How Much Borrowers Would Have Needed to Invest in Bitcoin, Ethereum and Binance Coin to Pay Off Student Loans

Those who didn’t immediately jump on the Bitcoin bandwagon may look at its roller coaster value with major “FOMO” — especially those saddled with sky-high student loan debts. That exponential growth would be nice to have, and according to an April 2021 survey from MagnifyMoney, 62% of cryptocurrency investors do believe they’ll strike it rich.

But if student loan borrowers had invested in cryptocurrency a few years ago, how much headway could they have made toward paring down their repayment? The latest Student Loan Hero study looks at the three largest cryptocurrencies by market cap — Bitcoin, Ethereum and Binance coin — to determine how much borrowers would have needed to invest in recent years to make big payoffs (big enough to, well, pay off their student loans) in 2020 and 2021. One potential surprise: It wasn’t the OG Bitcoin, but an up-and-coming Binance coin that offered the best value — especially for those who got in early when it was first created in 2017.

Let’s dive into some more of these sometimes-cryptic cryptocurrency insights.

Key findings

• U.S. student loan borrowers who bought 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 with $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 their loan value. 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 just $8,311.
• Ethereum, the second-largest cryptocurrency by market cap, offered the least value over 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 what they owed in student loans, emphasizing a significant downside to speculative assets.
• Binance coin, the third-largest cryptocurrency, offered far superior 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.

If you bought Bitcoin in 2017 and held it until 2020 to pay off your student loans, congrats

A lot of us fantasize about what life might be like if we’d first bought Bitcoin in 2009, when it was going for fractions of a penny. Dismissed as a fad and a fringe movement by many, it took years for the original cryptocurrency to reach even a single dollar in value, let alone the five-figure sum Bitcoin is worth these days.

But given its recent price explosion (and an apparent communal commitment to the validity of cryptocurrencies writ large), these days you can use Bitcoin through PayPal and at your local Starbucks. Investors could have hit it big even if they only got into the game fairly recently — like in 2017.

According to Student Loan Hero researchers, investors would only have needed to invest $12,185 in 2017 to pay off the 2020 U.S. student loan debt average of $34,300.

While the specifics vary — some states have higher or lower average student loan debt balances than others — the fact remains that Bitcoin’s growth rate in its average closing price between those two years was a whopping 181%. So if you were smart enough to get onboard relatively quickly (even if about eight years late), major kudos.

For example, if you live in North Dakota, where the average student loan debt is $27,100, you could have invested just $9,627 in 2017 to have enough value today to pay your loans. In the District of Columbia, on the other hand, the average student loan debt total is $58,800 — so you would have needed to cough up a hefty $20,888.

Researchers also tracked the currency’s value as it continued to surge upward in 2020. If you’d invested $8,311, on average, in Bitcoin last year and sold it this year, you’d have enough to pay off that $34,300 average U.S. student debt total from 2020. (Keep in mind that because this data was gathered in 2021, researchers are basing these figures on the average closing cost of Bitcoin through the end of October.)

MORE: How to pay student loans with Bitcoin

Of course, even “just” $8,000 or so is a whole lot of money, so if you missed the boat, don’t beat yourself up too hard — and remember that those steep increases can just as easily lead to precipitous falls. Crypto is still a fairly new (and risky) experiment! Case in point …

Ethereum, second-largest cryptocurrency, offered worst value in same period

While Bitcoin may be the biggest name in the crypto biz, it’s far from the only game in town — and which cryptocurrency you choose to invest in could have major ramifications on your return.

A prime example: Despite being the second-largest cryptocurrency by market cap, Ethereum, launched in 2015 by a 21-year-old entrepreneur and programmer from Toronto, didn’t enjoy the same skyrocket effect as Bitcoin did over the 2017-to-2020 period. In fact, between 2018 and 2020, the average closing price fell by 36%.

What does this all mean in actual dollar value? Well, if you’d invested $24,990 in Ethereum in 2017, you’d have garnered enough gains to pay off that $34,300 average U.S. student loan debt total in 2020. But if you’d waited until 2018, you would have needed to invest $53,961 — more than you owed in the first place — to have enough to pay the loans off (while still incurring a nearly $20,000 loss). There’s a reason they call them “speculative assets.”

That said, there are instances where Ethereum investors could have lucked out, provided they had the free cash upfront to invest in the first place. If you live in Georgia, where the average student loan debt is $41,200, and invested $30,017 in Ethereum in 2017, you’d have earned enough to pay off your loans in 2020, thus saving yourself a tidy $11,183 over three years.

