An equine veterinarian’s average student debt is $180,498, according to the 2024 AVMA/AAEP Report on the Economic State of the Equine Veterinary Profession. Undoubtedly, student debt is a massive burden on many early-career equine veterinarians. It can lead to financial insecurity, the postponement of other life goals, and even declining mental health.
The American Association of Equine Practitioners (AAEP) recently held a virtual round table called “Financial Planning Tips for Students and New Veterinarians,” sponsored by American Regent Animal Health. During the session, Rebecca Mears, DVM, a member of the VIN Foundation Student Debt Education Team, explained how young and aspiring equine vets can repay their student loans without sacrificing in other areas.
“It can feel overwhelming. I have $250,000 in student debt,” she revealed. “But I don’t ever want that number to stop me from doing the other things I want to do—that’s my goal. Federal student debt is the most flexible debt you’ll ever have. Don’t delay things like contributing toward your retirement plan, getting married, starting a family, or starting your own practice to focus on student debt.”
Busting Student Loan Myths
Mears began by dispelling a few common assumptions she hears from young veterinarians:
“I’m not eligible for forgiveness.” Everyone is eligible for some type of student loan forgiveness, either through public service loan forgiveness tied to your employment type or through income-driven repayment plans, she said. When you reach forgiveness depends on your starting income, income growth, family size changes, and student-debt-to-income ratio.
“Trends we’ve seen based on our data and simulations is if you have a student-debt-to-income ratio of 2:1 a year or two after graduating, you’ll probably reach forgiveness,” Mears said. “If it’s less than 1, you might repay (your debt) to zero before reaching forgiveness.”
“Consolidation is a mistake.” Loan consolidation is a tool in your repayment toolbox, said Mears. “It’s not a mistake, but one of the big questions I hear is, ‘What happens to my interest rate?’” she said. “When you consolidate those student loans with a federal consolidation loan, the weighted average interest rate of the loans included in the consolidation is your new interest rate. It doesn’t reset to current rates.”
Mears then offered ways students and early-career veterinarians can increase the flexibility in their repayment while still paying down their debts.
Advice for Current Veterinary Students
As a current student, the best thing you can do to set yourself up for repayment success is to borrow appropriately while you’re in school, said Mears. In other words, what can you do now to help yourself later on?
“I don’t necessarily advise borrowing the least amount possible because (that money) can be helpful for emergencies and prevents you from putting it all on your credit card, which can be risky,” she said.
She also recommended using the available loans in the most beneficial order:
- A Health Professions Student Loan or a Loan for Disadvantaged Students.
- Direct unsubsidized loans.
- Grad PLUS loans.
Mears reminded students they have a 120-day return window (about the length of a semester). “So, say you accept the full amount available to you, then realize you don’t need all that money,” she explained. “If you return the loan amount, you also return the fees and interest.”
Lastly, Mears urged vet students to file a tax return before graduating. “It might seem weird because you’re not earning much if any income, but having a low or zero adjusted gross income can be really beneficial for you when you start with repayment.”
Advice for New Grads
For most recent veterinary school graduates, especially the class of 2025 and later, the most beneficial repayment plan to start with is the SAVE plan, which is income-driven, said Mears. Some graduates, however, might be in what she calls the “new grad pickle.”
“Maybe this is a second career for you, or you had time between when you started borrowing for college and came back to vet school, so you have older loan types,” she explained. “It boils down to which student loan repayment plans your loans are eligible for. If your loans are eligible for PAYE or IBR 2009, that puts you in the new grad pickle, because it means PAYE is your only 20-year forgiveness-eligible plan option.”
This is important for 2024 grads to know because PAYE is set to phase out July 1, 2024.
Advice for Veterinary Interns and Residents
Mears advised interns and residents to use an income-driven repayment plan. “If you have zero or low income, you can have a zero dollar or low monthly payment during that time,” she said. Avoid deferment or forbearance.
Mears said early-career veterinarians often ask her whether they should make payments toward their student loans if they have the extra money to do so. Her response is no, especially if they’re using the SAVE repayment program.
“If you pay extra toward your loans while benefiting from that 100% unpaid interest subsidy, it’s going to go toward that interest set to be subsidized first,” she explained. “There are better things you can do with your money than paying toward interest that’s going to be subsidized. I’d rather you work on that emergency fund or retirement contribution first.”
Advice for Academia
Those who work in public service jobs like academia might be eligible for public service loan forgiveness (PSLF). “If you use a forgiveness-eligible repayment plan to repay your loan while working for a qualifying employer (e.g., a veterinary teaching hospital), you could qualify for PSLF,” said Mears. “This is the Holy Grail of loan forgiveness, because as long as you meet that criteria and check all the boxes, you can reach student loan forgiveness after 120 monthly payments (10 years), and it’s tax-free.”
If you fall into this category, she recommended using the SAVE repayment plan.
Take-Home Message
Depending on the repayment plan you choose, your portion of take-home pay that goes toward student debt can vary significantly. “A new graduate associate on a standard 10-year payment plan might be putting 35% toward student loans each month,” said Mears. “Using income-driven repayment options might be closer to 10% take-home pay.”
She advised setting yourself up to pay off your student loans successfully by:
- Filing a tax return before you graduate.
- Understanding your income-driven repayment options.
- Tuning in to the VIN Foundation’s free New Graduate Student Loan Playbook webinar the year you graduate.
- Preparing for loan forgiveness with a dedicated forgiveness planning fund.
View the round table in its entirety at https://youtu.be/GFqG10pu210.
