Cash out investments to pay off student loans?
Here’s the situation: I'm 21, I make 90k a year (all remote work), I invested in Bitcoin in 2017, I’ve made sizable returns (at the moment 40k on my 6k investment)
I have 93k in student loans (4.5% interest). My plan is to pay 5k a month on them but that will be about 1.5 years to pay off. I just hate the idea of living paycheck to paycheck for a year and a half knowing I could be done in 9 months if I cash out my investments.
My idea was to cash out Bitcoin pay the cap gains and take a chunk of my loans out. This would reduce my repayment to about 9 months.
I would then cost average back into BTC till I hit my initial investment (in BTC). I’ve tried to do the math on returns but it’s super speculative, as far as I can figure out. Does anybody have any thoughts or ideas about this?
Also, I am moving abroad in August, to a families house in the Philippines, this will allow me to have free housing and a cheap economy to reside in (in case you're wondering how I am making 5k/month payments)
I've posted this elsewhere and some thoughts were to treat it like a mortgage, pay the minimum($1000) and instead invest heavily while I'm young? How can I compare the outlooks on both these routes?
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@Zachary Himes congratulations on your accomplishments! If I had student loans I would not be paying them back right now. I am not familiar with details but there is too much talk about forgiving part or all of them? All the best!
Does it make a difference if you pay a lump sum or if you keep making payments? I don’t know much about BTC. All I know is that it is a bit volatile. Maybe you hit a ceiling.
If you want to cash out, maybe you cash out, pay the capital gains and then put the money into a stable coin that is making 8% a year. Collect that interest while making the monthly required student loan payment. Your student loan is 4.5% stable coin is about 8% so you have a +3.5% spread on the money.
If you take the lump sum of $60k and throw it into the $95k loan you are still going to have the same monthly payment, just with a reduced principle of $35k. 8% on 60k is $4,800 a year. That is an extra $4,800 a year you are going to make towards your payments. If you hold that money in there for 2 years that is almost $10k you didn’t have to work for.
Just some food for thought.
The way I see it given our economic situation (high inflation) and student loan payment pause till August... as long as your investments are beating inflation you're winning. Nobody pays loans when it's "free" and your money is making a return. My fiancé has about $22K in student loans and hasn't paid a dime towards them. We're cash flowing our wedding instead and she's saving the rest for a student loan fund when that day comes.
As far as Bit Coin as an investment? Seems a bit shaky if you ask me. It doesn't feel stable given the time frame you mentioned. Paying capital gains tax sucks but you already made a killing. If you can park that money in something boring with a 7-8% return I'd do that instead while you travel to other countries.
It's funny the news articles mention Biden canceling billions of dollars of student loans but it only amounts to roughly 2% of the borrowers!
Thank you all for the replies! It seems like the logical thing to do is to pay off any high-interest loans (which I don't have_) following that pay the minimum and invest the rest into something safe with an average 8% return creating a nice 3.5% on my money. It would be nice however to just have the peace of mind to not have any student debt and start fresh at 22 or 23, with a full income to work with. I'm going to think about the two, one makes financial sense and the other some inner peace. thank you guys!