Editor’s note: This article is reproduced from the WeChat public account “Bitcoin Chinese Network” (ID: bitecoin99) , author: Gerelyn Terzo, translation: Anne. 36氪Reprinted with permission.
Major credit card issuers may have banned bitcoin purchases, but that doesn't limit how college students can spend. According to a recent survey by the Student Loan Report, more than one in five (21.2%) college students are using financial aid funds to invest in top digital currencies. It's a risky bet, an investment that may pay off, or that students will take on more debt than they would have borrowed in an environment of rising interest rates.
Students were asked in the survey: "Have you used student loans to invest in digital currencies like Bitcoin?"
Interest rate conundrum
In the United States, more than 1.4 million college students use private loans to finance their education, and most of them use federal loans. As interest rates rise, these students may face higher rates than they expected.
At the same time, students also get cash, because lenders have a habit of releasing excess funds once tuition is returned to borrowers. This money should be spent on living expenses, but investing savvy young people turning it into an asset class could yield higher returns than anywhere else in traditional financial markets. Students are not required to disclose how the additional cash was used. The report mentions Bitcoin, Ethereum, and Ripple, among others.
In March, when bitcoin prices were under pressure, the Student Loan Report surveyed college students for several days. Given Bitcoin's wildly successful performance in 2017, the year wasn't enough for them to remember the potential returns that Bitcoin and other altcoins can offer. The time students were surveyed is reflected in the Bitcoin price chart below.
Advice from Blockchain Veterans
If lenders understood the risks students were taking, they might have introduced stricter controls. Consumers were free to use their credit cards to invest in bitcoin until JPMorgan, Bank of America and others said in February that they could no longer use credit cards to invest in digital currencies. Before the credit card ban, nearly 20 percent of bitcoin investors used credit cards to make purchases, according to a report by CNBC citing a LendEDU investigation.
Recall the advice provided by blockchain veteran Wences Casares, who told PayPal’s Dan Schulman: “The main way bitcoin can fail is once we start investing in bitcoin, we can’t afford to lose.”