Study: Investing in Crypto to Pay Off Student Loans

Those who didn’t immediately jump on the Bitcoin bandwagon may look at its roller coaster value with major “FOMO” — especially those saddled with sky-high student loan debts. That exponential growth would be nice to have, and according to an April 2021 survey from MagnifyMoney, 62% of cryptocurrency investors do believe they’ll strike it rich.

But if student loan borrowers had invested in cryptocurrency a few years ago, how much headway could they have made toward paring down their repayment? The latest Student Loan Hero study looks at the three largest cryptocurrencies by market cap — Bitcoin, Ethereum and Binance coin — to determine how much borrowers would have needed to invest in recent years to make big payoffs (big enough to, well, pay off their student loans) in 2020 and 2021. One potential surprise: It wasn’t the OG Bitcoin, but an up-and-coming Binance coin that offered the best value — especially for those who got in early when it was first created in 2017.

Let’s dive into some more of these sometimes-cryptic cryptocurrency insights.

Key findings

  • U.S. student loan borrowers who bought Bitcoin in 2017 and held it until 2020 before paying off the value of their loans would have received good value. Borrowers would have needed to invest an average of $12,185 in Bitcoin in 2017 to pay off the value of their loans in 2020, compared with $23,186 in 2018 and $22,701 in 2019.
  • Thanks to Bitcoin’s explosive growth, this scenario was even better for people who didn’t buy Bitcoin until 2020 — and sold the following year to pay off their loan value. If a borrower invested in Bitcoin in 2020 and sold it in 2021 to pay off an average of $34,300 in student loans, they would have needed to invest just $8,311.
  • Ethereum, the second-largest cryptocurrency by market cap, offered the least value over this period. In fact, the average closing price fell 36% between 2018 and 2020, so those looking to buy in 2018 and sell in 2020 would have needed to invest far more — $53,961 — than what they owed in student loans, emphasizing a significant downside to speculative assets.
  • Binance coin, the third-largest cryptocurrency, offered far superior value to student loan borrowers who first invested in this. Borrowers would have needed to invest just $3,169 in 2017 — the year Binance coin was created — to match the value of their loans in 2020.

If you bought Bitcoin in 2017 and held it until 2020 to pay off your student loans, congrats

A lot of us fantasize about what life might be like if we’d first bought Bitcoin in 2009, when it was going for fractions of a penny. Dismissed as a fad and a fringe movement by many, it took years for the original cryptocurrency to reach even a single dollar in value, let alone the five-figure sum Bitcoin is worth these days.

But given its recent price explosion (and an apparent communal commitment to the validity of cryptocurrencies writ large), these days you can use Bitcoin through PayPal and at your local Starbucks. Investors could have hit it big even if they only got into the game fairly recently — like in 2017.

According to Student Loan Hero researchers, investors would only have needed to invest $12,185 in 2017 to pay off the 2020 U.S. student loan debt average of $34,300.

While the specifics vary — some states have higher or lower average student loan debt balances than others — the fact remains that Bitcoin’s growth rate in its average closing price between those two years was a whopping 181%. So if you were smart enough to get onboard relatively quickly (even if about eight years late), major kudos.

For example, if you live in North Dakota, where the average student loan debt is $27,100, you could have invested just $9,627 in 2017 to have enough value today to pay your loans. In the District of Columbia, on the other hand, the average student loan debt total is $58,800 — so you would have needed to cough up a hefty $20,888.

