Student loans have become a major burden for millions of Americans. By 2024, about 43 million borrowers have paid a total of $ 1.77 trillion in student loans, with a majority federal loan.
Be aware: Coinbase fees: Full breakdown to reduce cost
Try it: 4 low risk methods to create your savings in 2025
While the traditional methods of repaying the student loan involve using their income to pay monthly, you can also use crypto to deal with the loan. Here are two ways to pay the student loan with Crypto.
Next, find out how you can pay your bills with cryptocurrency.
Take a deafi loan
Defi, or decentralized finance, is a financial service that runs on blockchain networks such as Etreum (Eth). Unlike traditional banks, DEFI platforms do not rely on human approval. Instead, they use smart contracts to borrow, lend or earn interest on their digital assets.
So, how do DEFI loans work? It is said that you have $ 15,000 in student loan and Eth of $ 30,000. Since you do not want to sell your ETH because you think the price will increase over time, you can use DEFI platforms like AAV or Mixardo to deposit your ETH as collateral and borrow $ 15,000 in Stabecrims.
You can then turn stablecoins to US dollars and pay your student loan loan. Once you pay the amount borrowed and interest, you get your ETH back.
However, most Defi platforms will only let you borrow from 50% to 70% of your collateral value. This is called the Lon-to-Value ratio. If the value of your crypto is significantly reduced, you may have liquid, which means that the platform sells share of your digital property to cover the loan.
Next read: If Trump ends the Department of Education, do you still have to pay your student loan?
Professionals
- low interest rates: The first thing that makes DEFI loan attractive is low interest rate and flexible repayment program. In some cases, borrowing rates are near zero.
- No credit score is required: Since these loans are issued through smart contracts and not by financial institutions, you do not need a good credit score. Your crypto acts as a collateral rather than your credit history.
Shortcoming
There are advantages when using DEFI loan to pay student loans, it is not without risk.
- Liquidation risk: If the value of your crypto is very low, the platform can sell parts or all to cover the loan.
- Convertible interest rate: Convertible interest rates may increase during high demand period, which can make the lending more expensive.
- Smart Contract Risk: Since smart contracts are code that are unsafe for bugs, your collateral is at risk.
Use third-party platform
If you own digital property, you can use a third-party platform like bitpes to pay bills using crypto. You just need to download the app and make a wallet.
Once your account is activated, link your student loan account directly to the platform. From there, select the loan you want to pay and select the cryptocurrency you want to use. The bitpe will then convert your crypto into cash and send the payment directly to your lender.
You can use Bitpay to pay student loans from almost any lender, including Sallie Mae, Navient, Nelnet and Fedloan service, others. In addition, the platform accepts dozens of cryptocurrency, such as bitcoin, atherium, dogicine, bitcoin cache and many more.
Unlike the Defi loan, where you return your crypto after repaying the lent amount, with this option, you will lose your digital property. Therefore, if you estimate the future price increase, taking DEFI loan can be a better option.
More than gobankingrates
Sources say
This article originally appeared on Gobankingrates.com: How to pay your student loan with Crypto
The idea and opinion expressed here are the idea and opinion of the author and not necessarily Nasdac, Inc.
