GOALS:
• Students will learn ratio for debttoincome.
OBJECTIVES:
• Students read Student Paths article about the longterm costs and benefits of continuing one’s education beyond high school
• Students answer questions about the reading
• Students calculate debttoincome ratios for various colleges and careers
ASCA STANDARDS ADDRESSED:
• C:B2.1 Demonstrate awareness of education and training needed to achieve career goals.
COMMON CORE STANDARDS ADDRESSED:
• CCSS.ELALiteracy.CCRA.R.1 Read closely to determine what the text says explicitly and to make logical inferences from it; cite specific textual evidence when writing or speaking to support conclusions drawn from the text.
• CCSS.ELALiteracy.SL.1112.2 Integrate multiple sources of information presented in diverse formats and media (e.g., visually, quantitatively, orally) in order to make informed decisions and solve problems, evaluating the credibility and accuracy of each source and noting any discrepancies among the data.
• CCSS.Math.Content.HSFBF.A.1 Write a function that describes a relationship between two quantities
PRIOR KNOWLEDGE:
No specialized prior knowledge is necessary to complete this lesson.
Information from the Bureau of Labor Statistics is helpful for instructors to incorporate the more detailed information on the cost of college: http://www.bls.gov/spotlight/2010/college/
MATERIALS:
• Student Paths article “College Debt: Is it worth it?” from Related articles
• Class set of printed materials for Questions and Directions (REPRODUCIBLE B). One for each student.
• Class set of table of mismatched occupations with salaries.(REPRODUCIBLE C)
• Scissors for students to cut table for matching activity.
Optional:
Student videos about college debt by Maria Maldonado, http://bit.ly/15oTAx2, Leah Ferguson, http://bit.ly/15oTLIP, and Aubreigh Sabbota, http://bit.ly/YhIUZR.
LESSON OVERVIEW:
The lesson comprises 4 sections:
• Introductory reading to understand key concepts
• Individual activity to match occupations with salaries and calculate debt
• Largegroup review of correct matches and debt ratios
• Reflective questions to focus attention on college financial planning
LESSON PROCEDURE:
Introductory Reading to Concept of College Debt (10 minutes)
Distribute and instruct students to read article “College Debt: Is it worth it?”
Allow students 2 minutes to read the article, then distribute REPRODUCBLE B and instruct them to complete the first 3 questions.
The questions are:
1. This article introduces the concept of college debt. List six things to consider in the cost of college.
School tuition, room and board, difference in requirements for major, additional fees, travel expenses, state vs. outofstate
2. Carol Stack and Ruth Vedvik recommend borrowing $8,000 or less per year because when you graduate with a fouryear degree, the amount borrowed is $32,000 or less—the average yearly salary a college grad can expect. Does this sound like a reasonable financial plan? Use specific annual planning and a simple calculation to explain your answer.
There may be more than one correct answer, but this question encourages students to use numbers in their financial planning.
Walk students through this simple example:
A student who borrows $8,000 a year for 4 years will have $32,000 in debt. If annual interest rates are 6% this debt could be paid off over a 10year period for a monthly payment of $355. The average annual income for entrylevel positions with a 4year Bachelor’s Degree is $32,000, with a monthly income of $2,667. Repaying a debt of $355 is 13.3% of projected monthly income.
3. If you had to predict today, how much education do you expect to obtain? High school, college, graduate school, specialized training?
Explain why you believe this today, and it is okay to change your mind in the future. Why is this particular level of education important for you?
Answers will vary, but should include consideration of the total cost of a college education and the risks associated with it.
Individual Work and Calculation Activity (10 minutes)
Distribute REPRODUCIBLE C with scissors
Direct student attention to the instructions on REPRODUCIBLE B. Here are the instructions to students on how to sort data and calculate a projected DebttoIncome Ratio:
The table on REPRODUCIBLE C includes information about jobs, required education, and salaries; however, this information is not in the correct order. Cut the table into individual pieces to match the occupation to the typical education and salary.