The pattern goes in a decidedly different direction once we get to the topsy-turvy, unpredictable pandemic world of 2020. Ethereum’s trend line, while still not anywhere near as high as Bitcoin’s, is still on a nearly vertical rise.

If you’d invested just $4,241 in Ethereum in 2020, you’d have enough to pay off your 2020 student loan debts, which is pretty impressive … but both your timing and your nerve would have to be impeccable.

Initial Binance coin buyers would be in luck if they held crypto value from 2017 to 2020

First available in 2017, Binance coin is the newcomer to the group of cryptocurrencies analysts studied. But at the third-largest by market cap, Binance has quickly become a front-runner in the sometimes-wild world of blockchain-based banknotes.

That said, if you were lucky enough to buy up some Binance coin at the start, you would have had to purchase relatively little to have enough to pay down your student loan debts today. On average, just $3,169 in 2017 Binance coin would come out to the average student loan debt total of $34,300 by 2020. (The coin wasn’t available until July 2017, so the average closing cost data for that year starts then.)

That said, if you’d waited until 2018 or 2019 and sold in 2020, you’d have seen a much lower return on your investment as the coin dropped and stagnated for two full years. But those jumping on the bandwagon in 2020 would also be in luck — and major luck at that. Just $2,158 of Binance coin purchased in 2020 would be enough to pay for that $34,000-plus debt total come 2021, easily the most achievable would-be investment scenario discussed in this study.

Pros, cons to using cryptocurrency to pay off your student loans

While striking it rich with cryptocurrency and decimating your student debt might sound like a dream, it’s just a far-fetched fantasy for many of us. We can’t turn back the clock and purchase the right kind of crypto at just the right time. And as has been proven by the up-and-down nature of these values, no one can predict the future.

Here are some pros and cons to think through as you consider using cryptocurrency to pay off your student loans.

Pros

• Unusually high returns: As this study shows, if you play your cards (or coins) just right, there is the potential to make what Student Loan Hero senior writer Andrew Pentis calls unusually high returns on the cryptocurrency market. “Your money may have grown a lot faster if, in say 2018 or 2019, you threw it into crypto as opposed to a mutual fund,” he says.
• Low barrier to entry: If there’s one uniting spirit behind cryptocurrency, it’s decentralization — no big agencies or banks are involved. All you need to start investing in cryptocurrency is a digital “wallet” and the money to buy your coins (or fractions thereof).
• Major money-saving potential, if the timing’s right: Again, if you’ve read this far, you know that if you just so happen to time it right and choose the right type of currency, it’s possible to luck out and make major returns on your investment…which can translate to massive savings when it comes to paying down student loans (or other major expenses). Case in point: If you’d purchased $2,158 of Binance coin in 2017 and sold it in 2020 to pay for your $34,300 student loan total, you’d have saved more than $30,000. Talk about a windfall.

Cons

• You’d likely still need to make a pretty big investment: In almost every instance discussed in these findings, you’d still have needed to invest a four-figure total into the right kind of cryptocurrency to see a return high enough to make a dent in your student loan debt. That’s not possible for most of us — so it might make more sense to consider crypto “as a potential prong of your overall investment strategy, not the crux of it,” Pentis says. “You might look at making smaller investments into crypto, again as part of an overall investing strategy that is diversified and doesn’t leave you as merely a pushing-your-chips-in speculator,” he says.
• Speculative currencies come at a high risk: While crypto can undeniably have major returns, it’s also still relatively new and relatively high-risk — which is yet another reason it might be a smart addition to an overall investment and student loan repayment plan, but it shouldn’t be the only tactic. “If you perceive a particular scheme as the means to ‘get rich quick,’ you’re probably in line to be disappointed,” Pentis says. “There is absolutely risk involved in this relatively new market, and diving headfirst into it with the idea that’ll solve all your student loan problems isn’t wise,” he says.
• Smart cryptocurrency investment often takes insider knowledge: Although the barrier to entry for cryptocurrency is low, the barrier to fully understanding it is another matter entirely — and many of us don’t have the means to learn it all without serious time investment or professional help. “So-called winners on the investing side have deep knowledge and expertise in the space that casual student loan borrowers-turned-investors likely don’t have,” Pentis says. “You really need to understand the confines of cryptocurrency, or enlist the help of a certified financial professional to ensure that your investments are wise and in line with personal financial goals like paying off debt.”