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Banking on kin for college loans

By Jennie L. Phipps · Bankrate.com
Monday, September 24, 2012
Posted: 5 pm ET

Keeping money in the family can be a good retirement planning strategy for everybody. Just ask George Lewis, an 82-year-old attorney based in southern Illinois, who is the manager of a family trust set up to lend money interest free to members of his extended family who need help going to college.

Lewis is the patriarch of a family venture that started in 1963 when his grandmother Alice E. Hersman died. Because of her dedication to higher education for her four children and resulting grandchildren, the family decided to skip the flowers and seek donations for a family education fund.

The fund has grown to $111,665. In the nearly 50 years it has operated, it has lent more than $170,000. Family members can apply each semester for loans ranging from $50 to $5,000. Recipients sign a commitment to pay back the money quickly after graduation. Generally, the process goes smoothy -- in the last two years alone, a total of $23,000 was repaid, Lewis says.

The loans aren't big enough to pay all expenses for most college students. "We expect them to have a budget and use this to cover extras," he says.

Money to fund the trust comes from a variety of sources, including bequests when family members die. One childless family member left $50,000. Steady contributions come from sales of a family address and information book and a family cookbook, which sell for $10 each. Sales of these at the biennual family reunion of the 425 descendents has brought in about $1,300 after expenses. The family also holds a fundraising auction at the reunion -- each attending family contributes something to be auctioned. Last year that raised $2,000.

Because the venture is operated by family for family, Lewis says it can't be a nonprofit entity -- that's why it is set up as a trust. Lewis, who is still practicing law after 52 years in the business, specializes in estate and trust work. Retirement, he says, is still a long way off. "I'm in a rut," he jokes.

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