Can investment in Bitcoin help in repaying student loans?
As per the Biden Administration’s Student Loan Debt Plan, if an American has received a Pell Grant while in college, he or she is eligible for up to $20,000 in debt reduction. While to students who didn’t receive Pell Grants, Biden announced forgiving debt up to $10,000. However, the forgiveness only applies to those whose earnings are less than $1,25,000.
The opinions are split when it comes to forgiveness for US student loans which is the second largest consumer debt category in the country, rivalling mortgages who has topped in lending.
Since Biden announced the student loans relief plan, the Republicans have challenged the move. While some states in the US are planning to tax student loan forgiveness. If that is not enough, then scammers have already started to make most of the announcements by calling the borrowers and tricking them to pay for loan cancellation, as per reports.
At present, there are more than $1.7 trillion in US student loans.
Lokesh Arora, CEO, of Study24x7 said, “About 43 million Americans have federal student loan debt as millions of students in the United States choose loans as their resort for education. As per the data, student loans are the second largest consumer debt category in the country, after mortgages. Currently, US student loan debt stands at more than $1.7 trillion, which is more than both credit card debt and mortgage debt combined, by a long shot. As per the reports, White House estimates its debt relief plan could lead to about 20 million borrowers having their debt completely cancelled.”
How does Bitcoin come into the picture?
Right after Biden announced the student loan forgiveness plan, it was the talk of the town across the country. Many wonder if this forgiveness could actually give the much-needed help to the borrowers. However, cryptocurrency netizens believe Bitcoin can be the solution instead of forgiving a certain amount of student loans.
Last month, Dennis Porter, CEO, and Co-founder of Satoshi Act Fund tweeted “instead of forgiving $10,000 in student debt, Biden should have given each person $10,000 in Bitcoin, locked up for 10 years in a smart contract that pays off the remaining balance of the student debt once it’s released.” His tweet was debated by Twitterati with some agreeing to Bitcoin as the solution, while some did not find the largest cryptocurrency as the wise option.
Can investing in Bitcoin really help in US student loans repayment?
Ashwani Kumar, CEO & Founder, HelperWorld explained for a student loan with a fixed interest rate, the return is clear; this can be a positive to using loans. For instance, let’s say you leave college owing around $37,000 in student loans. At a 6.8 percent fixed interest rate, repaying those loans over five years instead of 10 would drop the total interest you pay from $14,096 to $6,749. Those savings are concrete, and you can calculate them before you borrow anything.
“These numbers become bleaker for investments, which involve risk. Your investment may gain value, but it’s also possible to lose some or all of what you invest, especially with something as fickle as cryptocurrency,” Kumar added.
On Bitcoin as the solution, Abhijit Shukla, CEO and Director, Tarality said, “It’s nice to think of Bitcoin as a solution to the issues surrounding the current financial system, but the only way Bitcoin would even get close to minimising this deficit would be if universities/colleges widely accepted Bitcoin for tuition fees after the US government accepted Bitcoin as a payback for loans.”
So “Bitcoin” by itself cannot solve the student debt crisis, unless the students in debt have enough disposable personal income to invest and take the risk in Bitcoin. Since they don’t (hence the 1 million people per year in America who default) they remain both in debt and lack any investments, Shukla added.
The nature of the cryptocurrency market is highly sensitive driven and they are riskier compared to other market-related instruments. However, the demand for cryptocurrencies is still consistent. Currently, the global crypto market has erased its $1 trillion mark.
As per CoinMarketCap, at the time of writing, the market cap is around $933.14 billion lower by 1.21% on Saturday compared to the previous day. However, the total crypto market volume has risen by 2.2% to $61.31 billion.
Bitcoin has pulled back from the $20,000 mark and is trading on a bearish tone. The largest crypto is available at around $19,800 with a market cap of $379 billion. It has slumped by 2% in 24 hours.
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