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I'm a high school math teacher. As part of their high school math education, I encourage all of my students to do one of their projects on analyzing loans. I a

by japhyr 9y ago

I'm a high school math teacher. As part of their high school math education, I encourage all of my students to do one of their projects on analyzing loans. I ask them to pick an item they might take a loan out for, such as a car, a boat (we live in a small fishing town in Alaska), a house, or a student loan. They pick a realistic loan amount, APR, and term length. Then they run the numbers on the loan. I demonstrate making a loan analysis spreadsheet, starting with an empty spreadsheet. Students then get the choice of making their own spreadsheet, modifying one that I've made with them, or using a loan calculator. By the end of a session, most of my students have become comfortable using a spreadsheet to analyze a loan. This lets them understand how all the various factors interact, and they can play with any loan they become interested in. Students start out with no idea how banks and lending institutions determine monthly payments. They end up understanding loans better than many adults. They move away from "all loans are bad and predatory" and "loans are free money" to "some loans are fair, some are predatory, and I need to ask myself if a specific loan sets me up for a better life. I wish someone had done this for me. When I took out student loans many years ago, I had no idea what my monthly payments would end up being. I was just told it would be worth while, and I trusted the people advising me. Students these days can't afford to blindly trust that student loans are going to make their lives better.

mrhappyunhappy 9y ago
Care to share your instructions? I’m an adult and I just use the web calculators haha.
- japhyr 9y ago
  Here's a pdf version of the assignment: https://drive.google.com/file/d/1lAG9o3f106qwLBODURsglUChsBsbQOx0/view?usp=sharing https://drive.google.com/file/d/1lAG9o3f106qwLBODURsglUChsBs...
oliwarner 9y ago
I think it's hard to absolutely assess the value of a student loan —however predatory— without considering the prospects of having a higher education. Some degrees are worth a dodgy loan. Some really aren't. You could also say that many students wouldn't be in higher education without the loan. That is especially true here in the UK. That might not be a bad thing except that we've gone through an arms race so that every junior post needs five bachelor degrees and a decade of experience. Experience alone used to be enough. It'd be nice to get back there. Our focus on getting everybody into higher education —and underwriting indefinite liens on lifetime income— has also meant that universities care more about the number of students than the quality of teaching. That alone probably isn't news, what has been recently in the UK is the remuneration of higher management staff. They can apparently justify the 10-20× bump over senior lecturers (plus benefits like housing, cars, lunches) to their boards by saying they're the only people who can attract all the money from the students. It's disgusting and vicious cycle.
- PeachPlum 9y ago
  I think the UK loan system is pretty much optimum. It's a "can't pay don't pay" system. Even on £40k gross my payments are £1710 a year, leaving £28k after deductions (not including pension). I'm unlikely to default on that.
- gbacon 9y ago
  It’s similar in the U.S. people going six figures in debt for degrees that qualify them for $30k jobs is a problem, but that is a dirt-simple ROI analysis. Forcing nearly everyone into the college-bound track is a huge problem. Politically, vocational training is deemed classist or racist, and such utopianism creates a sad disservice to lots of young people who could be learning skilled trades and setting themselves up for comfortable living. Just like everyone at the university level is not med-school material, not every high schooler is college material.
  - JoeAltmaier 9y ago
    Sadly, in the US, we don't teach ROI. That comes in your 2nd year of college. Its a trap!
  - toomuchtodo 9y ago
    It sounds like a partial solution to this is an infographic that must be provided by each college before allowing loans to be taken out showing: * The degrees you're interested in * The total cost of ownership of each of those degrees, based on the dollar cost + interest * The years you'll have to work to pay off the degree based on the median salary of whatever career requires that degree * Placement rate in the career you're obtaining you're degree for after obtaining your education (colleges usually fudge the numbers here by considering a student getting any job as "placement" after going through their pipeline) Very similar to truth in lending requirements for credit cards and mortgages. https://www.occ.treas.gov/topics/consumer-protection/truth-in-lending/index-truth-in-lending.html https://www.occ.treas.gov/topics/consumer-protection/truth-i... https://en.wikipedia.org/wiki/Truth_in_Lending_Act https://en.wikipedia.org/wiki/Truth_in_Lending_Act
    - 9y ago
deleted 9y ago
[deleted]
JBlue42 9y ago
Very cool that you are doing this. I had an AP English teacher that took us 'off book' after we finished our tests to teach us real-life stuff (how taxes work, credit cards, etc.) for a few days. More students should be getting such a primer before college.
smadge 9y ago
The problem is not the lack of personal responsibility of students in their decision to take out loans. The problem is the systemic failure to provide high quality education to those qualified to pursue it. Those who are qualified to pursue higher education should not be prevented from doing so by questions of personal finances, inherited wealth, etc
sharemywin 9y ago
But, you can't predict whether your going to finish college or not. or whether your going to get a "college grad" level job. or whether your going to get pregnant and not finish. Analysis is great for aggregate decision making. But for the lotto of life. sometimes you can make the best decisions and still get screwed.
sekh60 9y ago
That is really wonderful. Schools everywhere, regardless of country, should really have a mandatory basic financial literacy course. So many people fall into various debt cycles and I feel such a course would be very beneficial at preventing a lot of people getting trapped.

