Student loans are a common form of debt. While they can be useful tools that can help you achieve your education and career goals, taking on too much debt can make it difficult to repay those loans. In fact, the Consumer Financial Protection Bureau reported that 63% of borrowers said they’ve had difficulty affording their payments in the past.
Watching someone struggle with their debt can be hard, so it’s no surprise that parents and relatives often want to help their loved ones pay off their loans. One option people may consider is gift taxes to assist with student loan repayment. Although gift taxes aren’t a common strategy for most families, President Trump’s One Big Beautiful Bill did make some changes to how gift taxes work.
Learn how the gift tax applies to student loan payments and what you can do to help a loved one manage their loans.
What Are Gift Taxes?
If you leave money to your loved ones when you die, your estate (the assets and property in your name) will have to pay an estate tax. Depending on the amount of your assets, that tax can range from 18% to 40%. And, in some states, the recipients have to pay an inheritance tax, which can be anywhere from 10% to 16% of the inherited amount.
Those taxes can eat into a significant portion of the estate, so some people may try to lessen the tax burden by instead giving away some of their wealth during their lifetimes. As a result, the IRS uses gift taxes to keep track of large financial gifts and to ensure high-net-worth individuals don’t avoid taxes altogether.
Annual Limits
“Gift taxes” are a type of federal tax that applies when you give money or property to another person as a gift, without receiving something of equal value in return.
The person giving the gift — the donor — is responsible for paying the gift tax, not the recipient. However, a parent gifting money to their child for student loan repayment is unlikely to pay gift taxes thanks to annual exclusion and lifetime exemptions.
Annual Exclusion Limits
There’s an annual exclusion limit, so you can give away up to that amount each year without having to report the gift. As of 2025, the annual limit is $19,000 per donee.
If you exceed that amount, you won’t necessarily have to pay gift taxes, but you will have to report the excess amount to the IRS, and it will count toward the lifetime gift tax exemption. To report the gift, you need to fill out and submit Form 709: United States Gift (And Generation-Skipping Transfer).
Lifetime Exemption
The lifetime exemption allows you to give away millions during your lifetime before gift taxes apply.
How the One Big Beautiful Bill Affects Gift Taxes
President Trump’s sweeping One Big Beautiful Bill (OBBB) made several changes to our financial aid and tax systems. For families looking to help their children with student loan debt, here’s what you need to know about the OBBB and gift taxes.
The OBBB Extended the Gift Tax Exemption
The federal estate and gift tax exemption is currently $13,990,000. Under the 2017 Tax Cuts and Jobs Act (TCJA), that limit was set to expire at the end of 2025, and the new limit would be $7 million — nearly half the current exemption amount.
However, the OBBB made the higher limit permanent, locking in the larger amount so families can plan for the long-term.
The Limit Will Be Indexed for Inflation
Previously, the gift tax limit was a flat amount. But, as of January 1, 2026, the exemption will be $15 million for individuals, and it will be indexed for inflation, so the limit will grow as economic conditions change.
Are Student Loans Exempt from Gift Taxes?
If you want to help a loved one with their outstanding student loans, you can make payments toward their debt or pay off their entire remaining balance.
Student loans aren’t exempt from gift taxes, but that doesn’t mean you have to pay taxes on the amount you repay. Few people will ever reach the lifetime exclusion limit and incur gift taxes. You can give money to a friend or loved one to repay their student loans — or pay their lender directly — without worrying about additional taxes.
[Tip: If you have children or relatives entering college, another option is to cover their tuition costs. You can pay tuition without incurring gift taxes, and the money you spend doesn’t count against your annual or lifetime gift tax limits.]
If you need help with gift taxes — or tax planning in general — it’s a good idea to consult with a certified public accountant (CPA) or other tax professional. They can provide personalized advice and guidance on how to handle your taxes.
3 Ways to Help a Loved One with Their Debt
If you have a child or loved one struggling with student loan debt, here are some ways you can help:
1. Make a Lump Sum Payment
If you have a sudden influx of cash — perhaps from a tax refund or bonus from work — you can make a lump sum payment toward your loved one’s debt. Making a one-time payment can help your loved one save on interest and pay off their loan faster.
For example, say your child has $10,000 in student loan debt with eight years left on the loan and a 6% interest rate. If you made a $1,000 payment, they’d pay off their loan nearly one year earlier, and they’d save over $500 in interest charges.
| Original Loan Terms | With $1,000 Lump Sum Payment | |
| Time Left in Repayment | 96 months | 84 months |
| Total Paid | $12,672 | $12,088 |
| Savings | N/A | $572 |
2. Match Your Loved One’s Payments
“Can someone else pay off my student loans?” If your child has asked this question, you may be torn. You want to help your child, but you also want to make sure they know the value of their education (and the importance of building financial stability). Instead of paying off the loan in full, another option is to match their payments. It encourages them to keep up with their payments and take accountability for the loan, but makes repayment easier.
You can decide to match a percentage of their payments up to a certain maximum. For example, you could say you would match up to 50% of their payment amounts. If they pay $3,000 toward their student loans this year, that means you’d pay an additional $1,500. This approach could motivate them to be frugal and make extra payments toward their debt, and your contributions would help them save hundreds or thousands of dollars.
3. Co-sign a Refinancing Application
If your loved one has high-interest student loan debt, student loan refinancing can be an excellent tool. They may qualify for a lower rate and reduce their payments and save money. But, they might not qualify for a lower rate on their own. If you have a steady job and good credit, you can help them by co-signing their refinancing application, which can improve their odds of qualifying for a loan at a competitive rate.
Keep in mind that a co-signer is responsible for the loan’s repayment if the primary borrower falls behind, so only co-sign a loan application if you’re confident in the borrower’s ability to handle the payments.
