Should Your Repay Your Child's Debt?

Sometimes as a parent, your child no matter how old they are, may need your help. In fact, according to Experian, the age group of borrowers aged between 35 to 49 were the ones that had the highest amount past due in all five delinquency stages. This age group alone owed a total of $15.5 billion in direct loans. This staggering number is just for student loans and doesn’t account for any other debt that a person may have like credit debt, car debt, etc. These high levels of debt are the reason that some adults may lean on their parents for assistance. However, as a parent it can be a difficult decision to make. You may want to help your child but don’t have the financial means. Even if you do have the financial means, you may want them to learn a lesson in responsibility. Either way, it should be a decision that a parent takes seriously.

What are the Tax Implications?

There may be tax implications if you decide to pay your child’s debt. However, this is especially the case if you will end up paying over $15,000 on their debt. The best course of action for a parent to take is to speak to a tax professional. They will be able to better understand and explain what debt repayment means for your tax situation.

Are You Actually Required to Handle the Debt?

If you are co-signed onto a specific debt like a car loan or student loan, and your child is struggling to keep up with payments, then it is even more important for a parent to handle this. The reason that a parent should begin repayment on a loan that they are co-signed on is so that there are no credit repercussions. Whatever happens to that loan will affect both the original borrower as well as the co-signor because the co-signor takes on full responsibility for loan repayment. You don’t even need to pay off the complete debt right away, but just paying the minimum payment until you figure out a full-term solution is key. You can also see what options are available for taking you off of the loan as well.

Unintentional Consequences of Repaying Your Child’s Debt

Every debt situation is unique. That is why you want to proceed with caution. If you help your adult child out of debt when times get hard, that could create a cycle where they feel that it is okay to build up debt because their parent will handle it. You want to keep strict financial boundaries in mind when dealing with your child’s debt.


Make sure to have a conversation with your child about why they need assistance and what that means for both of your financial situations. Make sure not to stretch yourself too thin, and only repay a debt if it is within your financial means. If you do decide to pay back your adult child’s debt, you need to make sure boundaries are in place, so a dependency doesn’t occur.