When I teach about personal finance at my church or for various other organizations, I often refer to the Old Testament story of Joseph.
He could interpret dreams, and predicted in Egypt seven years of plenty followed by seven years of famine. During the years of plenty, Joseph saved so much grain that when the famine came, folks from other nations came in search of food. He could share because he had intentionally saved extra.
I use the story to explain that it’s not enough to save just for your needs or wants. If you can, I believe you should do what Joseph did and save even more so that your abundance can be used to help others in need.
And that’s what Amanda Beery is planning to do. She wants to help a niece go to college.
We are in the season when high school seniors are making college plans. As part of the process, students will receive financial aid award letters. To fill the gap left when they haven’t been offered enough scholarships, grants or work-study, many families will turn to borrowing. It’s a decision that has pushed student loan debt to $1.3 trillion.
Beery is finishing her obstetrics and gynecology residency in New Hampshire. She doesn’t want her niece Jillian, who will be attending the University of Alaska in Anchorage in the fall, to have to take out student loans.
Beery is Jillian’s Joseph.
“She is one of my sister’s four children,” she wrote. “My sister is a manager at a deli and a single mom. She does not have a lot of resources, but her family is strong on love!”
In the fall, Beery said she will be joining a private practice back home in Anchorage. She will quadruple her current salary. She and her husband have decided to cover tuition for her niece.
“I am the first one in my family to have gone to college,” Beery said. “My parents never had the means or the forethought to save for college. They owned a small furniture store in Anchorage, so I was only able to qualify for loans. I now have $330,000 in loans to repay. Having these loans has been a big burden for my husband and me. We will be okay because I will be making enough money to pay back my loans, and my husband and I have simple needs and plan to live by simple means. But Jillian has dreams of being a social worker, and I do not want her to have to carry that [debt] burden.”
Beery asked about the best way to pay the tuition, which for the upcoming year will be about $5,500, including student fees.
If the gift is just for tuition and Beery gives it directly to the school, she can avoid gift taxes, according to Mark Kantrowitz, an expert on financial aid and senior vice president and publisher of Edvisors.com.
But she might want to wait before gifting any money to see how much her niece may get in need-based financial aid, he said.
Colleges could treat money as an additional resource and reduce any anticipated awards, he said.
“Giving the money to the student’s 529 plan is not a bad way of giving the money with a minimal impact on aid,” Kantrowitz said. “Also, gifts to the student’s parents aren’t reported as income on the Free Application for Federal Student Aid (FAFSA). Only gifts to the student are.”
Considering all the options, “I’d give the money to the parent,” Kantrowitz said.
But if you find you want to help pay someone’s college expenses and you aren’t sure the money would be used for that purpose and instead squandered, I would send it directly to the university.
Beery says if her niece gets scholarships or grants to pay for tuition and fees, then she and her husband will help her with room and board, books and other expenses.
“We are planning to help her for as long as she needs help,” she said. “This will likely be all four years of her undergraduate degree, and maybe more for graduate school if she still wants to get a master’s in social work.”
Her niece’s older brothers, 20 and 24, didn’t go to college and are working in construction. Her younger brother is 10.
“Maybe he will want to go to college, and we’ll be ready to help him as well,” Beery said.
This couple’s generosity is worthy of praise. It is an example of giving a hand up by taking extra cash in your time of plenty and blessing others.
Readers may write to Michelle Singletary at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071 or email@example.com. To read previous Color of Money columns, go to wapo.st/michelle-singletary.