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All You Need to Know About Gifting Student Loan Payments

Published March 15, 2018


Student Loan

In a recent survey, it was determined that more people would rather be gifted a student loan payment than a traditional gift. In fact, when respondents were asked if they’d rather have the equal value of a student loan payment gifted rather than receiving the puppy of their dreams, 75% said yes – and in a country that loves puppies, that’s saying a lot.

The average college graduate pays as much as a single car payment every month in student loans, so as a gift, it’s a no-brainer. If you want to gift a student loan payment, there are a few options:

Give cash – gifting in cash will allow the receiver to make the payment themselves.

Become an authorized payer – with most student loans there is also the option of making a family member an authorized payer in which case, you can make a payment directly if you happen to be a family member.

Do it together – another option is to make a one-time online payment together.

Use a third-party service – you can also opt to use websites services like loangifting.com, 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.

A student loan payment is a great gift and when it comes to paying it out, there are many options to choose from. Once you’ve gifted your first student loan payment with the option that works best for you, just know, you probably made the recipient happier than a cute, fluffy puppy.