Make us your home page

Stocking stuffer for debt-burdened students: cash

All Elizabeth Starkey wants for Christmas is a little help paying her student loans.

With a monthly payment topping $1,000, the 31-year-old digital designer for Bravo cable television network said even a small contribution would provide some breathing room. "The only things I really need are a new computer, which is more than anyone wants to spend, or student loan money," said Starkey, who owes more than $51,000. "That is the biggest burden for me, financially, other than rent."

So after she learned about a new service that allows people to send cash gifts to student loan providers, Starkey alerted her family. But she's not terribly optimistic they'll comply. "People said, 'I want to get you something fun,' " she said.

Cash gifts are often written off as too impersonal. But as you're scrambling to find the perfect gift for a loved one, particularly the students and graduates who collectively hold about $1.2 trillion in student debt, a little financial wiggle room might be exactly what they want and need.

Here are some ideas, with instructions on how to minimize taxes and other unintended consequences.

PLAIN CASH: If you're not too concerned about exactly how your gift is spent, there's really nothing easier than old-fashioned cash. Individuals can legally give gifts of up to $14,000 to as many people as they wish in 2013, with no tax consequences.

STUDENT LOAN PAYMENTS: There are a few ways to help graduates chip away at debt. Anyone can make a payment on behalf of a borrower by check, though you need to know the loan servicer, the borrower's account number and the monthly payment amount, according to student loan experts.

A more effective method: Send a letter with your check that states the money should be used to prepay or reduce the principal of the loan, and not for a future loan payment.

A new service, through, makes this easier since it requires only that you know the gift recipient's email address.

TUITION HELP: Anybody can pay for some or all of a student's tuition directly. There are no gift tax implications, as long as the payment is made directly to the institution. But if you pay a big chunk of college tuition, or provide a large cash gift, it could hurt the student's ability to get financial aid. One workaround is to give the cash to the parent.

529 CONTRIBUTIONS: All contributions to these state-run, college-savings accounts grow tax-free. And the money can be withdrawn without paying capital gains taxes as long as the proceeds are used for education expenses. A majority of states provide state income tax deductions for contributions, but rules vary.

Services like GiftofCollege and GradSave try to make this easier: They allow you to contribute to anyone's account through a college gift registry.

APPRECIATED STOCK: Given the stock market's ascent over the last few years, you may be sitting on stock that has also risen appreciably. If you give those shares to a relative or friend in a lower tax bracket, he can sell them for cash and may pay far less in capital gains taxes than you would. But parents who give stock to younger children may not achieve the same sort of tax savings.

CONSUMER DEBT: Helping pay down a loved one's credit card debt can help ease stress at the start of the new year.

"If someone has $5,000 or less in credit card debt and can add a mere $50 a month to a minimum payment every month until the debt is paid off, depending on the interest rate, you can literally shave off a decade or more from the paydown period and wipe out thousands in extra interest," said Manisha Thakor, who runs MoneyZen Wealth Management. The same goes for gifting a lump sum.

Stocking stuffer for debt-burdened students: cash 12/20/13 [Last modified: Friday, December 20, 2013 6:13pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, New York Times.

Join the discussion: Click to view comments, add yours

  1. Unexpected weak quarter at MarineMax slashes boating retailer shares by 20 percent


    CLEARWATER — Just then you thought it was safe to go back into the water, a boating business leader issued a small craft warning.

    Bill McGill Jr., CEO of Clearwater's MarineMax, the country's biggest recreational boat retailer. [Courtesy of MarineMax]
  2. CapTrust moving headquarters to downtown Park Tower


    TAMPA — CAPTRUST Advisors, a Raleigh, N.C.-based investment consulting firm, is moving its Tampa offices into Park Tower. CapTrust's new space will be 10,500 square feet — the entirety of the 18th floor of the downtown building, which is scheduled to undergo a multi-million-dollar renovation by 2018.

    CAPTRUST Advisors' Tampa location is moving into Park Tower. Pictured is the current CapTrust location at 102 W. Whiting St. | [Times file photo]
  3. Good news: Tampa Bay no longer a major foreclosure capital of the country

    Real Estate

    Once in the top five nationally for foreclosure filings, the Tampa Bay area no longer makes even the top 25.

    A few short years ago, Tampa Bay was a national hub for foreclosures. Not any more. [Getty Images/iStockphoto]
  4. Tampa-based start-up takes on Airbnb by promoting inclusion, diversity


    NEW TAMPA — Last May, Rohan Gilkes attempted to book a property in Idaho on the home-sharing platform Airbnb. After two failed attempts, the African-American entrepreneur asked a white friend to try, and she was "instantly" approved for the same property and dates.

    Rohan Gilkes poses for a portrait at his home and business headquarters in Tampa. 

Innclusive, a Tampa-based start-up, is a home-sharing platform that focuses on providing a positive traveling experience for minorities. Rohan Gilkes, the founder, said he created the organization after several negative experiences with Airbnb.
[CHARLIE KAIJO   |   Times]

  5. McMansions, state sewage order on tap at St. Petersburg City Council

    Local Government

    ST. PETERSBURG — The City Council is set Thursday to vote on two major issues: controversial zoning changes aimed at curbing big McMansion-style homes and a consent order with the state that will require St. Petersburg to fix its ailing sewage system.

    Two big, blocky homes on the 2300 block of Dartmouth, Ave N under construction in April. Several new homes under construction.
in St. Petersburg's Historic Kenwood Neighborhood are too big, residents complain. The St. Petersburg City Council on Thursday is set to consider ordinances aimed at curbing the construction of big "McMansions." [LARA CERRI   |   Times]