How much borrowers would have needed to invest in Bitcoin to pay off student loans
State 2020 student debt Invested in 2017, sold in 2020 Invested in 2018, sold in 2020 Invested in 2019, sold in 2020 Invested in 2020, sold in 2021
Alabama $37,100 $13,179 $25,078 $24,554 $8,990
Alaska $33,500 $11,901 $22,645 $22,171 $8,117
Arizona $36,100 $12,824 $24,402 $23,892 $8,747
Arkansas $32,300 $11,474 $21,834 $21,377 $7,827
California $37,100 $13,179 $25,078 $24,554 $8,990
Colorado $36,300 $12,895 $24,538 $24,025 $8,796
Connecticut $35,700 $12,682 $24,132 $23,628 $8,651
Delaware $36,800 $13,073 $24,876 $24,356 $8,917
District of Columbia $58,800 $20,888 $39,747 $38,916 $14,248
Florida $38,300 $13,606 $25,890 $25,348 $9,281
Georgia $41,200 $14,636 $27,850 $27,268 $9,983
Hawaii $34,800 $12,362 $23,524 $23,032 $8,432
Idaho $33,500 $11,901 $22,645 $22,171 $8,117
Illinois $37,300 $13,250 $25,214 $24,686 $9,038
Indiana $32,300 $11,474 $21,834 $21,377 $7,827
Iowa $29,600 $10,515 $20,009 $19,590 $7,172
Kansas $32,800 $11,652 $22,172 $21,708 $7,948
Kentucky $32,900 $11,652 $22,172 $21,708 $7,948
Louisiana $34,900 $11,687 $22,239 $21,774 $7,972
Maine $32,700 $12,398 $23,591 $23,098 $8,457
Maryland $42,600 $11,616 $22,104 $21,642 $7,924
Massachusetts $34,400 $15,133 $28,796 $28,194 $10,322
Michigan $35,900 $12,220 $23,253 $22,767 $8,336
Minnesota $32,200 $12,753 $24,267 $23,760 $8,699
Mississippi $36,900 $11,439 $21,766 $21,311 $7,802
Missouri $35,100 $13,108 $24,943 $24,422 $8,941
Montana $32,100 $12,469 $23,727 $23,230 $8,505
Nebraska $31,300 $11,403 $21,699 $21,245 $7,778
Nevada $35,000 $11,119 $21,158 $20,715 $7,584
New Hampshire $33,700 $12,433 $23,659 $23,164 $8,481
New Jersey $36,500 $11,972 $22,780 $22,304 $8,166
New Mexico $34,000 $12,966 $24,673 $24,157 $8,844
New York $37,500 $12,078 $22,983 $22,502 $8,239
North Carolina $36,400 $13,322 $25,349 $24,819 $9,087
North Dakota $27,100 $12,931 $24,605 $24,091 $8,820
Ohio $34,500 $9,627 $18,319 $17,936 $6,567
Oklahoma $31,800 $12,256 $23,321 $22,833 $8,360
Oregon $37,200 $11,297 $21,496 $21,046 $7,706
Pennsylvania $34,900 $13,215 $25,146 $24,620 $9,014
Rhode Island $32,700 $12,398 $23,591 $23,098 $8,457
South Carolina $36,800 $11,616 $22,104 $21,642 $7,924
South Dakota $28,600 $13,073 $24,876 $24,356 $8,917
Tennessee $35,500 $10,160 $19,333 $18,928 $6,930
Texas $32,800 $12,611 $23,997 $23,495 $8,602
Utah $32,400 $11,652 $22,172 $21,708 $7,948
Vermont $34,700 $11,510 $21,901 $21,443 $7,851
Virginia $38,200 $12,327 $23,456 $22,966 $8,408
Washington $35,400 $13,570 $25,822 $25,282 $9,256
West Virginia $32,100 $12,576 $23,929 $23,429 $8,578
Wisconsin $30,700 $11,403 $21,699 $21,245 $7,778
Wyoming $30,100 $10,906 $20,752 $20,318 $7,439
U.S. $34,300 $12,185 $23,186 $22,701 $8,311
Note: 2021 figures based on closing price through Oct. 31

Researchers also tracked the currency’s value as it continued to surge upward in 2020. If you’d invested $8,311, on average, in Bitcoin last year and sold it this year, you’d have enough to pay off that $34,300 average U.S. student debt total from 2020. (Keep in mind that because this data was gathered in 2021, researchers are basing these figures on the average closing cost of Bitcoin through the end of October.)

MORE: How to pay student loans with Bitcoin

Of course, even “just” $8,000 or so is a whole lot of money, so if you missed the boat, don’t beat yourself up too hard — and remember that those steep increases can just as easily lead to precipitous falls. Crypto is still a fairly new (and risky) experiment! Case in point …

Ethereum, second-largest cryptocurrency, offered worst value in same period

While Bitcoin may be the biggest name in the crypto biz, it’s far from the only game in town — and which cryptocurrency you choose to invest in could have major ramifications on your return.

