How to Investigate Suspicious Scholarship Offers

These tips and tools will help you combat scholarship scams.

Tools for Investigating Corporations

If an organization claims to be incorporated – by including “Inc.”, “Incorporated”, “Corporation”, or “LLC” as part of their name, or otherwise identifying themselves as a corporation – their articles of incorporation must be on file with the Office of the State Attorney General or the Office of the Secretary of State. Even if the company is incorporated in another state, they must be registered as an alien or foreign corporation in order to do business in your state. Many states require corporations to file a copy of their annual report as well. If you discover that a corporation isn’t really incorporated, that would suggest that it is a scam trying to pass itself off as a legitimate business.  Application, handling, processing or any other fees – scholarships should cost you no more than Tools for Investigating Nonprofit Organizations

Tools for Investigating Corporations

Foundations and non-profit organizations must register with the state Attorney General’s Office or the Office of the Secretary of State. Many states have a separate State Registry of Charitable Trusts for this purpose.

Most states have laws that prohibit companies from using a business name that falsely gives the impression that the company is a government agency, foundation, or public benefit corporation. Although these laws aren’t enforced very well, if a company uses the words “Fund” or “Foundation” in its name but is not a foundation, be careful.

Shocking as it may seem, just because an organization is a nonprofit corporation doesn’t mean it isn’t a scam. All nonprofit status really means is that the corporation does not have shareholders and retains all of its “profits”; it does not mean that it is a charitable organization. Nonprofit corporations are not required to have 501(c)3 tax exempt status. Nothing prevents a nonprofit organization from paying exorbitant salaries to its employees or from providing generous employee benefits.

Your local public library may have a copy of the Directory of Nonprofit Organizations, the Encyclopedia of Associations and the Foundation Center’s Foundation Directory and Foundation Grants to Individuals. If the organization is not listed in these directories, be suspicious.

Talk to the Organization

If the organization has published a telephone number in their solicitation, it often helps to call the number. Call first as a gullible clueless student and see what they tell you. Sometimes they will unwittingly reveal information about their organization if you ask the right questions in a non-confrontational manner.

If they want a confirmation number, use the one provided on the postcard received by the student. Often the same number is printed on all the postcards.

Other Resources

  • The State Consumer Protection Offices can sometimes provide helpful information.
  • The Federal Trade Commission has published a directory of FTC Regional Offices and federal, state and local consumer protection resources.
  • If you conduct a Google search for the name of the organization or scholarship and the word ‘scam’, you may find that other people are also suspicious about the organization.
  • Try calling the Federal Student Aid Information Center at 1-800-4-FED-AID. They have a list of scams that have been the subject of law enforcement action.