When you believe you have the correct and matching order, calculate the student debttoincome ratio. Follow this simplified calculation to divide the debt incurred from a student loan by the expected salary over a 10year period.
Here are the average costs of tuition in 2011:
B.A. is 4 years of tuition at $22,092 per year
A.A. is 2 years at $8,909
J.D. or M.D. is a B.A. plus 3 more years at $29,600
Project to pay the loan off over 10 years.
1. Calculate the total tuition cost for each profession. For example, a lawyer will pay for 4 years of tuition at $22,092 and 3 years at $29,600 for $177,168 of Total Tuition payments over 7 years of college.
2. For this activity, pretend all tuition must be paid by student loans, no annual interest rate on the loan, no inflation, and the loan will be paid off in 10 years. All of these factors must be considered in a real debttoincome ratio, but we will keep it simple to understand the basic idea. Divide the Total Tuition by 10 to project the Annual Student Loan Repayment over 10 years after college.
It would be $17,716.80 for a lawyer.
3. Divide the Annual Student Loan Payment by the Average Salary to determine an estimated student debttoincome ratio without interest. A lawyer can expect to pay 13.6% of his annual or monthly income to repay a college debt.
Important Note:
This calculation ignores two significant pieces of information for financial planning and student loans. First, there are variations in annual interest rates, salaries, inflation, repayment periods, and the economy. Second, this planning assumes that every student completes a degree and obtains a job within the field. Only 30% of Americans have college degrees, and many do not work in a matching field, but more than 60% have college debt. This activity is a brief introduction to using a student debttoincome ratio to inform your financial decisions.
LargeGroup Review (10 minutes)
Focus class attention on their results for the matching activity. Before sharing results, ask students: What could have gone wrong with the calculations?
Remind students of three points to consider when making financial calculations
1. Confirm the numbers are correct. One lawyer may make $500,000 a year while another makes $50,000. This is a big difference, and it is important to always check the facts that guide your decisions.
2. Plan for the unexpected. We may make plans, but things may not go according to plan. For example, at age 18 some students hope to pay for college with an athletic scholarship and earn millions as a professional athlete. They may predict a low student debttoincome ratio, but ignore the low probability that they will make millions of dollars.
3. Consider other costs and debts. Car loan, home mortgage, and credit card debt would also be considered in a full debttoincome ratio. This lesson is specifically about calculating and projecting for a student loan debt; however, a debttoincome ratio includes all debts incurred by an individual divided by all sources of income. This would be especially important for aspiring professional athletes and entertainers to consider.
Here is the Answer Key to the Matching Activity with Projected Student DebttoIncome Ratios:
1. Lawyer:
(Typical education) G. Doctoral or professional degree, plus professional exam and certification
(Average salary in 2011) e. $130,490
(Projected cost of ed) $177,168
(Projected debttoincome ratio)
2. Physician (Family Practice)
(Typical education) E. Doctoral or professional degree program at accredited school with intern, professional exam and certification
(Average salary in 2011) j. $184,650
(Projected cost of ed) $177,168
(Projected debttoincome ratio)
3. Elementary School Teacher
(Typical Education) B. Bachelor’s degree, most states require intern and exam for certification
(Average salary in 2011) i. $55,270
(Proejcted cost of ed) $88,368
(Projected debttoincome ratio)
4. Carpenter
(Typical education) C. High school diploma, no experience needed
(Average salary in 2011) d. $44,330
(Projected cost of ed) $0
(Projected debttoincome ratio) 0
5. TV Actor
(Typical education) I. Some college, no degree
(Average salary in 2011) a. N/A / median pay $17.44 per hour
(Projected cost of ed) N/A
(Projected debttoincome ratio) N/A
6. Auto Mechanic (skilled)
(Typical education) A. Associate’s degree, exam for advanced certification
(Average salary in 2011) f. $38,560
(Projected cost of ed) $17,818
(Projected debttoincome ratio) 4.6%
7. Registered Nurse
(Typical education) H. Associate’s degree and professional exams, no experience needed
(Average salary in 2011) g. $69,110
(Projected cost of ed) $17,818
(Projected debttoincome ratio) 2.6%
8. Clothes Designer