A prime example: Despite being the second-largest cryptocurrency by market cap, Ethereum, launched in 2015 by a 21-year-old entrepreneur and programmer from Toronto, didn’t enjoy the same skyrocket effect as Bitcoin did over the 2017-to-2020 period. In fact, between 2018 and 2020, the average closing price fell by 36%.

What does this all mean in actual dollar value? Well, if you’d invested $24,990 in Ethereum in 2017, you’d have garnered enough gains to pay off that $34,300 average U.S. student loan debt total in 2020. But if you’d waited until 2018, you would have needed to invest $53,961 — more than you owed in the first place — to have enough to pay the loans off (while still incurring a nearly $20,000 loss). There’s a reason they call them “speculative assets.”

That said, there are instances where Ethereum investors could have lucked out, provided they had the free cash upfront to invest in the first place. If you live in Georgia, where the average student loan debt is $41,200, and invested $30,017 in Ethereum in 2017, you’d have earned enough to pay off your loans in 2020, thus saving yourself a tidy $11,183 over three years.

How much borrowers would have needed to invest in Ethereum to pay off student loans
State 2020 student debt Invested in 2017, sold in 2020 Invested in 2018, sold in 2020 Invested in 2019, sold in 2020 Invested in 2020, sold in 2021
Alabama $37,100 $27,030 $58,366 $21,942 $4,587
Alaska $33,500 $24,407 $52,702 $19,813 $4,142
Arizona $36,100 $26,301 $56,793 $21,351 $4,463
Arkansas $32,300 $23,533 $50,815 $19,103 $3,994
California $37,100 $27,030 $58,366 $21,942 $4,587
Colorado $36,300 $26,447 $57,107 $21,469 $4,488
Connecticut $35,700 $26,010 $56,164 $21,114 $4,414
Delaware $36,800 $26,811 $57,894 $21,765 $4,550
District of Columbia $58,800 $42,839 $92,505 $34,776 $7,270
Florida $38,300 $27,904 $60,254 $22,652 $4,736
Georgia $41,200 $30,017 $64,816 $24,367 $5,094
Hawaii $34,800 $25,354 $54,748 $20,582 $4,303
Idaho $33,500 $24,407 $52,702 $19,813 $4,142
Illinois $37,300 $27,175 $58,681 $22,060 $4,612
Indiana $32,300 $23,533 $50,815 $19,103 $3,994
Iowa $29,600 $21,565 $46,567 $17,506 $3,660
Kansas $32,800 $23,897 $51,601 $19,399 $4,055
Kentucky $32,900 $23,970 $51,759 $19,458 $4,068
Louisiana $34,900 $25,427 $54,905 $20,641 $4,315
Maine $32,700 $23,824 $51,444 $19,340 $4,043
Maryland $42,600 $31,037 $67,019 $25,195 $5,267
Massachusetts $34,400 $25,063 $54,118 $20,345 $4,253
Michigan $35,900 $26,155 $56,478 $21,232 $4,439
Minnesota $32,200 $23,460 $50,657 $19,044 $3,981
Mississippi $36,900 $26,884 $58,051 $21,824 $4,562
Missouri $35,100 $25,573 $55,220 $20,759 $4,340
Montana $32,100 $23,387 $50,500 $18,985 $3,969
Nebraska $31,300 $22,804 $49,241 $18,512 $3,870
Nevada $35,000 $25,500 $55,062 $20,700 $4,327
New Hampshire $33,700 $24,553 $53,017 $19,931 $4,167
New Jersey $36,500 $26,592 $57,422 $21,587 $4,513
New Mexico $34,000 $24,771 $53,489 $20,109 $4,204
New York $37,500 $27,321 $58,995 $22,179 $4,637
North Carolina $36,400 $26,520 $57,265 $21,528 $4,501
North Dakota $27,100 $19,744 $42,634 $16,028 $3,351
Ohio $34,500 $25,135 $54,276 $20,404 $4,266
Oklahoma $31,800 $23,168 $50,028 $18,808 $3,932
Oregon $37,200 $27,102 $58,523 $22,001 $4,600
Pennsylvania $34,900 $25,427 $54,905 $20,641 $4,315
Rhode Island $32,700 $23,824 $51,444 $19,340 $4,043
South Carolina $36,800 $26,811 $57,894 $21,765 $4,550
South Dakota $28,600 $20,837 $44,994 $16,915 $3,536
Tennessee $35,500 $25,864 $55,849 $20,996 $4,389
Texas $32,800 $23,897 $51,601 $19,399 $4,055
Utah $32,400 $23,605 $50,972 $19,162 $4,006
Vermont $34,700 $25,281 $54,590 $20,523 $4,290
Virginia $38,200 $27,831 $60,097 $22,593 $4,723
Washington $35,400 $25,791 $55,692 $20,937 $4,377
West Virginia $32,100 $23,387 $50,500 $18,985 $3,969
Wisconsin $30,700 $22,367 $48,297 $18,157 $3,796
Wyoming $30,100 $21,930 $47,354 $17,802 $3,722
U.S. $34,300 $24,990 $53,961 $20,286 $4,241
Note: 2021 figures based on closing price through Oct. 31

