Students: Avoid these 5 financial aid scams

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Most scholarship programs out there want to help starving college students. A few try to take advantage. According to Finaid.org, victims of scholarship scams lose more than $100 million each year to crooks who prey on college students in need. You don't have to be a victim. Here's how to spot the top five scholarship scams.

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Scam 1. The Not-So-Free Scholarship

If you find an award that charges an application, processing or any other fee, run like hell, says Michael Miller, director of the office of financial aid and scholarships for the University of California, Santa Barbara.

"Never pay for a service when applying for federal, state and institutional financial aid," he says. "If you are approached by a company seeking a fee, be very cautious."

Whether applying for funds through the government, a college or a private organization, students should never pay more than the cost of mailing in the application.

Scam 2. The Award Guarantee

"If [a scholarship provider] makes claims that are difficult or impossible to substantiate, such as that they'll guarantee that you'll get your money back if you pay them some money for a scholarship or that they have information that nobody else has — things of that nature — that's something to stay clear of," says Jim Anderson, director of financial aid at Montclair State University in New Jersey.

While some colleges automatically issue scholarships or grants to students who meet certain criteria, such as having status as a high school valedictorian or National Merit finalist, private scholarship organizations can never make that guarantee.

Scam 3. The Up Close and Personal

"The first thing that usually gives the scammer away is they want your personal identifying information," says Heather McDonnell, associate dean of financial aid and admissions at Sarah Lawrence College in New York.

Students have to provide basic information on scholarship apps, which may include the college they're attending, their GPA or SAT/ACT scores. However, legitimate scholarship applications won't ask for things like your credit card number or Social Security number, McDonnell adds.

Scam 4. The Unnecessary Help

The hunt for the perfect scholarship — or combination of awards — is tough. It's easy to invest countless hours in filling out forms, writing essays, gathering recommendations, creating a mind-blowing personal portfolio and making sure that test scores get sent to the appropriate places. If a company offers to do the legwork for you, approach with caution, warns Miller.

"There is nothing magical about applying for financial aid and scholarships, so students should not look for outside agencies to do the work for them," he says. "If they use common sense and do not pay for services, they will navigate the process just fine."

If you need help navigating college finance terrain, there is free assistance available. College Goal Sunday and the Federal Student Aid Information Center's helpline at 1-800-4-FED-AID can answer questions about applying for federal aid, while your school's financial aid office can help with everything else.

Scam 5. The Bait and Switch

Sometimes an organization looks like a scholarship provider but tries to sell families services or products instead. These organizations may not be out-and-out scams but oftentimes do confuse consumers into purchasing something they may or may not need.

Fafsa.com, a site that offers help applying for federal aid for a fee, could be one example, says Jim Anderson.

"Their claim would be that they're offering a service for a fee, which I guess is technically correct, but the reality is that a lot of people wander onto this website in error and end up paying a fee for an application that really should be free to file," he says.

The actual Free Application for Federal Student Aid is available at no cost at Fafsa.ed.gov.

To avoid scams entirely, Miller recommends keeping your eyes and ears open and report anything suspicious to your state's attorney general's office.

"Just remember," Miller says, "if it sounds too good to be true, it typically is."

Thanks to Michael Miller, Jim Anderson, Heather McDonnell and, respectively, the University of California, Santa Barbara, Montclair State University, and Sarah Lawrence College.