A student or graduate may not have to go it alone in handling loan repayment.

Family assistance.

Parents who can afford to do so may help a child pay off student loans. This can be done in a variety of ways, such as making a lump-sum payment or some or all of the monthly payments. If there is more than one loan outstanding, payments should be targeted to the one with the higher interest rate (e.g., a private loan versus a federal student loan). Grandparents or any other relative may also be in a position to help. When making a lump sum payment, be sure that it is used to reduce the outstanding balance and is not merely applied toward future payments.

Financial planners generally do not advise parents to help repay student loans at the cost of their own retirement savings. For example, if a parent is deciding between making a contribution to her 401(k) plan or helping a child repay a student loan, it is probably better to make the retirement plan contribution. Students have time to repay their college loans, while parents have a limited window to save for retirement.

In making payments, parents and grandparents should factor in the gift tax. There is no gift tax issue if, for example, the parent is a cosigner of the loan. But if the child is the only borrower, then payments are treated as gifts. If the amount is more than $14,000 in 2017 ($28,000 if a spouse joins in the gift), this requires the filing of a gift tax return and using part of the parent’s lifetime exemption amount. Of course, if federal estate and gift taxes are eliminated, as has been proposed, this will no longer be an issue.