With high interest rates, a rise in debt levels and an increase in default rates, there are no easy solutions for the 44 million US borrowers who hold over $1.3 trillion in student loan debt (the same size as the US junk bond market). Millennials are crunching the numbers on the cost of their education and looking for solutions.
While loan forgiveness is another way of forming a queue at the government’s door, waiting for relief through loan forgiveness programs, cryptocurrencies promise something else. They’re increasingly becoming a viable (and extremely risky) asset for parking cash before turning it over to Stafford and Sallie Mae for loan repayment.
Ethereum is the coin of choice for a growing number of millennials. With its recent surge past $600 to a new all time high on a gain of 32% in 24 hours, the cryptocurrency promises to return more on the dollar over 30 days than monthly interest accrued on student debts that have an average monthly payment of $371 bearing 4.45 to 7% interest. As new money pours into the crypto markets from Wall Street, several altcoins, along with Bitcoin, are reaching all time highs including Litecoin, Dash and Monero.
When everything pops, the big bubble bag will be the US dollar in the hands of the government for guaranteeing student loans that borrowers are unable to pay off.
And then there are the perpetual warnings surrounding the crypto market, including a red flag from Charlie Lee, the founder of Litecoin.
Ok, sorry to spoil the party, but I need to reign in the excitement a bit…
Buying LTC is extremely risky. I expect us to have a multi-year bear market like the one we just had where LTC dropped 90% in value ($48 to $4). So if you can't handle LTC dropping to $20, don't buy! ?
— Charlie Lee [LTC?] (@SatoshiLite) December 11, 2017
For millennials as well as other investors, the downside of buying cryptocurrencies instead of paying loans up front is not only their extreme volatility and risk, but the short-term capital gains taxes the government demands once the coins are traded back into fiat for profit taking.