What Are the Costs and Benefits of Credit Counseling?

Grade: 11 Lesson # 10

What are the costs and benefits of credit counseling?

SS 912.FL 4.9 Explain that consumers who have difficultly repaying their debt can seek assistance through counseling services and by negotiating directly with creditors.

LAFS.1112 RL.1.2 Determine two or more themes or central ideas of a text and analyze their development over the course of the text, including how they interact and build on one another to produce a complex account; provide an objective summary of the text. SS 912.FL 4.9Explain that consumers who have difficulty repaying debt can seek assistance through credit counseling services and by negotiating directly with creditors.

What are the costs and benefits of credit counseling services? Hint: It’s Free!

Lesson Number 10:

Correlated Florida Standards (See Full Text on Cover Page)  LAFS.1112 RL.1.2

Essential Questions  What is credit counseling?  What are the costs and benefits of credit counseling?  What are some problems that may arise when consumers take on too much debt, misunderstand the terms of their credit agreements, or may be victims of fraud?

Learning Goals/Objectives  Identify the danger signs of too much debt.  Analyze specific credit problems and identify solutions.  Identify the costs and benefits of credit counseling services

Overview  This lesson, adapted from “In Trouble,” In Charge Institute of America’s Lesson 13, will provide students with an overview of credit-counseling services, as well as programs to protect consumers and debtors.

Materials  Student Guide, Lesson 13, “In Trouble,” https://www.incharge.org/wp- content/uploads/2015/07/Student-Guide-Lesson-Thirteen.pdf (Included in Lesson 10 file)  Getting Out of Debt PowerPoint, Indiana Department of Education (Included in Lesson 10 file)  Projector and Whiteboard

Time  50 minutes

Activity Sequence INTRODUCTION/HOOK  Explain to students that despite our best intentions, adults sometimes make bad choices about spending. They are sometimes inclined to live beyond their means and run up big debts. Credit card debt is a common problem and so are high monthly payments on car loans, high monthly payments for rent, and an inability to save money. Ask students to share whether or not they know anyone in that situation. Explain to students that they will learn about laws and programs to help them if they ever find themselves in this situation. (5 minutes)

ACTIVITY 1. Remind students that “Credit” is defined as “a contractual agreement in which a borrower receives something of value now and agrees to repay the lender at some date in the future, generally withinterest. The term also refers to the borrowing capacity of an individual or company.” (www.investopia.com)

2. Explain the risks of using credit and review the Getting Out of Debt PowerPoint with the students. www.in.gov/dfi/ DEBT _mini. ppt. (10 minutes for steps 1 and 2)

3. Break students into groups of three or four. Explain that they will role-play being a credit counselor for clients with financial problems.

4. Distribute the student handouts. (Note to teacher: only pages 4 through 8 are needed for the credit counseling simulation). https://www.incharge.org/wp- content/uploads/2015/07/Student-Guide-Lesson-Thirteen.pdf

5. Tell students to read and discuss each of the three scenarios in the “Are They in Trouble” section of the student guide and to create a sound financial plan for each. (20 minutes for steps 3 and 4)

6. Discuss the answers with the class. (10 minutes)

CLOSURE  Project Slide 12 from the PowerPoint and remind students that there are non-profit credit- counseling agencies that provide assistance to people who are having difficulty managing their finances. There is a way to get help, but the best course of action is to always use credit wisely and live within their means. Show and read the last slide of the PowerPoint. (5 minutes)

OPTIONAL EXTENSION SUGGESTION/HOME LEARNING  Write a sample letter to a hypothetical creditor explaining how you do not have the income to make the minimum payment at this time. Explain the reason for your financial problem, your current income, other financial obligations, your debt management plan, and how much you can make a payment each month.

Sources/Bibliographic Information that contributed to this lesson: In Charge Institute of America, Financial Literacy for High School Students, https://www.incharge.org/financial-literacy/resources-for-teachers/high-school

Indiana Department of Financial Institutions Consumer Education, www.in.gov/dfi/ DEBT _mini. ppt

The National Foundation for Credit Counseling, www.nfcc.org