Gift to payoff student loan debt.

I want to payoff my daughter's 100K in student loan debt. My understanding is there are two ways I can do it. #1 Payoff the entire 100K in 2012 and file a gift tax return. This would be desirable since the lifetime gift tax exclusion is 5 million in 2012 before it goes back to 1 million next year. #2 Payoff the entire 100K in 2012 as a gift loan from my wife and I and then forgive a portion of the loan up to the yearly limit of $13,000 per person = 2 x $13,000 = $26,000 per year. If I do it this way it doesn't eat into the lifetime gift tax exclusion but what documentation do I need? Can I pay the debt directly to the lender or do I need to gift it to my daughter and let her pay the lender? Is there imputed interest required on the loan and can I also forgive that?