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Bitcoins, Beer and the Student Loan Disaster

How much of this should the American taxpayer subsidize?

A large percentage of the $1.48 trillion student loan debt accumulated by Americans was never spent on tuition at all. Instead, much of that money went towards everything from beer, Bitcoin, spring break shenanigans and exotic reptiles.

More than one in five; or 21.2% of college students, surveyed by The Student Loan Report admitted to spending student loan money on cryptocurrencies like Bitcoin (BTC). That speculation is risky because Bitcoins lost almost 65% of their value between December 2017 and April 2018. A Bitcoin was trading at $19,205.11 on December 17, 2017, and $6,701.40 on April 5, 2018, data from Coinbase indicates.

Disturbingly, buying cryptocurrencies like Bitcoin and Ethereum (ETH) might be the most responsible thing college students are actually doing with their money. If they hold onto these digital coins, they stand to make money if prices recover.

How Colleges are Bribing Students with Student Loan Debt

Many more students are spending student loan funds on stuff like beer, Spring Break trips, video games, cable TV, big-screen TV sets, Uber rides, pets, bar tabs, pizza, fast food, new smartphones, or payments on new cars.

Such spending is possible because of the way student-loan money is paid to colleges. Under the current system, colleges do not send the lenders a bill for tuition. Instead, the lender sends the college a lump-sum payment to cover the tuition and living expenses.

The college takes the tuition out of the loan money and sends the rest to the student in the form of a check or electronic payment. The student is free to spend the money on whatever he or she wants. Anybody who has ever seen Animal House will know why handing cash to a 20-year old college student is always a bad idea.

Another abuse of the current system is that it appears to give colleges the ability to bribe students with cash. The somewhat shocking aspect is that the “bribes” are being financed with the students’ future earnings.

The Student Loan Disaster is Much Worse Than You Think

The average member of the Class of 2016 owed $37,172 in student loans about graduation, estimated. That amount was a 6% increase over 2015.
Around 44 million Americans owed $1.48 trillion in student loan debt in January 2018. That figure was more than double the federal deficit which was $640 billion in 2017 and the amount of credit card debt owed by Americans which is estimated to be close to $620 billion.

Student loans are problematic and potentially catastrophic because they cannot be written off through bankruptcy. That means a person has to pay it off, no matter how broke they are or how old the debt is.
Some people have even had their Social Security benefits garnished because of unpaid student loans. Social Security retirement benefits can be garnished for delinquent student loans as well.

Unfortunately, the number of people defaulting on student loans is increasing rapidly. Around 11.5% of people who began repayment on student loans on October 1, 2013, were in default by September 30, 2016, The Chicago Tribune estimated. No estimate on how much of that debt was used to finance beer, spring break parties or cryptocurrency investments was available.

Could a congressman run for office by promising to eliminate the “college loans gone wild” program?


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