What is the name of your state? Texas
Ok, so here is my situation in a nutshell: My sister died in an accident, and there was some inheritance that went to my parents. I am over 25 years old, and living on my own, taking classes at a college. In order to fund my continued schooling, I had to seek financing from a private bank in order to secure enough to supplement what I could get from government loans. The private loan amount was $25,000, which my father co-signed for. The rest of the money I borrowed for school was about $8,000 from government student loans, which have been consolidated at a lower fixed rate.
Since my sister died, and my parents came into some money they weren't anticipating, they offered to help me pay off these loans I took out to attend college the last couple years. We understand that there is a $12,000 per person limit on the amount of money can be given in a year without getting a tax penalty. But, since my father is the co-signor on the $25,000 private loan, if he paid that off directly, would that count towards the $12,000 limit on the amount he can loan me in a year? In a sense, yes it is a gift, but in a sense, he would be on the hook to pay that money if I defaulted, so he could be just looking out for his own interests by paying it off....
Any help, and as soon as possible, as I'm due to make a payment soonish, and would like to have the loans paid off sooner rather than later. My parents suggested that they could pay part this year then the rest next, but I'm wondering what the tax penalty vs the interest accruing on the loans would weigh out.
Cheers,
BigTex
Ok, so here is my situation in a nutshell: My sister died in an accident, and there was some inheritance that went to my parents. I am over 25 years old, and living on my own, taking classes at a college. In order to fund my continued schooling, I had to seek financing from a private bank in order to secure enough to supplement what I could get from government loans. The private loan amount was $25,000, which my father co-signed for. The rest of the money I borrowed for school was about $8,000 from government student loans, which have been consolidated at a lower fixed rate.
Since my sister died, and my parents came into some money they weren't anticipating, they offered to help me pay off these loans I took out to attend college the last couple years. We understand that there is a $12,000 per person limit on the amount of money can be given in a year without getting a tax penalty. But, since my father is the co-signor on the $25,000 private loan, if he paid that off directly, would that count towards the $12,000 limit on the amount he can loan me in a year? In a sense, yes it is a gift, but in a sense, he would be on the hook to pay that money if I defaulted, so he could be just looking out for his own interests by paying it off....
Any help, and as soon as possible, as I'm due to make a payment soonish, and would like to have the loans paid off sooner rather than later. My parents suggested that they could pay part this year then the rest next, but I'm wondering what the tax penalty vs the interest accruing on the loans would weigh out.
Cheers,
BigTex
