<p>After I applied for all the loans and secured them my parents have decided to give my son some money for college. What would be the best way (tax wise)for my son and I to use this gift.My son has Stafford and Perkins loans and I took out PLUS loan.Would it be OK to start paying off one of these loans and does he have to declare this money on his taxes?</p>
<p>You will get better advice from those that have been there -- but I have read in numerous places that the best way to handle grandparents that want to give money for school is to continue with your planned financing and let the grandparents put money toward the loans AFTER graduation. That way the amount they give does not show as income and affect the EFC. Another thing they could do is to pay for plane tickets, computer or other incidentals -- again, not showing as income but still helping out.</p>
<p>Money given by the grandparent to the parent under the FAFSA does not show anyway, and as long as the amount is less than $11,000 per person (g'parent gives $11,000 to dad and another $11,000 to mom, other g'parent the same) it is not taxable by the IRS either.</p>
<p>My advice, pay off the loans. Put the money you would have paid into the loans into retirement or home equity...</p>
<p>And count yourself lucky!</p>
<p>I would pay off the PLUS loan with it as they start charging interest right away . Your son - has time - after graduation to pay his loans back that are in his name . You may not be able to do it - as you get older and plan for retirement .</p>