Is it Legal to Invest in Bitcoin Using One’s Student Loan?

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.

Coronavirus Forbearance of Student Loans

The U.S. Dept. of Education recently published information about student loan forbearance in response to the impact of the ongoing coronavirus crisis.

The Coronavirus and Forbearance is in connection with the Congress-approved CARES Act, signed into law by president Donald Trump last March 27, 2020 The law includes broad relief for borrowers who have been granted federal student loans. The CARES Act has automatically placed student borrowings under administrative forbearance, which means students and/or parents are allowed to temporarily stop making monthly payments on educational loans, up to September 30, 2020.

 

Although the CARES Act was enacted March 27, 2020, the date of effectivity for the suspension of payments was made retroactive from March 13, 2020.

Other Questions Raised in Connection with Student Loans and Financial Aid

Some students have put forward questions about the possibility of increasing the financial aid received, after their parents lost their jobs as a result of the coronavirus crisis.

In response to such queries, the U.S. Education Department recommends communicating with the financial aid office of the school. The department gives assurance that there are flexibility measures in place to enable students to stay in school and finish their course.

Generally, the recommendation is for students and/or parents to get in touch with schools via their website and inquire about the coronavirus-related guidance outlined for students, particularly with regard to student financial loans granted by private financial institutions.Under the forbearance scheme, students who will continue payment of their loans amid the health crisis, will not pay interest due on the loan.

The Education Department stated that although most schools transitioned to conducting classes through online systems, many continue to stay open in order to provide students not only answers to their questions but also assistance.