My son recently graduated from medical school with a student loan of ~ 200K. He will be a resident fellow for the next 7-8 years with 60-80k annual income. My wife and I have some cash and are willing to payoff his loan as a lump sum to stop interest accumulation with rates between 4% and 6%. He will then pay us the loan each month at a level that is possible for him.
I was wondering:
1) Is this a sound decision from a financial and tax point of view?
2) What are tax implications for us? Would his monthly payments to us be tax deductible for him?
3) Do we have to pay taxes from these monthly payments? Can he give this money to us a "gift" to make it tax exempt? What are tax consequences of this payoff?