Launch: Paying Off Large Debts

15-Minute Debt Payoff Challenge

https://duckduckgo.com/?q=paying+off+loans+video&t=newext&atb=v369-1&iax=videos&ia=videos&iai=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DC1H8NG9fLAc

Materials Needed:

1. Debt Profile Sheet:
   • Loan A: $4,000 at 6% interest
   • Loan B: $3,000 at 8% interest
   • Loan C: $3,000 at 5% interest
2. Monthly Income:
   • $1,500 monthly income, with $1,200 in fixed expenses, leaving $300 for loan repayment.
3. Repayment Options:
   • Loan A: $50 minimum
   • Loan B: $75 minimum
   • Loan C: $45 minimum
   • Extra payments can be allocated to any loan.
4. Loan Repayment Worksheet: To track interest and payments.
5. Calculators (optional, for speed): To calculate how extra payments impact interest and the repayment timeline.

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Steps:

1. Introduction (3 minutes):

• Briefly introduce the scenario: "You owe $10,000 in student loans across three loans with different interest rates. You need to create a plan to minimize interest and pay off the debt as efficiently as possible with $300 for extra payments after covering fixed expenses."

2. Strategy Phase (7 minutes):

• In groups, students will:
  • Decide how to allocate the $300 extra payment.
  • Discuss which loan to prioritize based on the interest rates and total cost.
  • Consider the Debt Snowball vs. Debt Avalanche method in their discussion.
• Encourage groups to decide:
  • Should they pay the minimum on all loans or make extra payments on one loan?

3. Group Presentations (4 minutes):

• Each group briefly presents their repayment strategy:
  • Which loan they prioritized for extra payments.
  • How they distributed the $300 extra payment.
  • Their reasoning (Debt Snowball or Avalanche).

4. Quick Reflection and Discussion (1 minute):

• Ask the Socratic questions to quickly reflect on strategies:

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Socratic Questions for Reflection (A/B Choices):

1. Why might someone choose to pay off a smaller loan first, even if it costs more in interest?
   • A) Because it feels rewarding to eliminate a loan quickly and build momentum.
   • B) Because it may not be the most financially efficient choice, and they prefer tackling higher-interest loans first.
2. How does focusing on the loan with the highest interest rate impact long-term financial health?
   • A) It saves more money over time because less interest accumulates.
   • B) It may take longer to pay off smaller loans, but it avoids the emotional satisfaction of clearing small balances.
3. What factors (income changes, emergency expenses) might affect a repayment plan?
   • A) A sudden change in income or an emergency expense might force you to slow down repayments or reallocate funds.
   • B) A windfall, like a bonus or gift, could allow for faster repayment, but it's hard to predict.

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Why It Works in 15 Minutes:

• Focused Learning: Students quickly analyze and prioritize loan repayment strategies, learning to balance emotions and financial efficiency.
• Real-World Application: The activity simulates real-life financial decision-making, encouraging practical insights into managing debt.
• Engagement: The brief but intensive exercise keeps students engaged and encourages rapid critical thinking.