(Typical education) F. HS diploma or equivalent; formal training/apprenticeship required for specialty
(Average salary in 2011) c. $73,930
(Projected cost of ed) $0
(Projected debttoincome ratio) 0
9. Chief Executive
(Typical education) D. Bachelor’s degree, 5+ years of experience
(Average salary in 2011) h. $176,550
(Projected cost of ed) $88,368
(Projected debttoincome ratio) 5%
10. Real Estate Agent/Property Manager
(Typical education) J. High school diploma, professional exam, 5+ years of experience
(Average salary in 2011) b. $63,150
(Projected cost of ed) $0
(Projected debttoincome ratio) 0
This data was obtained from http://www.bls.gov/oes/current/oes_nat.htm and http://www.bls.gov/emp/ep_table_112.htm
Additional resources to calculate the costs of college may be found at:
http://educationportal.com/articles/10_Free_Online_Calculators_to_Estimate_College_Costs.html and
http://www.whitehouse.gov/issues/education/highereducation/collegescorecard
Concluding Activity Questions (5 minutes)
After completing the group review of the matching and calculating activities, instruct students to return to original handout to complete the following questions on REPRODUCIBLE B.
4. When you learned the answers to the matching activity, did any of the salaries and educational requirements of the careers listed surprise you? List 3 things you understand better after completing this activity.
5. Many of the professions shown here had experience in field listed as a requirement toward earning such salaries. Write a sentence to respond to each question:
Would it be possible in many of these fields to gain the experience necessary to earn the listed salaries without training? Why or why not?
From the list, what fields could one enter with no formal training?
How do you gain experience in a field without training?
6. Read your answer to question #3 that you completed before the activity. When you look at that answer now, do you feel any differently about the educational path in front of you? Briefly explain why you desire this level of education, and how you plan to pay for it.
Conclude this lesson with a reminder to students that the cost of tuition and annual salaries may vary significantly by school, state, and other factors. A key to successful financial planning for college is to first obtain the proper information for the decision and then work hard to follow through to complete the degree.
PreActivity Questions
Read Student Paths article “College Debt: Is it worth it?” and complete the following questions on another piece of paper.
1. This article introduces the concept of college debt. List six things to consider in the cost of college.
2. Carol Stack and Ruth Vedvik recommend borrowing $8,000 or less per year because when you graduate with a fouryear degree, the amount borrowed is $32,000 or less—is the average yearly salary a college grad can expect. Does this sound like a reasonable financial plan? Use specific annual plan and calculation to explain your answer.
3. If you had to decide today, how much education do you expect to obtain? High school, college, graduate school, specialized training. Explain why you believe this today, and it is okay to change your mind in the future. Why is this particular level of education important for you?
PostActivity Questions
4. When you learned the answers to the matching activity, did any of the salaries and educational requirements of the careers listed surprise you?
List 3 things you understand better after completing this activity.



5. Many of the professions shown here had experience in the field listed as a requirement toward earning such salaries. Write a sentence to respond to each question:
Would it be possible in many of these fields to gain the experience necessary to earn the listed salaries without training? Why or why not?
From the list, what fields could one enter with no formal training?
How do you gain experience in a field without training?
6. Read your answer to question #3 that you completed before the activity. When you look at that answer now, do you feel any differently about the educational path in front of you? Briefly explain why you desire this level of education, and how you plan to pay for it.
Activity to sort data and calculate a projected DebttoIncome Ratio
The table on REPRODUCIBLE C includes information about jobs, required education, and salaries; however, this information is not in the correct order. Cut the table into individual pieces to match the occupation to the typical education and salary.
When you believe you have the correct and matching order, calculate the student debttoincome ratio. Follow this simplified calculation to divide the debt incurred from a student loan by the expected salary over a 10year period.
