Photo courtesy of Hispanicize

One of the most significant financial hurdles for America’s youth is student loans. It is a fact that the cost of student loans is disproportionately high and rises more with each passing year. Currently, students arrive at graduation with thousands of dollars of debts — this without contemplating all the extra expenses that these loans should cover, such as rent and food. 

American students face many issues in a system that chains them to massive debt before they even have a chance to start a professional life and become financially independent.

The financial gap produced by these loans leaves students uncovered and creates a real issue that forces them to seek extra income from part-time jobs. During this pandemic time, when the employment market has destabilized considerably, everything becomes more difficult. Others are forced to rely on the help of parents and relatives to fill the gap, but everyone’s income has also been affected by the overall crisis. This is when students must turn to other ways of generating money.

New data indicates that the younger generations are setting their sights on cryptocurrency to be able to pay the enormous college debt.

Cryptocurrency: the new investment 

Cryptocurrency is gaining more popularity in the market, and its relevance in the country’s economy is rising. We are in an era in which everything is digital, and it was only a matter of time before this would lead to a new fully digital currency.

According to a study conducted by LendEDU, the younger the consumers of cryptocurrency, the higher the possibility that they will invest. This showed that 18-to 24-year-olds are more willing to invest in cryptocurrencies, specifically Bitcoin. 

However, these investments come with a high risk, as the possible gains are subject to the prices of the desired currency in the crypto market. That is to say, if prices were to plummet, all you would achieve is to add more to your debt, but if you run lucky and prices rise, then the gains would be considerable. The cryptocurrency market is very volatile and impossible to predict how much and how fast the price of a coin can fall, and guaranteeing good results is left to chance. 

“Understand that these are very volatile investments, so if big fluctuations cause you to lose sleep, this isn’t the space for you,” says Dan Herron, a CFP with Elemental Wealth Advisors in San Luis Obispo, California.

An alternative form of payment 

Despite all this, many people are looking to use cryptocurrency more to pay bills than to invest, which would be a less risky use. 

Studies show that the ethnicities and races of people who use, exchange, or invest in cryptocurrency are mostly Hispanic, Asian, or black compared to white people, with Hispanics having the highest percentage (16%). They choose to use it more as a form of payment that can be transferred directly to a wallet avoiding traditional bank accounts and minimal fees.

This is a system in which some U.S. workers can receive their payments, which facilitates money transactions and bill payments.

In fact, as CBS News reported, cryptocurrency is booming in Latin America, especially in countries like Argentina and Mexico, where inflation is higher than in the U.S. That could inspire use by U.S. Hispanics who want to send money to those countries or are simply swayed by the enthusiasm.

Bitwage, a provider of cryptocurrency payroll and benefits billing services, has seen its Latin American business grow dramatically in the past two years, especially in Argentina, Brazil, and Mexico, according to its CEO, Jonathan Chester.

U.S. workers can sign up and choose to receive their pay in stablecoin or bitcoin and have it go directly into a wallet they own, bypassing a traditional bank account, Chester told CBS News.

Can you really pay off your student loans with cryptocurrency?

According to data shared by Student Loan Hero, U.S. student loan borrowers who purchased 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 to $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 the value of their loan. 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 only $8,311.

Ethereum, the second-largest cryptocurrency by market capitalization, offered the least value during 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 they owed in student loans, highlighting a significant downside to speculative assets.

The Binance coin, the third-largest cryptocurrency, offered far greater 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.

Bottom line: studying the cryptocurrency market can prove to be a key tool in the economic positioning of our community, provided we take the foresight and time to understand the market.