As a parent, you want your child to have a better life. After college, watching your child struggle to manage their student loan payments can be challenging, and you may want to swoop in and help them with their debt. There are ways a parent can help a child with student loan debt, but it’s important to balance your generosity with maintaining your own financial well-being.
Can Parents Pay Off Student Loan Debt?
Yes, parents — and even grandparents, aunts, uncles, and other relatives — can help a child with their student loan debt. While the loan is in the child’s name, you can’t just take over control, but you can contribute money to the loan to pay it off faster or provide other forms of support.
There is an important caveat: make sure you don’t sacrifice your own financial well-being or future retirement to pay off your child’s loans. Doing so can put you at risk of financial hardship later. Instead, focus on giving your child the rolls and support they need to manage their debt themselves.
Whether you have plenty of cash or are on a tighter budget, these are nine ways to help your child with their student loan debt:
1. Make Payments During the Loan Grace Period
With federal student loans and many private loans, your child doesn’t have to make payments while they’re in school or for six months after they graduate (the loan grace period). However, interest continues to accrue during this time on most loans, even though payments aren’t due.
You can help cut down on the interest that builds by making payments that cover the interest charges during the loan grace period.
2. After Graduation, Make a Lump Sum Payment
Once your child graduates, you can make a lump sum payment toward their debt. A lump sum payment can cover a portion of the loan balance, or you can pay off the loan entirely.
If you don’t have tons of extra cash, a smaller lump sum payment can still make a substantial impact. For example, say your child has a $10,000 loan with a 10-year repayment term and a 7.00% interest rate. If you paid $250 toward the loan at the beginning of the repayment term, your child would save $248.55 in interest charges, and they’d be out of debt four months sooner.
3. Boost Loan Payments
If you have a little extra money you can put toward debt each month, boosting your child’s loan payments by an added $10 or $15 per month can make a surprisingly big difference. For example, if your child has the loan from the above example, their monthly payment would be $116 per month. If you put $10 per month toward the loan — bringing the total monthly payment to $117 — your child would save $470 over the life of the loan. And, as a result, they’d be out of debt 13 months sooner.
| Minimum Payment | Payment + $10 | |
| Payment Amount | $116 | $117 |
| Time In Repayment | 120 months | 107 months |
| Total Paid | $13,933 | $13,463 |
4. Match Your Child’s Loan Payments
When it comes to managing their finances, many people benefit from having to work toward their goals on their own. Rather than taking over responsibility for the loan, one way to help your child learn financial skills and accountability (but lessen the burden of their debt), is to match their payments.
If you match their payment amount — effectively doubling their loan payments — they’ll save thousands in interest, and pay off their loans years ahead of schedule.
5. Provide Free or Low-Cost Housing
You don’t have to provide loan payments to make a difference. Another way to help your child is with living costs. If you’re willing to have your child at home, allowing them to live with you for free or at a reduced rental rate can allow them to dedicate more money toward debt repayment. Without having to worry about the cost of rent for an apartment or utilities, they can put hundreds more toward paying off their debt faster.
6. Teach Your Child How to Budget
Making extra payments or providing a lump sum of cash only goes so far; for long-term success, your child needs to know how to budget their money and track their spending. Sit down with your child and discuss popular budgeting methods, or help your child sign up for a free or low-cost budgeting app so they can manage their money from their phone.
7. Rethink Gifts
Shopping for an adult child can be tricky. Rather than buying a sweater or game you’re not sure they’ll like, consider putting the money you’d spend on a gift toward their debt, instead.
8. Research Other Payment Options
If your child can’t keep up with their payments, and you’re not in a position to help them with the cost, research other potential repayment options. Depending on what type of loans they have and their income, they may qualify for an alternative payment plan that can make their debt more manageable.
9. Co-sign a Refinancing Application
Some student loans can have very high interest rates. Student loan refinancing is a way your child can reduce their interest rate and save money over time. But, refinancing usually requires good to excellent credit. If your child hasn’t built up their credit history yet, you may be able to help them by co-signing a loan application; it can improve their odds of qualifying for a loan with a competitive rate. Just keep in mind that a co-signer is legally responsible for the loan if the primary borrower doesn’t make payments.
Refinance Student Loans with ELFI
ELFI offers student loan refinancing options for parents and students, with some of the lowest rates available and flexible terms. We also have no application fees, no loan origination fees, and no penalty for paying off your student loan early. See how much you could save with ELFI student loan refinancing.
Originally published November 18, 20222
