It had been known that many college students are riding on the digital currency craze head first. It was reported that these college students had been using their student loans to invest on cryptocurrencies such as automated bitcoin trading.
Financial authorities who found out about this trend said that this could be very risky specifically to those who are taking out private student loans versus financial student aid, considering that private loans impose higher interest rates and non flexible repayment schemes.
Funds Intended For Living Expenses Were Invested
Student loan borrowers can do this because they can use the remaining of the student loan funds for “living expenses”. Most of the time, student borrowers get higher loans which is more than what they need for the school semester.
As soon as the college or university’s Financial Aid Office takes the required financial assistance to pay for the course, a refund check will be sent out to the student borrower. The student borrower on the other hand can use the refund check to cover for his or her living expenses.
In essence, there is no policy or procedure in place that ensures the student borrower spends the remaining money on college living costs. Consequently, the borrower can invest the money the way they want to. Obviously, for quite a few students, they think it is best to use this money to invest in Bitcoin, Ethereum, and many other virtual currencies.
Decline In Crypto Prices In 2018
In 2017, the hottest investment in the market are cryptocurrencies. This is especially true for young college students in America. That’s why many college borrowers are drawn in to invest thinking that this is a smart way to put their refund money.
Some students may have figured that they can pay off their student loan quickly with their crypto investment too considering that when bitcoins have started, digital money seem to have great returns.
However, in 2018, the days of massive price increases appear to be miles away. Digital currencies, particularly the giant cryptos, Ethereum and Bitcoin, have fallen sharply from record high prices, and daily price volatility is more consistent with common stock.
Should these students invest more wisely and carefully, they could have avoided the huge lost incurred in 2018. Diversified investments could have been a better investment path like investing a partial in crypto, then a few on high yield savings, and etc. However there could always be yet another explosion of growth in digital currency, and student borrowers will receive far from what they have invested. Or, they may quickly lose all the financial assistance money they have invested.