Should You Use Student Loan Cash to Buy Bitcoin?


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Stock market investors have been doing this for decades: Borrow money to buy stocks when prices are rising.

Now some college students are adding a new twist to leveraged investing: Buy bitcoin and other cryptocurrencies with cash from student loans. Sounds pretty clever right?

Let’s think this strategy through for a moment. You only make money using somebody else’s dime if the price of what you’re buying goes up. And…you still need to pay back the loan. What if the price falls?

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But that logic isn’t stopping some college students from taking the plunge. According to a new survey by The Student Loan Report, some 21% of current college students are using loan money to buy digital currencies.

“Student loan borrowers would be able to pull off such a maneuver,” the report states, “because they are given their remaining student loan funds to be used on `living expenses.’

“Sometimes, student debtors borrow more than they end up needing for that semester of classes. Once the borrower’s college or university’s financial aid office uses the necessary financial aid to pay for courses, they send a refund check to the borrower.”

“​Essentially, there is no system in place to ensure the debtor is using the leftover money for college living expenses. Th​refore, borrowers ​may spend that money ​any way they wish.”

The bottom line is that only a handful of students will make money doing loan investing. The rest will get burned. At the moment, there’s no way to predict future cryptocurrency prices, much less which ones out of the thousands on the market will even make money.

What’s a better strategy? Don’t go into debt in the first place.

Plan to get a debt-free degree by lowering your college costs upfront. Consider commuter and community colleges to eliminate room and board — that’s about $40,000 over four years.

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Stock market investors have been doing this for decades: Borrow money to buy stocks when prices are rising.

Now some college students are adding a new twist to leveraged investing: Buy bitcoin and other cryptocurrencies with cash from student loans. Sounds pretty clever right?

Let’s think this strategy through for a moment. You only make money using somebody else’s dime if the price of what you’re buying goes up. And…you still need to pay back the loan. What if the price falls?

Shutterstock

But that logic isn’t stopping some college students from taking the plunge. According to a new survey by The Student Loan Report, some 21% of current college students are using loan money to buy digital currencies.

“Student loan borrowers would be able to pull off such a maneuver,” the report states, “because they are given their remaining student loan funds to be used on `living expenses.’

“Sometimes, student debtors borrow more than they end up needing for that semester of classes. Once the borrower’s college or university’s financial aid office uses the necessary financial aid to pay for courses, they send a refund check to the borrower.”

“​Essentially, there is no system in place to ensure the debtor is using the leftover money for college living expenses. Th​refore, borrowers ​may spend that money ​any way they wish.”

The bottom line is that only a handful of students will make money doing loan investing. The rest will get burned. At the moment, there’s no way to predict future cryptocurrency prices, much less which ones out of the thousands on the market will even make money.

What’s a better strategy? Don’t go into debt in the first place.

Plan to get a debt-free degree by lowering your college costs upfront. Consider commuter and community colleges to eliminate room and board — that’s about $40,000 over four years.

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