Here are the average costs of tuition in 2011:
B.A. is 4 years of tuition at $22,092 per year
A.A. is 2 years at $8,909
J.D. or M.D. is a B.A. plus 3 more years at $29,600
Project to pay the loan off over 10 years.
4. Calculate the total tuition cost for each profession. For example, a lawyer will pay for 4 years of tuition at $22,092 and 3 years at $29,600 for $177,168 of Total Tuition payments over 7 years of college.
5. For this activity, pretend all tuition must be paid by student loans, no annual interest rate on the loan, no inflation, and the loan will be paid off in 10 years. All of these factors must be considered in a real debttoincome ratio, but we will keep it simple to understand the basic idea.
Divide the total tuition by 10 to project the annual student loan repayment over 10 years after college. It would be $17,716.80 for a Lawyer.
6. Divide the Annual Student Loan Payment by the Average Salary to determine an estimated student debttoincome ratio without interest.
A lawyer can expect to pay 13.6% of his annual or monthly income to repay a college debt.
Important Note:
This calculation ignores two significant pieces of information for financial planning and student loans. First, there are variations in annual interest rates, salaries, inflation, repayment periods, and the economy. Second, this planning assumes that every student completes a degree and obtains a job within the field. Only 30% of Americans have college degrees, and many do not work in a matching field, but more than 60% have college debt. This activity is a brief introduction to using a student debttoincome ratio to inform your financial decisions.
The information below is not in the correct order. Use scissors to cut this list into individual pieces and match the appropriate:
1. Occupation with A. Typical Education and a. Average Salary.
Once you think you have the correct matching order, use this information to calculate a projected student debttoincome ratio as described in the instructions in REPRODUCIBLE B.
1. Lawyer:
(Typical education) G. Doctoral or professional degree, plus professional exam and certification
(Average salary in 2011) e. $130,490
(Projected cost of ed) $177,168
(Projected debttoincome ratio)
2. Physician (Family Practice)
(Typical education) E. Doctoral or professional degree program at accredited school with intern, professional exam and certification
(Average salary in 2011) j. $184,650
(Projected cost of ed) $177,168
(Projected debttoincome ratio)
3. Elementary School Teacher
(Typical Education) B. Bachelor’s degree, most states require intern and exam for certification
(Average salary in 2011) i. $55,270
(Proejcted cost of ed) $88,368
(Projected debttoincome ratio)
4. Carpenter
(Typical education) C. High school diploma, no experience needed
(Average salary in 2011) d. $44,330
(Projected cost of ed) $0
(Projected debttoincome ratio) 0
5. TV Actor
(Typical education) I. Some college, no degree
(Average salary in 2011) a. N/A / median pay $17.44 per hour
(Projected cost of ed) N/A
(Projected debttoincome ratio) N/A
6. Auto Mechanic (skilled)
(Typical education) A. Associate’s degree, exam for advanced certification
(Average salary in 2011) f. $38,560
(Projected cost of ed) $17,818
(Projected debttoincome ratio) 4.6%
7. Registered Nurse
(Typical education) H. Associate’s degree and professional exams, no experience needed
(Average salary in 2011) g. $69,110
(Projected cost of ed) $17,818
(Projected debttoincome ratio) 2.6%
8. Clothes Designer
(Typical education) F. HS diploma or equivalent; formal training/apprenticeship required for specialty
(Average salary in 2011) c. $73,930
(Projected cost of ed) $0
(Projected debttoincome ratio) 0
9. Chief Executive
(Typical education) D. Bachelor’s degree, 5+ years of experience
(Average salary in 2011) h. $176,550
(Projected cost of ed) $88,368
(Projected debttoincome ratio) 5%
10. Real Estate Agent/Property Manager
(Typical education) J. High school diploma, professional exam, 5+ years of experience
(Average salary in 2011) b. $63,150
(Projected cost of ed) $0
(Projected debttoincome ratio) 0
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