# The Cost of Debt (Part 3 of the Spending & Saving Project)

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## Objective

SWBAT investigate how changing parameters of a purchase will change the total cost of debt.

#### Big Idea

Debt is not free, but students can make sense of how to make it more or less expensive.

## Opener: A Big Purchase

5 minutes

Today's class is in the computer lab, where students will use spreadsheet software to explore how changing the parameters of a purchase on credit will change the overall cost of the debt.

As students arrive, I greet them and tell them to take a seat at any computer they'd like.  While they're logging in to the computers, I explain the day's first task: "Think of a big purchase that you'd like to make today, or someday, something that you might not be able to afford right now.  Your purchase can be as realistic or as unlikely as you want."  Then I tell students to spend a few minutes researching the cost of their item online.  Some students will ask for a price-range for their item.  With a smile, I tell them to keep it between five hundred dollars and ten million dollars.

As they're conducting this initial research, I distribute copies of Part 3 of the Spending & Saving Project, which I describe in the next section of this lesson.

## Introduction to The Spending & Saving Project, Part 3

10 minutes

About Part 3 of the Project

Today, students will use computers to complete Part 3 of the Spending & Saving Project.  In previous days, they've worked on Parts 1 and 2.  Until today, I've asked that students show me their complete work on one part of the project before I provide the next.  Today, regardless of what each student has done so far, all students will work on Part 3.  Here is the handout for Part 3 of the project.  I make double-sided photo copies of this two page document (here is the original Word file, if you'd like to be able to make edits).

In order to complete this part of the project, students will use this "Debt Calculator" spreadsheet.  I use a link on my class website to share this file with students.  I give students a minute or two to download and open the file, and I project it on the screen at the front of the room.  When everyone is ready, I teach a mini-lesson about how to use the spreadsheet to complete the project.  Please see this screencast video for an overview of how the debt calculator works, and for a description of how I teach this mini-lesson.

## Work Time and Extensions

25 minutes

Students now have the rest of class to finish Part 3 of the project.  Once they understand how the spreadsheet works and what I'm asking them to do, it doesn't take long to finish the front of this assignment.  I circulate to make sure everyone understands what's going on.  I use this opportunity to make sure that students understand the word parameter, and that while two parameters stay the same (Price of Item and Annual Percentage Interest Rate), we exploring how changing the Monthly Payment will cause the outputs - Months to payoff  and Total Cost - to change.

Students may need help figuring out how to make a plan that's possible to pay off.  This  student's work, for example, shows how it might take some students a few tries before they come up with a monthly payment that will actually give them a chance to get out of debt.

Part 3 Extensions

For anyone who finishes with time to spare, I make sure that they've recorded their thoughts on the two prompts on the bottom of Part 3, before directing them to back of the assignment, which lists some "Extensions" to the project.  I describe the thinking behind these extensions in this narrative video.  Students will have the next two class periods to finish up the project, so even if they don't get to these today, we'll be able to work on them soon.

## Debrief: Evaluating the Cost of Debt

3 minutes

With a few minutes left in class, I ask the question that I've been asking throughout the lesson: Is debt worth it? The answer I want them to leave with is that it depends and that debt can be worth it, but that you have to be very careful.  I ask if anyone has ever heard the phrase, "The rich get richer," and what it might mean.  We touch on the idea that it can save someone a lot of money by paying for an item up front, rather than using debt, but that on the other hand, the use of debt might be only way that someone can make a necessary purchase.

What I really want to kids to see is that there are options when it comes to debt.  There are ways - in the context of the learning target, there are parameters that we can change - to make debt very expensive, or to minimize its cost.  So I get this conversation started, and I then I give kids the floor to share their thoughts for a few minutes.