Use your student loan to invest in cryptocurrency? | The informed student
Following the Bitcoin boom, many are scrambling to get on board before cryptocurrency skyrockets. For students, that means they invest their student loans and spend them securing a bit here and there. In fact, Investopedia reports that one in five college students have done so and have used the money earmarked for their education and living expenses, to bet in cryptocurrency – a volatile market at best.
Students accept cryptocurrency because they understand the power of a digital society. They are much more exposed to the use of technology and believe that cryptocurrency is the future. However, is this a wise decision? Will it pay off in the long run or will it create more problems than it’s worth?
Cryptocurrency investments are like gambling
As with any form of investment, investing in cryptocurrency comes with risks. In 2017, it might have been a promising investment, but Bitcoin fell 60% in 2018 and has fluctuated since. There is no foolproof way to ensure that there is a financial gain on every investment.
Delegate assistance with rent and food
By putting money aside in cryptocurrency, students are essentially stretching their already tight budgets. If one is determined to invest in cryptocurrency, he may also be adept at getting a part-time job and paying back the amount he borrowed for cryptocurrency.
Use excess money to pay off your loans
Professionals argue that if a student has excess student loan leftovers, they should take that money and pay it off to write off some debt is the better choice. However, students might not see it that way. Having some extra cash on hand that could help them earn more money, doesn’t seem like such a bad option. However, they should take into account the taxes and interest rates the student might incur on both the investment and their student loan. Their earnings, if any, could be wiped out by these unforeseen expenses.
Invest in a high yield savings account
Instead of putting the money in for the purpose of earning more, financial institutions advise students to put that money into a bank account instead. Interest rates may be low, but they are stable and secure.
Since there are no rules in place prohibiting students from using the funds for their own earnings outside of school, this has become a trend. Additionally, many students lack access to financial stability and are largely unable to purchase crypto with credit cards, which is why they resorted to their student loans instead.
It is important that students understand the risks involved and that they do their research before investing their money where they see fit. The payoffs can be huge, but if their investment fails, they will run out of money and may even have to drop out of college without a degree, and with a huge debt to pay on top of that.