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=== '''Launch: “The Debt Payoff Challenge”''' ===
'''Scenario Overview:'''
Present the students with a fictional scenario where they owe a total of '''$10,000 in student loans''' across three separate loans, each with different interest rates and monthly payment requirements. Their task is to develop a repayment strategy that minimizes the total interest paid and enables them to pay off the debt as efficiently as possible.
'''Socratic Questions:'''
* '''What factors did you consider when deciding on your repayment strategy?'''
* '''How does interest affect the total amount you pay over time?'''
* '''What are the benefits and challenges of paying off debts quickly versus slowly?'''
----
=== '''Challenge Overview:''' ===
Students are given a scenario in which they owe '''$10,000''' across three loans with varying interest rates. They must analyze repayment options, calculate the impact of extra payments, and create a plan that minimizes interest payments while aiming to pay off the debt quickly.
----
=== '''Materials Needed:''' ===
# '''Debt Profile Sheet''': Each group will receive the following loan details:
#* '''Loan A''': $4,000 at '''6%''' interest rate
#* '''Loan B''': $3,000 at '''8%''' interest rate
#* '''Loan C''': $3,000 at '''5%''' interest rate
# '''Monthly Income''': Each group has a '''$1,500''' monthly income to allocate. Fixed expenses (e.g., rent, groceries) total '''$1,200''', leaving '''$300''' for loan repayment.
# '''Repayment Options''': Each loan has a minimum monthly payment:
#* Loan A: '''$50'''
#* Loan B: '''$75'''
#* Loan C: '''$45'''  Students may allocate the remaining '''$300''' as extra payments to any of the loans.
# '''Loan Repayment Worksheet''': Includes formulas to calculate monthly interest and track total interest paid. Students will use this to monitor their repayment progress and make decisions.
# '''Calculators or Online Loan Payoff Calculators''': These tools will help students calculate how interest accumulates and how extra payments affect the payoff timeline.
----
=== '''Steps:''' ===
==== '''1. Introduction (5 minutes)''': ====
* Present the scenario: “You owe '''$10,000''' across three loans with different interest rates. Your goal is to create a repayment plan that minimizes interest paid and pays off the debt as quickly as possible.”
* Clarify the concepts of '''interest rates''', '''minimum payments''', and how extra payments can reduce the total interest paid over time.
==== '''2. Strategy Phase (15–20 minutes)''': ====
* Groups should analyze the loans and decide on their strategy:
** Should they pay the minimum on all loans, or make extra payments on one loan?
** If extra payments are made, which loan should they target first? Encourage discussion on different strategies:
** '''Debt Snowball Method''': Focus on paying off the smallest balance first to build momentum.
** '''Debt Avalanche Method''': Focus on paying off the loan with the highest interest rate first to save the most money in the long run.
==== '''3. Presentation Phase (10 minutes)''': ====
* Each group presents their repayment strategy, including:
** Which loan they prioritized for extra payments.
** How they allocated the $300 of extra payments.
** Their rationale for minimizing interest or paying off loans more quickly.
==== '''4. Reflection and Discussion (10 minutes)''': ====
* Review the groups’ strategies and compare outcomes.
* Discuss the following:
** Which strategies were most effective at saving money?
** How might emotions like motivation or the fear of debt influence their decisions?
** How important is it to balance short-term sacrifices with long-term financial benefits?
----
=== '''Socratic Questions for Reflection:''' ===
# '''Why might someone choose to pay off a smaller loan first, even if it costs more in interest?'''
# '''How does focusing on the loan with the highest interest rate impact long-term financial health?'''
# '''What other factors, such as changes in income or unexpected expenses, could influence the repayment plan?'''
----
=== '''Why It Works:''' ===
* '''Real-Life Skills''': Students learn how interest works and are introduced to effective debt management strategies.
* '''Critical Thinking''': The activity encourages students to think through the trade-offs between emotional satisfaction (paying off smaller loans) and financial efficiency (paying off higher-interest loans first).
* '''Engagement''': By simulating a real-world financial challenge, students gain practical skills that are directly applicable to managing their own finances.
----
=== '''Optional Add-Ons:''' ===
# '''Bonus Scenario''':  Introduce a situation where students receive a '''$1,000 windfall''' (e.g., a gift or bonus). Students must decide whether to use it for debt repayment or savings.
# '''Unexpected Setbacks''':  Introduce an unexpected financial setback, like a '''$300 car repair''' or other emergency, forcing students to re-evaluate their repayment plan.
----This format should provide a comprehensive, engaging, and reflective experience for the students, helping them understand the dynamics of managing student loans and making financial decisions.
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