asks you for up-front fees, processing or handling fees, origination fees or advanced fees.
  • Guarantees. If someone promises that they can get you a scholarship if you work with them, run in the other direction. No one can make that kind of guarantee.
  • Pre-Approval. Any time someone tells you that you (or your child) have been pre-approved for student financial aid or a scholarship, it’s a scam. That’s simply not how the process works.
  • Purchases. Nothing legitimate will ever require that you purchase another product in order to be granted aid or a scholarship.
  • Experts. Beware of someone who tells you that the process is too complicated and only they truly understand it.

Final Word

Scams are bad in general, but when they target youth who are just getting a start in life, it seems even worse. If you have a child getting ready to go off to college, share this with them and keep an eye on the kinds of aid they are applying for. It could be vital to their financial future.

Do you have a scam story, or do you know of any other financial aid scams that readers should avoid? If so, I’d love for you to post your comments below. Let’s get the word out about these types of scams and help put an end to them!


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Suzanne lives in Texas and has been a full-time freelance writer for 20 years. She’s written for numerous business and financial publications, both online and in traditional print media. She also owns her own small business and has a passion to help others achieve their dreams of financial independence. Her goal is to eventually work from a remote island that is equipped with Wi-Fi.