The pattern goes in a decidedly different direction once we get to the topsy-turvy, unpredictable pandemic world of 2020. Ethereum’s trend line, while still not anywhere near as high as Bitcoin’s, is still on a nearly vertical rise.

If you’d invested just $4,241 in Ethereum in 2020, you’d have enough to pay off your 2020 student loan debts, which is pretty impressive … but both your timing and your nerve would have to be impeccable.

Initial Binance coin buyers would be in luck if they held crypto value from 2017 to 2020

First available in 2017, Binance coin is the newcomer to the group of cryptocurrencies analysts studied. But at the third-largest by market cap, Binance has quickly become a front-runner in the sometimes-wild world of blockchain-based banknotes.

That said, if you were lucky enough to buy up some Binance coin at the start, you would have had to purchase relatively little to have enough to pay down your student loan debts today. On average, just $3,169 in 2017 Binance coin would come out to the average student loan debt total of $34,300 by 2020. (The coin wasn’t available until July 2017, so the average closing cost data for that year starts then.)

That said, if you’d waited until 2018 or 2019 and sold in 2020, you’d have seen a much lower return on your investment as the coin dropped and stagnated for two full years. But those jumping on the bandwagon in 2020 would also be in luck — and major luck at that. Just $2,158 of Binance coin purchased in 2020 would be enough to pay for that $34,000-plus debt total come 2021, easily the most achievable would-be investment scenario discussed in this study.

