by Jan Michael Carpo, Reporter
Some college students believe that investing in cryptocurrency is a better use for their student loan funds than regular purchases like clothes and other necessities.
In a study conducted by The Student Loan Report, it was found that more than one-fifth of university students with student loan debt would rather utilize their borrowings to invest in virtual currencies like bitcoins.
The study also reported that students who receive financial aid through loans would occasionally use the extra money that they have however they see fit, including investing.
Out of the 1,000 students polled, more than 21% have admitted to taking a risk and using their borrowed funds to invest in the extremely unpredictable digital currency market.
College students are permitted to utilize loans for “living expenditures,” a flexible category that includes a wide range of potential demands, even if the school administration may frown upon the practice of using borrowed money for non-school expenses.
Refund checks for student loans
In the Philippines, there are strict rules for students receiving financial aid. Normally, after a student loan is authorized, the money gets deposited into the student’s college account. The funds may then be used to cover costs such as tuition, board & lodging, as well as book and travel allowance.
However, there are instances where the loan funds become greater than the expenses. This situation is known as a credit balance. Unless the student notifies the school that the money is to be used for future expenses, the school must pay the credit amount to the student or to the parent within 14 days.
Therefore, the college may issue a refund check to the student for the credit balance. The money can be used any way the students please — for books, other costs, and anything else. However, the money must still be repaid as part of unpaid student loans. In other words, there is nothing stopping college students from investing in cryptocurrencies or using their return cheques for any other purpose.
Investing to pay off student loans
If the value of bitcoin and other cryptocurrencies falls, investing in the market could be a rapid method to increase debt obligations. For those who are fortunate, a rise in cryptocurrency values could speed up student loan repayment.
Meanwhile, since hitting a record high of $20,000 in December 2017, bitcoins have lost more than half of their value. Since the beginning of 2019, the price of bitcoins has fluctuated wildly, from around $3,500 to well over $11,000 in 2020. To capture all of those gains, digital currency investors would have needed to pace the market perfectly in 2019.
Borrowing money to invest in cryptocurrency is probably not the best use for the financial aid that college students get; they could be better off investing the money in themselves by earning a graduate degree or a professional certification.
Meanwhile, it is important to keep in mind that there are risks of loss when investing in digital currencies and that past prices don’t predict future performance. College students could learn more than they have expected, including the ins and outs of market corrections, if the market doesn’t seem to head out in the right direction.