<p>Well, you may be called upon to prove it, so paperwork signed and possibly notarized should be done. It’s a small price to pay. I would even suggest writing in some interest. With a verbal agreement only, there is nothing about the arrangement that is outwardly different than a gift.</p>
<p>Paying the school directly would seem to be a bad idea. Looks too much like a gift or a bill paid on the child’s behalf. If you have paperwork saying it’s a loan to the child, then they should probably write a check to the child.</p>