Student loans have become a massive burden for millions of Americans. As of 2024, nearly 43 million borrowers owe a total of $1.77 trillion in student loans, with the majority being federal loans.
While traditional methods of repaying student loans involve using your income to make monthly payments, you can also use crypto to tackle debt. Here are two ways to pay down student loan debt with crypto.
Take Out a DeFi Loan
DeFi, or decentralized finance, is a financial service that runs on blockchain networks, like ethereum (ETH). Unlike traditional banks, DeFi platforms don’t rely on human approval. Instead, they use smart contracts to let people borrow, lend, or earn interest on their digital assets.
So, how do DeFi loans work? Say you have $15,000 in student loan debt and own $30,000 worth of ETH. Since you don’t want to sell your ETH because you think the price will go up over time, you can use a DeFi platform like Aave or MakerDAO to deposit your ETH as collateral and borrow $15,000 in stablecoins.
You can then convert the stablecoins into U.S. dollars and pay off your student loan debt. Once you repay the borrowed amount plus the interest, you get your ETH back.
However, most DeFi platforms will only let you borrow 50% to 70% of your collateral’s value. This is called the Loan-to-Value (LTV) ratio. If the value of your crypto drops significantly, you may be liquidated, meaning the platform sells part of your digital asset to cover the loan.
Pros
Cons
While using DeFi loans to pay down student loans has advantages, it’s not without risks.
Use a Third-Party Platform
If you own digital assets, you can use a third-party platform, like BitPay, to pay bills using crypto. All you need to do is download the app and create a wallet.
Once your account is active, link your student loan account directly to the platform. From there, select the loan you want to pay and choose the cryptocurrency you’d like to use. BitPay will then convert your crypto into cash and send the payment directly to your lender.
You can use BitPay to make student loan payments from virtually any lender, including Sallie Mae, Navient, Nelnet, and FedLoan Service, among others. Plus, the platform accepts dozens of cryptocurrencies, such as bitcoin, ethereum, dogecoin, bitcoin cash, and many more.
Unlike DeFi loans, where you get back your crypto after repaying the borrowed amount, with this option, you’ll lose your digital assets. So, if you anticipate a value increase in the future, taking a DeFi loan might be a better option.
This article has been published in gobankingrates.com via Yahoo News
While traditional methods of repaying student loans involve using your income to make monthly payments, you can also use crypto to tackle debt. Here are two ways to pay down student loan debt with crypto.
Take Out a DeFi Loan
DeFi, or decentralized finance, is a financial service that runs on blockchain networks, like ethereum (ETH). Unlike traditional banks, DeFi platforms don’t rely on human approval. Instead, they use smart contracts to let people borrow, lend, or earn interest on their digital assets.
So, how do DeFi loans work? Say you have $15,000 in student loan debt and own $30,000 worth of ETH. Since you don’t want to sell your ETH because you think the price will go up over time, you can use a DeFi platform like Aave or MakerDAO to deposit your ETH as collateral and borrow $15,000 in stablecoins.
You can then convert the stablecoins into U.S. dollars and pay off your student loan debt. Once you repay the borrowed amount plus the interest, you get your ETH back.
However, most DeFi platforms will only let you borrow 50% to 70% of your collateral’s value. This is called the Loan-to-Value (LTV) ratio. If the value of your crypto drops significantly, you may be liquidated, meaning the platform sells part of your digital asset to cover the loan.
Pros
Cons
While using DeFi loans to pay down student loans has advantages, it’s not without risks.
Use a Third-Party Platform
If you own digital assets, you can use a third-party platform, like BitPay, to pay bills using crypto. All you need to do is download the app and create a wallet.
Once your account is active, link your student loan account directly to the platform. From there, select the loan you want to pay and choose the cryptocurrency you’d like to use. BitPay will then convert your crypto into cash and send the payment directly to your lender.
You can use BitPay to make student loan payments from virtually any lender, including Sallie Mae, Navient, Nelnet, and FedLoan Service, among others. Plus, the platform accepts dozens of cryptocurrencies, such as bitcoin, ethereum, dogecoin, bitcoin cash, and many more.
Unlike DeFi loans, where you get back your crypto after repaying the borrowed amount, with this option, you’ll lose your digital assets. So, if you anticipate a value increase in the future, taking a DeFi loan might be a better option.
This article has been published in gobankingrates.com via Yahoo News
