Sometime in August 2020, “The Student Loan Report” revealed that more than ⅕ of university students had used their student loan to invest in digital currency. Prior and during the period, the bitcoin price was already on an upward trend, as trading prices closed between $9.5k and $11.5k price ranges. Today the current bitcoin price is at the $50k mark, although the previous week sent the BTC price soaring to an all time high of $58K +. Stiil, it denotes that students who are still holding on to the bitcoins purchased last year have already earned for themselves, a passive income with bitcoin.
Passive income by the way means earnings from an asset investment, usually from a rental property,or from a limited business partnership in which a person is a silent investor and not one who is actively involved in the operation of the business. If so, it would be best for students to be on their toes by monitoring the best time for them to convert their bitcoin into fiat money. That way they will be able to realize optimum benefits while there is still passive income in their BTC holdings.
While the U.S. Department of Education, which administers the Federal Student Aid did not pursue investigations in relation to the report, the department nonetheless reiterated guidelines on how student loan recipients should spend money received as funding for college education.
Why No Legal Issues were Raised Against Students Who Used Student Loan Money to Buy BTCs
Based on the general guidelines, funds received as proceeds of student loans are forwarded to the college in which the student is enrolled. The educational institution in turn, will apply the money as payment of enrollment costs. Now the amount received by the college is usually in excess of the enrollment costs, since a certain portion will be used by the student for other educational expenses. The rule though is that students can use the excess funds that way see fit, whether to buy supplies, or purchase clothes or save it for a spring break vacation.
The bottom line is that the portion of the student loan used by students to buy cryptocurrencies were the excess funds that the college administration released as refunds. Technically, investing the excess money in bitcoin was not illegal since students used discretionary funds. Besides, regardless of how they spent the excess money, students will still have to pay the entire amount of student loan they took out as college money.
Secretly Mining for Bitcoins in Dorm Rooms is Illegal
One thing students should not do is to mine for bitcoins using campus electricity being paid for by the educational institution. This was the case sometime in 2018, when the amount of electrical power in college campuses soared, which led to the discovery that some students were secretly mining cryptocurrencies in their dorm. The likeliest punishment on those who found to have been doing so was incarceration for stealing electricity; although not much has been reported about them.
In 2019, The findings were confirmed by research conducted by tech behemoth Cisco, which published a report stating that universities and colleges were the second largest group of miners in the country.