Lesson 8: Loans and Debt

Hand holding several credit cards.

Name(s) of student(s):

Age and grade level:

Goal from IEP connected to lesson:

Objective from IEP connected to lesson:

Purpose of lesson: To familiarize the student with types of debt, the principal amount borrowed, and interest.

Materials needed: Internet access, pitcher of water, and glass


“I wish I could bring in a panel of people with varying incomes who are in debt. You would hear anguish in their voices if they talked openly about borrowing money. Spending outside of your means may sound desirable because you can purchase a better home, newer technology, and a fancier wardrobe. In reality, owing money is a burden; your incoming money is used to pay off past expenses and you are in a major crisis if you lose your job.”

“Today, I want you to gain an awareness of how one borrows money and what the borrower owes the lender. I also hope you learn the value of remaining debt-free.”

Discussion: Loans

“Suppose you want to attend college or buy a home, and you cannot afford to pay up-front. You may choose to take a loan from the bank. A loan is borrowed money. The amount initially borrowed, called the principal, must be paid back by a certain date. The date is set under the terms of the specific loan. We previously learned about earning interest on money kept in various bank accounts. When you have a loan, you pay a percentage of the amount you owe as interest. The money (principal and interest) is usually paid back in evenly dispersed installments, typically monthly. For example, if the principal amount borrowed is $25,000.00 and the interest rate is 6% (which is a low interest rate), you might pay $484.00 a month for 60 months. Overall, you would pay $29,000.00. The bank made $4,000.00 in interest on your loan; this is how the bank makes money.”

Exercise: Debt

“The amount you owe is your debt. You are in debt to the financial institution or bank. Let’s learn about some types of debts.”

Student should explore common types of individual debt using the Internet. Ensure the following topics are covered: mortgages, car loans, student loans, cash advances, and credit card balances.

Exercise: Video

Watch a video explaining the trap of debt. You can search “Credit Card Debt Explained with a Glass of Water” on YouTube. The demonstration uses a glass and a pitcher of water. The content is accessible if the instructor performs the demonstration and video.

Discussion: Conversation Starters

  • What is the benefit of paying more than the minimum monthly payment required for a debt? (You are paying more towards the principal and decreasing the total interest you’ll pay.)
  • How can a student loan be beneficial?
  • Is it possible to attend postsecondary school without a student loan or with a minimal loan?
  • If a loan must be taken, how do you choose which loan to take? (lowest interest rate)
  • How might it feel to be in debt?
  • Is staying debt-free a valuable goal? Why or why not?


“Today, we learned about borrowing money from a lender. It may sound awfully nice to spend money we do not have, but it leads to a financial burden. You spend far more than originally borrowed, and owing money can be very stressful.”

Progress notes, data collection, comments, and modifications:

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