Survey finds 1 in 5 college students using loan money to buy cryptocurrency

Posted at 3:14 PM, Apr 10, 2018

Student loan debt has surpassed $1 trillion. It's expensive to go to school, and loans help many afford higher-education but not all that money may be going toward tuition and books.

A survey found that one in five college students are using some of their leftover loan money to dip their toes into virtual currencies like Bitcoin.

The mere mention of cryptocurrency is enough to make Loyola University Maryland Assistant Accounting Professor JP Krahel cringe.

“Oh, oh boy,” said Krahel with the Sellinger School of Business.

Even worse, students are buying into it and they're using student loan money to do so.

The allowance meant for living expenses is instead being invested into Bitcoin and Ethereum. The Student Loan Report found that's how 21 percent of current college students are using their excess financial aid money.

“Given the unregulated market of cryptocurrency, given what we've already seen, proven volatility, and given the fact that student loan debt is something you can't get rid of in bankruptcy, I personally, without getting too hyperbolic here, I would not do that,” Krahel said.

A warning from someone who knows money, but even his wisdom is not enough to convince some of his own students.

“They'll say, ‘Oh, did you see what bitcoin did yesterday, I made x dollars,’ I'm like, children, come on. Your interest rates and student loans that's what you should be worried about. If you have free money, send it back to Sallie Mae, you know, pay that debt off early because that stuff starts snowballing and paying off debt is a guaranteed return on investment,” said Krahel.

And yet it's hard to shake the promise of investing in a market that's produced millionaires from relatively low investments just several years ago.

“I don't want to knock cryptocurrencies, they do have a value, but people are getting into it because of that volatility, because you could have a thousand today and $3,000 tomorrow,” said Krahel. “So, if you're willing to only see the upside, cryptocurrencies are great but that's not the way life works.”

Bitcoin's value has sunk $2,000 in the last month and plummeted from its peak in December at nearly $20,000.

However, with every slump there's also the possibility of a rally. These students could prove their professor wrong or learn a real-life lesson about loss and spending wisely.

Krahel said you should be borrowing the least amount of money possible so you have less to pay off in the future.

Students are graduating with an average of $30,000 in student loan debt.