Student Loans

Dear Liz: Our daughter took on substantial student loan debt to get her master’s degree. She owes about $60,000 and so far has only been able to work a minimum wage job.

If my wife and I were to pay off the loans, would there be any tax advantages or other benefits we could use to offset the expense?

Answer: You won’t get a deduction for paying your daughter’s student loans and you’ll need to be mindful of gift tax rules, but that shouldn’t deter you from this generous act if you can afford to help.

Education debt is the norm for today’s college graduates, but a Gallup poll found the majority say their student loans caused them to delay at least one major life milestone such as buying a home, starting a business, getting married or having kids. Borrowers often forgo saving for retirement in their attempts to pay down debt, losing years or even decades of compounding and diminishing their future wealth. Student loan debt also can create mental health burdens, leading to more depression, anxiety and a reduced quality of life.

The annual gift tax exemption allows you to give up to a certain amount annually to any recipient without having to file a gift tax return. In 2026, the limit is $19,000 per recipient, so you and your wife could give $38,000 this year toward paying down your daughter’s student loans. The exemption probably will be the same or slightly higher next year, allowing you to completely pay off the loans without having to file a gift tax return.

If you wanted to pay the whole bill in one go, you’d have to file the return but you’d be unlikely to pay any gift taxes. Gift taxes are only owed once the amounts you give away above the annual exemption exceed your lifetime estate and gift tax exemption, which for 2026 is $15 million.