My parent had to get a Parent Plus Loan to help me pay for college, with the unwritten condition that I pay it off. As I good child, I obliged. However, I want to start aggressively paying it off starting January, and I began to think of the transactions.

I pay the loan company directly -- the money comes from my personal checking account to FedLoan. At the end of next year I hope to have paid ~$10,000-$12,000

Now I've seen some posts about children giving money to their parents and having the parent pay the loan, but that is not the case here.

Are there any issues?

  • 2
    Just FYI, if the amount you were going to repay per year was going to be more than the gift tax exclusion, it would have been better to actually have a loan document drawn up between you and your parent, with a small amount of interest charged (the min interest allowed by the IRS varies but is typically around 2%). This doesn't apply in your case though.
    – TTT
    Dec 1, 2017 at 17:14
  • 1
    In all fairness, if that were the case, I'd probably not pay as aggressively on the loan. This is a standard 10 year loan (seven years left) that I want to pay off in a year :)
    – qwertybin
    Dec 1, 2017 at 17:41
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    I think what @TTT is saying is that your parents would take out the plus loan, then loan you the money (at a lower interest rate). Then you could pay your parents as much as you wanted in any year, and they could turn around and pay their PLUS loan off with the money you just gave them. The money you give them would be paying back a loan, not a gift, so there wouldn't be any limit/gift tax form involved.
    – stannius
    Dec 1, 2017 at 19:15

1 Answer 1


In this case, it is a gift. It is also less than the annual exclusion amount of $15,000 (for 2018) per gift recipient. Therefore, you do not need worry about anything here. For more information, see


  • Thanks Derek! That is what I thought, but I just didn't think it made sense from a personal finance aspect. I.E. If I were to have an audit, someone might think it was odd I have a good chunk if cash going to a loan that isn't mine.
    – qwertybin
    Dec 1, 2017 at 16:58
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    Note that if there are 2 parents, then the amount given could be $30K per year.
    – TTT
    Dec 1, 2017 at 17:12
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    @qwertybin - you do not need to worry about that. I think it would pretty easy to explain that you were paying your parents' loan. Totally within the realm of reasonable and legal.
    – Derek
    Dec 1, 2017 at 17:18
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    The 30k exclusion due to two people is worth adding to the answer, I'd say.
    – Joe
    Dec 1, 2017 at 21:22
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    The $15k per person is a 2018 limit. If OP has spare money now, s/he could give each parent $14k for 2017, and each parent $15k in January. If OP is married his/her spouse can gift the same amounts. If the loan is more than $116k, OP might want to consult a tax advisor.
    – stannius
    Dec 1, 2017 at 21:33

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