How much borrowers would have needed to invest in Binance coin to pay off student loans
State 2020 student debt Invested in 2017, sold in 2020 Invested in 2018, sold in 2020 Invested in 2019, sold in 2020 Invested in 2020, sold in 2021
Alabama $37,100 $3,428 $19,464 $35,004 $2,334
Alaska $33,500 $3,095 $17,575 $31,607 $2,108
Arizona $36,100 $3,335 $18,939 $34,060 $2,271
Arkansas $32,300 $2,984 $16,945 $30,475 $2,032
California $37,100 $3,428 $19,464 $35,004 $2,334
Colorado $36,300 $3,354 $19,044 $34,249 $2,284
Connecticut $35,700 $3,298 $18,729 $33,683 $2,246
Delaware $36,800 $3,400 $19,306 $34,721 $2,315
District of Columbia $58,800 $5,433 $30,848 $55,478 $3,699
Florida $38,300 $3,539 $20,093 $36,136 $2,410
Georgia $41,200 $3,806 $21,615 $38,872 $2,592
Hawaii $34,800 $3,215 $18,257 $32,834 $2,189
Idaho $33,500 $3,095 $17,575 $31,607 $2,108
Illinois $37,300 $3,446 $19,569 $35,193 $2,347
Indiana $32,300 $2,984 $16,945 $30,475 $2,032
Iowa $29,600 $2,735 $15,529 $27,928 $1,862
Kansas $32,800 $3,030 $17,208 $30,947 $2,064
Kentucky $32,900 $3,040 $17,260 $31,041 $2,070
Louisiana $34,900 $3,224 $18,309 $32,928 $2,196
Maine $32,700 $3,021 $17,155 $30,853 $2,057
Maryland $42,600 $3,936 $22,349 $40,193 $2,680
Massachusetts $34,400 $3,178 $18,047 $32,456 $2,164
Michigan $35,900 $3,317 $18,834 $33,872 $2,259
Minnesota $32,200 $2,975 $16,893 $30,381 $2,026
Mississippi $36,900 $3,409 $19,359 $34,815 $2,322
Missouri $35,100 $3,243 $18,414 $33,117 $2,208
Montana $32,100 $2,966 $16,841 $30,286 $2,020
Nebraska $31,300 $2,892 $16,421 $29,532 $1,969
Nevada $35,000 $3,234 $18,362 $33,023 $2,202
New Hampshire $33,700 $3,114 $17,680 $31,796 $2,120
New Jersey $36,500 $3,372 $19,149 $34,438 $2,296
New Mexico $34,000 $3,141 $17,837 $32,079 $2,139
New York $37,500 $3,465 $19,673 $35,381 $2,359
North Carolina $36,400 $3,363 $19,096 $34,343 $2,290
North Dakota $27,100 $2,504 $14,217 $25,569 $1,705
Ohio $34,500 $3,187 $18,100 $32,551 $2,171
Oklahoma $31,800 $2,938 $16,683 $30,003 $2,001
Oregon $37,200 $3,437 $19,516 $35,098 $2,340
Pennsylvania $34,900 $3,224 $18,309 $32,928 $2,196
Rhode Island $32,700 $3,021 $17,155 $30,853 $2,057
South Carolina $36,800 $3,400 $19,306 $34,721 $2,315
South Dakota $28,600 $2,642 $15,004 $26,984 $1,799
Tennessee $35,500 $3,280 $18,624 $33,494 $2,234
Texas $32,800 $3,030 $17,208 $30,947 $2,064
Utah $32,400 $2,993 $16,998 $30,569 $2,038
Vermont $34,700 $3,206 $18,205 $32,740 $2,183
Virginia $38,200 $3,529 $20,041 $36,042 $2,403
Washington $35,400 $3,271 $18,572 $33,400 $2,227
West Virginia $32,100 $2,966 $16,841 $30,286 $2,020
Wisconsin $30,700 $2,836 $16,106 $28,966 $1,932
Wyoming $30,100 $2,781 $15,791 $28,399 $1,894
U.S. $34,3009 $3,169 $17,995 $32,362 $2,158
Notes: Binance coin launched in July 2017; 2021 figures based on closing price through Oct. 31

Pros, cons to using cryptocurrency to pay off your student loans

While striking it rich with cryptocurrency and decimating your student debt might sound like a dream, it’s just a far-fetched fantasy for many of us. We can’t turn back the clock and purchase the right kind of crypto at just the right time. And as has been proven by the up-and-down nature of these values, no one can predict the future.

Here are some pros and cons to think through as you consider using cryptocurrency to pay off your student loans.

Pros

  • Unusually high returns: As this study shows, if you play your cards (or coins) just right, there is the potential to make what Student Loan Hero senior writer Andrew Pentis calls unusually high returns on the cryptocurrency market. “Your money may have grown a lot faster if, in say 2018 or 2019, you threw it into crypto as opposed to a mutual fund,” he says.
  • Low barrier to entry: If there’s one uniting spirit behind cryptocurrency, it’s decentralization — no big agencies or banks are involved. All you need to start investing in cryptocurrency is a digital “wallet” and the money to buy your coins (or fractions thereof).
  • Major money-saving potential, if the timing’s right: Again, if you’ve read this far, you know that if you just so happen to time it right and choose the right type of currency, it’s possible to luck out and make major returns on your investment…which can translate to massive savings when it comes to paying down student loans (or other major expenses). Case in point: If you’d purchased $2,158 of Binance coin in 2017 and sold it in 2020 to pay for your $34,300 student loan total, you’d have saved more than $30,000. Talk about a windfall.

Cons



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