by japhyr 9y ago

mrhappyunhappy 9y ago

Care to share your instructions? I’m an adult and I just use the web calculators haha.

japhyr 9y ago
Here's a pdf version of the assignment: https://drive.google.com/file/d/1lAG9o3f106qwLBODURsglUChsBsbQOx0/view?usp=sharing https://drive.google.com/file/d/1lAG9o3f106qwLBODURsglUChsBs...

oliwarner 9y ago

I think it's hard to absolutely assess the value of a student loan —however predatory— without considering the prospects of having a higher education. Some degrees are worth a dodgy loan. Some really aren't. You could also say that many students wouldn't be in higher education without the loan. That is especially true here in the UK. That might not be a bad thing except that we've gone through an arms race so that every junior post needs five bachelor degrees and a decade of experience. Experience alone used to be enough. It'd be nice to get back there. Our focus on getting everybody into higher education —and underwriting indefinite liens on lifetime income— has also meant that universities care more about the number of students than the quality of teaching. That alone probably isn't news, what has been recently in the UK is the remuneration of higher management staff. They can apparently justify the 10-20× bump over senior lecturers (plus benefits like housing, cars, lunches) to their boards by saying they're the only people who can attract all the money from the students. It's disgusting and vicious cycle.

PeachPlum 9y ago
I think the UK loan system is pretty much optimum. It's a "can't pay don't pay" system. Even on £40k gross my payments are £1710 a year, leaving £28k after deductions (not including pension). I'm unlikely to default on that.
gbacon 9y ago
It’s similar in the U.S. people going six figures in debt for degrees that qualify them for $30k jobs is a problem, but that is a dirt-simple ROI analysis. Forcing nearly everyone into the college-bound track is a huge problem. Politically, vocational training is deemed classist or racist, and such utopianism creates a sad disservice to lots of young people who could be learning skilled trades and setting themselves up for comfortable living. Just like everyone at the university level is not med-school material, not every high schooler is college material.
- JoeAltmaier 9y ago
  Sadly, in the US, we don't teach ROI. That comes in your 2nd year of college. Its a trap!
- toomuchtodo 9y ago
  It sounds like a partial solution to this is an infographic that must be provided by each college before allowing loans to be taken out showing: * The degrees you're interested in * The total cost of ownership of each of those degrees, based on the dollar cost + interest * The years you'll have to work to pay off the degree based on the median salary of whatever career requires that degree * Placement rate in the career you're obtaining you're degree for after obtaining your education (colleges usually fudge the numbers here by considering a student getting any job as "placement" after going through their pipeline) Very similar to truth in lending requirements for credit cards and mortgages. https://www.occ.treas.gov/topics/consumer-protection/truth-in-lending/index-truth-in-lending.html https://www.occ.treas.gov/topics/consumer-protection/truth-i... https://en.wikipedia.org/wiki/Truth_in_Lending_Act https://en.wikipedia.org/wiki/Truth_in_Lending_Act
  - 9y ago

deleted 9y ago

[deleted]

JBlue42 9y ago

Very cool that you are doing this. I had an AP English teacher that took us 'off book' after we finished our tests to teach us real-life stuff (how taxes work, credit cards, etc.) for a few days. More students should be getting such a primer before college.

smadge 9y ago

The problem is not the lack of personal responsibility of students in their decision to take out loans. The problem is the systemic failure to provide high quality education to those qualified to pursue it. Those who are qualified to pursue higher education should not be prevented from doing so by questions of personal finances, inherited wealth, etc

sharemywin 9y ago

But, you can't predict whether your going to finish college or not. or whether your going to get a "college grad" level job. or whether your going to get pregnant and not finish. Analysis is great for aggregate decision making. But for the lotto of life. sometimes you can make the best decisions and still get screwed.

sekh60 9y ago

That is really wonderful. Schools everywhere, regardless of country, should really have a mandatory basic financial literacy course. So many people fall into various debt cycles and I feel such a course would be very beneficial at preventing a lot of people getting trapped.