It’s bad enough that 75% of college students gamble. But now another perilous student behavior has emerged. A recent survey by The Student Loan Report indicates that 21% of student borrowers invest in cryptocurrencies such as Bitcoin.
As a responsible parent you of course advise your student not to gamble. But also urge him to stay away from cryptocurrency investments!
Unfortunately, these investments are easy to make. After loan and other aid money pays tuition and fees for an academic term, your student gets the remainder to cover that term’s books and other necessary expenses. Now he could have up to a few thousand dollars in hand.
He can invest these funds — hopefully in a safe and secure bank account, but also in high-risk opportunities such as cryptocurrencies. Wherever he invests, he’ll still need to pay for necessities like books, housing, and food as the term progresses.
What makes cryptocurrencies so dicey for college students? It’s what investment professionals call “volatility.” Cryptocurrencies can become really volatile really fast!
For example, Bitcoin’s value on January 10 was $14,890.72. But by February 5 it’s value dropped to $6,914.26 — a 54% loss! So if your student bought a $2,000 share in Bitcoin on January 10 and sold this share just 25 days later, he lost $1,080 of his investment! Meanwhile, thousands in costs for the term remain to be paid.
Some call Bitcoin the potentially biggest “bubble” in history. A $1,080 loss from his limited pool of funds could easily place your child among the 52% of college students facing high levels of food insecurity, or the 12% college students who are homeless.
Difficulty paying for basic needs undermines academic performance, and money shortages have long been among the most common reasons why students leave college without degrees, so cryptocurrency financial losses could also end up placing your student among the 25% who drop out every year.
Far better for your student to spend as conservatively as possible and, toward the end of the term, if he has money he doesn’t need, return it to the government. For every $100 of his spring Federal Direct Unsubsidized Loan he returns within 120 days of its disbursement, Washington will immediately cancel all fees and interest applicable to that $100. The result is that for every $100 he returns, the total amount he’ll ultimately repay on this loan will be cut by up to $191!
There’s an old saying, “Never gamble unless you can afford to lose the money.” If your student needs loans and/or other financial aid to help pay for college, he certainly cannot afford to lose money on erratic investments such as cryptocurrencies!
College Affordability Solutions has 40 years of experience in counseling students and parents on ways to manage their dollars for college. Call (512) 366-5354 or email email@example.com for a no-cost consultation.