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All You Need to Know About Gifting Student Loan Payments

In a year that’s been anything but traditional, many gift-givers are looking for a more practical present that may not...

Published December 29, 2020

6 min read

In a year that’s been anything but traditional, many gift-givers are looking for a more practical present that may not need gift wrap—something like paying down student loan debt. In 2020, the average student loan debt came in at $32,731, with an average monthly payment of $393. So a gift that helps pay down this kind of debit will certainly outlast the gifting season.

We’re all aware of the burden of mounting student loan debt since it directly affects many of our closest friends and family. According to U.S. News & World Report, the average total student debt among recent college graduates is the highest it’s been in 10 years, setting a record high this year.

If you’re looking for a less traditional way to share the holiday spirit and want to gift a student loan payment, there are a few options:

Give cash or check to the borrower

Gifting in cash will allow the receiver to make the payment themselves. Particularly after the most unpredictable of years, there are few who will object to the appeal of a cash gift that can be used to help pay down their student loans.

Become an authorized payer

With most student loans there is also the option to add another individual as an authorized payer. In this case, you could make a payment directly toward their student loans. There will be a few steps for the borrower to grant this access to a someone new, so they’ll want to check their student loan servicer’s website for more information on setting up “third-party account authorization” or “account authorization” for this option.

Pay a student loan together

Another option is to make a one-time online payment together with a friend or family member. You could get together with grandparents, aunts, uncles, or other family members to help your loved one pay down their student loans. Sit down with them and have them walk you through making a payment on their behalf. It’s an easy way to get it done together, so you don’t have to jump through any hoops on your own.

Use a third-party student loan payment service

You can also opt to use websites services like loangifting.com, tuition.io, or other apps which will make the payment directly to the loan servicing company for you.

Don’t forget the gift tax

First off, the person giving the student loan payment as a gift will be responsible for paying all applicable gifting taxes. If you intend to gift a single payment, then the gift tax shouldn’t be a concern. However, if you would like to gift a sizable amount, it may become an issue. Just keep in mind there are annual and lifetime exclusions that can help to minimize those taxes, but check your state laws regarding specifications.

Currently, the annual gift tax exclusion is $15,000, and not taxable. If you’d like to give more than that, as an individual, it would, in theory, be taxed – unless you’re married. In that case, both of you could gift up to $15,000. As a side note, loan co-signers, usually a parent, can make tax-free donations of any amount. Learn more about gift taxes here.

A student loan payment is a great gift and there are many options to choose from when it comes to paying it out. If you decide to gift a student loan payment, you’ll be giving a gift that can help their bank account and their stress level. And we can all agree that the holidays should be more stress-free.


In providing this information, neither Laurel Road nor KeyBank nor its affiliates are acting as your agent or is offering any tax, financial, accounting, or legal advice.

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