There are many real scholarships available, but scholarship scams do exist. Following a few rules of thumb can help you avoid the pitfalls.

But if you believe an offer you receive is a scam, you should report it. Sometimes a scam persists for years before people catch on to it.

Rules of Thumb

1. If you must pay money to get money, it might be a scam. 
2. If it sounds too good to be true, it probably is.
3. Spend the time, not the money.
4. Never invest more than a postage stamp to get information about scholarships.
5. Nobody can guarantee that you'll win a scholarship.
6. Legitimate scholarship foundations do not charge application fees.
7. If you're suspicious of an offer, it's usually with good reason.

Tips

• Be cautious if fees are involved. Even if the organization turns out to be legitimate, it is never in your best interest to respond to an offer with an up-front fee.
• Get an independent opinion from a trusted source, such as a financial aid administrator at a local college or university, the local reference librarian, or your high school guidance counselor.
• Call Directory Assistance to see if the company has a listing. If it doesn't, it's unlikely to be legit. You can reach Directory Assistance by dialing 1-202-555-1212. (Use 1-800-555-1212 to see if they have a toll free number.) You can also look for a listing online using 555-1212.com, Switchboard, and WhoWhere.
• Never give out personal information to strangers. Don't provide your checking or savings account numbers, Social Security number, or other personal information, no matter how reasonable the request sounds.
• Get it in writing before responding. Get offers, cancellation and refund policies, and guarantees in writing before sending money. Then read all the fine print. Don't rely on verbal promises.
• Don't respond to unsolicited offers.
• Ask the organization how it got your name. If it got your name from a reputable source, verify it with the source. Scams often use carefully written scripts designed to elicit your SAT score or GPA and then feed it back to you later in the conversation to reassure you as to their legitimacy.
• Ignore offers that involve time pressure. If the company demands an immediate response, respond by hanging up the phone.
• Trust your instincts. If you feel uneasy about an offer, don't spend any money until you've addressed your concerns. Your initial suspicious reaction to an offer is often correct.
• Keep good records. Keep photocopies of your correspondence with the company and the company's promotional materials and take notes during any telephone conversations. If it does turn out to be a scam, include these materials with your complaint to law enforcement agencies.

For a list of the most typical types of scams, visit the FinAid Web site.

— adapted from http://www.finaid.org/scholarships/protecting.phtml