Can investment in Bitcoin help in repaying student loans?

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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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