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Consumer Financial
Protection Bureau
To nd this and other activities, go to:
consumernance.gov/teach-activities
Summer 2022
BUILDING BLOCKS TEACHER GUIDE
Understanding how much student debt
you can afford
Students calculate how much they can afford in monthly student loan payments
based on what their salary might be after graduating from college or another
post-secondary institution.
KEY INFORMATION
Building block:
Financial knowledge and
decision-making skills
Grade level: High school (11–12)
Age range: 16–19
Topic: Spend (Paying for college),
Borrow (Getting loans)
School subject: CTE (Career and technical
education), Math, Social studies or history
Teaching strategy: Direct instruction,
Personalized instruction
Bloom’s Taxonomy level: Understand,
Analyze
Activity duration: 45–60 minutes
National Standards for Personal
Financial Education, 2021
Earning income: 8-3, 8-4, 12-3, 12-4, 12-5
Managing credit: 8-6, 12-4, 12-5
These standards are cumulative, and topics are not
repeated in each grade level. This activity may include
information students need to understand before
exploring this topic in more detail.
Learning goals
Big idea
Making sure your student loan debt will be
affordable once you graduate can help prepare
you to manage your money in the future.
Essential questions
§ How much student loan debt can I handle?
§ How does the career I choose affect the
amount of debt I can successfully manage?
Objectives
§ Understand that your career choices may
inuence your ability to repay student loans
§ Determine how much student loan debt
you could afford based on a career’s
starting salary
NOTE
Please remember to consider your students’
accommodations and special needs to ensure
that all students are able to participate in a
meaningful way.
Summer 2022
BUILDING BLOCKS TEACHER GUIDE
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Understanding how much student
debt you can afford
What students will do
§ Calculate the monthly gross income for entry-level jobs in different careers.
§ For each career, they’ll calculate how much money they can spend on debt
repayment each month.
§ Determine whether each career would allow them to afford the student loan
amount described in the scenario.
Preparing for this activity
□ While it’s not necessary, completing the “Reading about federal nancial aid”
or “Learning how federal nancial aid can help you pay for higher education”
activities rst may make this one more meaningful.
□ Print copies of all student materials, or prepare for students to access
them electronically.
What you’ll need
THIS TEACHER GUIDE
§ Understanding how much student debt you can afford (guide)
cfpb_building_block_activities_understanding-how-much-student-debt-afford_guide.pdf
STUDENT MATERIALS
§ Understanding how much student debt you can afford (worksheet)
cfpb_building_block_activities_understanding-how-much-student-debt-afford_worksheet.pdf
Exploring key nancial concepts
When choosing a college or other post-secondary institution,
be sure to consider how much you need to borrow, since you
may be paying your loans back for 10 years or more after you
graduate. If you decide how much student debt is too much
BEFORE you take out any loans, you’ll likely ease your nancial
burden for years to come. To make this decision, consider how
much both your monthly loan payments and your monthly gross
income — your total pay before taxes and other deductions are
taken out — are likely to be.
TIP
Because nancial aid rules and
programs change, students
should be encouraged to
always look for the most
up-to-date information.
Summer 2022
BUILDING BLOCKS TEACHER GUIDE
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Understanding how much student
debt you can afford
A good place to start is to calculate what your monthly payments would be for
different loan amounts. One rule to live by is to try to limit your total amount of
student loans to a small percentage of what your expected annual salary may be
from the rst job you get after college. For example, you could decide that your
monthly loan payment should be no more than 10 percent of your gross income.
Taking the time to thoughtfully plan can help you make informed borrowing
decisions that set you up for a more manageable nancial future.
Teaching this activity
Whole-class introduction
§ Ask students if they would consider getting student loans to help pay for
college or other post-secondary education.
§ Ask students to share some things they might need to do to be sure they can
pay back the loans.
°
Answers may include avoiding borrowing too much or making sure they can
earn enough money to pay back the loans.
§ Read the “Exploring key nancial concepts” section to students.
§ Be sure students understand key vocabulary:
°
Budget: A plan that outlines what money you expect to earn
or receive (your income) and how you will save it or spend
it (your expenses) for a given period of time; also called a
spending plan.
°
Federal student loans: These loans are funded by the
federal government and have terms and conditions that are
set by law. Federal loans also include benets that private
student loans don’t usually offer. These benets could include lower interest
rates, repayment plans based on income, and possible loan forgiveness for
people who choose to work for a certain amount of time in government or for
certain not-for-prot organizations or teach in a low-income school.
°
Financial aid: Money given in the form of grants, work-study, loans, and
scholarships to help pay for post-secondary tuition and fees, as well as related
expenses such as room and board, books, supplies, and transportation.
°
Gross income: Total pay before taxes and other deductions are taken out.
°
Loan: Money that needs to be repaid by the borrower, generally with interest.
(You’ll have to pay interest on student loans.)
TIP
Visit CFPB’s nancial
education glossary at
consumernance.gov/
nancial-education-glossary/.
Summer 2022
BUILDING BLOCKS TEACHER GUIDE
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Understanding how much student
debt you can afford
§ Post-secondary education: Includes all forms of schooling after high school, not
just college.
§ Private student loans: These loans are from private organizations, such as banks
and credit unions, which set their own terms and conditions. Private loans are
generally more expensive than federal loans.
Individual and group work
§ Distribute the “Understanding how much student debt you can afford”
worksheet to students.
§ Have students work in pairs or small groups to review the worksheet and discuss
the following questions:
°
Why might it be good to limit how much of your monthly budget will go
toward debt repayment?
°
Why is it important to consider your potential salary after graduation when
you’re determining how much student loan debt you can afford?
§ The pairs or groups will then complete the calculations on the worksheet.
§ Be sure students understand that the loan amount, monthly payment, and
salaries on the worksheet are examples only.
§ Explain that while the worksheet scenario limits monthly loan payments to 10
percent of monthly gross income, people should choose an amount that works
for their circumstances. The important thing is to try not to accumulate more
total student debt than you expect to earn as a starting annual salary when you
leave school.
§ Students will then complete the reection questions on their own.
Wrap-up
§ Ask the pairs or groups to share their answers to the calculations.
§ Ask them to compare their answers with other groups. If answers differ, have
them recalculate problems as needed.
§ Ask volunteers to share their answers to the reection questions.
Summer 2022
BUILDING BLOCKS TEACHER GUIDE
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Understanding how much student
debt you can afford
Suggested next steps
Consider searching for other CFPB activities that address the topics of spending,
including paying for college, and borrowing, including getting loans. Suggested
activities include “Using a student loan calculator” and “Choosing a student loan
that’s right for you”.
Measuring student learning
Students’ answers on their worksheets and during discussion can give you a sense
of their understanding.
This answer guide provides possible answers for the “Understanding how
much student debt you can afford” worksheet. Keep in mind that students’
answers may vary. The important thing is for students to have reasonable
justication for their answers.
Answer guide
Occupation
Starting
annual gross
income
Monthly
gross income
(annual ÷ 12)
Budget allocation
(10% of monthly
gross income)
Monthly
student loan
payment
Can you
afford this
much debt?
Chemical
engineer
$62,230 $5,185.83 $518.58 $279.26 Yes
Graphic
designer
$28,560 $2,380.00 $238.00 $279.26 No
Human
resources
specialist
$35,810 $2,984.17 $298.42 $279.26 Yes
Social
worker
$29,560 $2,463.33 $246.33 $279.26 No
