You can use cryptocurrency assets to pay off student debt. There are two ways: easy (selling your crypto) and better (borrowing against your crypto holdings).
Selling crypto to pay your student loans
You can sell off your crypto holdings and use that money to pay off student loans. However, selling crypto holdings will set off a tax bomb.
If you sell crypto holdings within one year of purchase, your gains are subject to regular income tax. This is typically higher than capital gains tax.
If you sell crypto holdings more than one year after purchase, your gains will be subject to the capital gains tax.
Borrowing a DeFi loan against your crypto holdings
You can borrow against your crypto holdings using a DeFi (Decentralized Finance) loan. You avoid a tax bomb, and the interest rates are usually lower than loans from traditional financial institutions.
Can crypto be used as collateral for a loan? Yes, you can use crypto as collateral for a DeFi loan.
How DeFi loans work: You can borrow 25%-50% of the value of your crypto holdings using a DeFi loan. Interest rates are typically low, and there is no taxable event. Here’s the problem: The risk is high if your crypto loses too much value.
DeFi loans do not consider credit score/history or debt-to-income ratio, just the current value of your holdings used as collateral.
These can act as refinancing loans toward student debt, credit card debt, personal loans, or anything you need to refinance.
How to get a DeFi loan:
Decide which tokens or stablecoins you want to stake and borrow against. For some DeFi loans, you may be able to stake multiple crypto coins.
Identify the DeFi platform/exchange where you’d like to take out the loan.
Connect a conventional bank account to an exchange like Coinbase. You’ll need to choose an exchange with a KYC (know your customer) onboarding process.
Then connect your exchange with a browser wallet, such as MetaMask or Phantom’s wallet.
On a DeFi platform, stake your desired token(s).
You will likely receive the borrowed amount in stablecoin (like USDC). Send that stablecoin from your browser wallet to an exchange like Coinbase.
From the exchange, you should be able to convert the stablecoin into fiat currency, such as the US dollar (USD).
Send the fiat money to your conventional bank account from an exchange like Coinbase.