One in Five Students Say They’ve Used Loan Money to Buy Crypto

If there’s something that most financial experts can agree on it’s that student debt has gotten out of control. In addition to being a hot topic for politicians, it seems there’s always a story about how student debt is crippling Millennials and now Generation Z. As a result of their debt load these adults are mostly unable to prepare for things like retirement nor invest their money properly. However a new study shows there’s one perceived investment opportunity they might be springing for regardless: cryptocurrency.

A survey conducted by The Student Loan Report asked current college students if they’d ever used their student loan funds to purchase Bitcoin or other cryptocurrencies. Somewhat surprisingly, more than one-fifth (21.2% to be exact) said they had. While interesting, it should be noted that this study only sampled 1,000 students and was conducted over the course of four days. Still the figures suggest there could be trouble ahead for these young investors who may have purchased at the wrong time.

As is well documented at this point, cryptocurrencies like Bitcoin have made early adopters a lot of money as their popularity exploded in 2017. Unfortunately 2018 hasn’t been too kind to the crypto market following calls for regulation, policy crackdowns from banks, and ad bans from major players like Google, Twitter, and Facebook. Currently Bitcoin is worth less than half of what it was at its height late last year.

Some may be wondering how these students are even able to use their loan funds to invest in digital currency. The answer is simple, in that students can overborrow what they need for a semester and use the funds for “living expenses” once their tuition, room, board, and books are covered. As a result students are free to use the leftover money as they see fit.

On the one hand you could argue that getting students to learn about investing early on is actually a good thing, even if they’re using loan money to do it. Then again one of the important lessons of investing is not to risk anything you can’t afford to lose. Moreover one could hypothesize that some of the students who did purchase crypto saw it less as a gamble and more as a “get rich quick” scheme that proper investing is not. At this time cryptocurrency is likely not the best medium for first-time investors to buy into — especially when the money used is borrowed. In any case, hopefully for the sake of these students and others, the cryptocurrency market will bounce back and make these student loan-funded investments pay off.

Author

Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded DyerNews.com in 2015 to focus on personal finance and the emerging FinTech markets.

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