Veterinary students accumulate a substantial amount of educational debt while completing four years of veterinary school. Some continue on to internships and residencies, during which time they often defer repayment of student loans, allowing interest to accrue and increasing their indebtedness.
According to the AVMA 2020 State of the Profession Report, the mean debt of new graduates was $183,302, and 10.7% of graduates reported more than $300,000 in student loan debt. Those who attended off-shore veterinary schools were more likely to have higher amounts of student loans. About 30% of equine-focused graduates had no debt compared to about 20% of graduates entering companion animal practice.
Physicians in the U.S. also take on considerable debt to finance their education. Median indebtedness at graduation for an MD is now more than $170,000 for graduates of U.S. medical schools.
A survey that included 102 U.S. medical schools showed that “students with higher debt relative to their peers at their home institution reported higher frequencies of feeling callous toward others, were more likely to choose a specialty with a higher average annual income, were less likely to plan to practice in underserved locations and were less likely to choose primary care specialties. Students with higher aggregate amounts of medical student loan debt were more likely to report high levels of stress from their educational debt, to delay getting married and to report disagreement that they would choose to become a physician again, if given the opportunity to revisit that choice. Increases in both aggregate and relative debt were associated with delaying having children, delaying buying a house, concerns about managing and paying back educational debt, and worrying that educational debt will influence one’s specialty choice.”
These findings regarding medical students are observed in veterinary students, as well. In the equine field, it is common for new graduates to leave the profession in the first five years of their careers, often in search of higher salaries due to concerns about their debt. First job salaries a er internship in the equine sector were reported to be $63,000 for females and $73,000 for males in the 2016 AVMA AAEP Economic Impact Study. In contrast, starting salaries in exclusive companion animal private practice without internship were $90,893 in 2020. Managing large amounts of debt while building a life as a young adult is difficult and stressful. Life choices cannot help but reflect these realities.
Financial Training for Students
Research has shown mixed results for financial literacy training directed at veterinary students. According to the American Association of Veterinary Medical Colleges (AAVMC), “the natural assumption is that greater levels of financial literacy will lead to better financial decision-making in terms of debt acquisition and debt retirement. However, a closer look at the professional literature concerning financial literacy and behavioral change suggests that there is not a direct causal relationship between the two.”
Financial literacy is defined as the ability to use skills and information to manage money in ways that promote financial well-being. It might seem intuitive that minimizing the amount borrowed will have a positive effect on later outcomes, but a percentage of students continue to borrow in excess of annual budgets for tuition, books and living expenses.
Lisa Greenhill, AAVMC’s senior director for institutional research and diversity, said that financial literacy programs that have been shown to be effective are deadline oriented, short term programs with a specific focus and desired outcome. For example, financial education literature suggests that programming on loan repayment for graduating fourth-year students will be far more successful at influencing behavior if provided within three to six months of graduation.
Conventional wisdom suggests educating around this topic very early in a student’s academic career, but studies show that such ill-timed programming is predictive of riskier behavior in spending and greater loan amounts. When the programming is focused during a window when it is most relevant and when new graduates can begin to act on the new knowledge, individuals are more likely to make more informed and better decisions about debt management, reported Greenhill.
Smart Repayment of Student Loans
While avoiding as much educational debt as possible is recommended, for some students it is inevitable that in order to achieve their degrees, they will graduate with significant loan obligations. Once graduated, the emphasis must shift to smart repayment. Every situation is different, so every repayment strategy will differ. Some veterinarians double down on their debt and pay it off as fast as possible.
Dr. Caitlin Daly, owner of Mid-Coast Equine in Maine, has worked diligently on her debt for 10 years. Originally, she had a total debt of $186,908 that ballooned to $242,000 after being late in filing her income certification, a mistake that resulted in the loan interest being compounded. She has reduced it to $91,000 through aggressive payback, and she expects to have the entire balance paid in full by the end of 2021.
According to Daly, “I made the decision to commit my income and life (temporarily) to the payment of my student loans when the noose around my neck became too tight to breathe. My student loans got in the way of almost everything. Being a young business owner, I was unable to get a business loan or home mortgage without the help of my parents. It didn’t matter how much ‘promise’ I had as a young practitioner. I was tired of feeling paralyzed—unable to move my life in any significant direction.
“More importantly, I was tired of the ever-consuming feeling of jealousy of those that had what I felt entitled to after the years of hard work and letters that followed my name.
“I began my journey in January of 2020 by committing $30,000 of my savings (following Dave Ramsey and leaving only $1,000 in my savings),” she said. “It was really scary because I basically gave all of my money away in our ‘slow season,’ then COVID hit shortly thereafter (and a divorce that eliminated any financial help from a significant other). But seeing the immediate drop in my loan balance was intoxicating.
“I would not have been able to make such an impact if it had not been for a few things,” she continued. “First, the pause on student loan interest for the last year and a half. I estimate that this has saved me approximately $20,000 in interest charges. Second, being a practice owner. There are so many increased risks and responsibilities when you own a veterinary practice, but one of the biggest advantages is the profit is yours to invest how you see fit. For me, it has been in my student loans. As the practice owner, I also have been able to write off a number of expenses (cell phone, internet, car, insurance, etc.) that an associate is not able to do. Third, having a real estate investment. Buying cheap and selling high will enable me to pay off the remaining educational debt with the sale of the home.”
The advice that Daly has for other veterinarians with high educational debt is: “Decide what you want, what your goals are. An aggressive debt repayment plan isn’t for everyone. I do not have any children to support, but I also do not have a spouse to help with any expenses. Stop the narrative of entitlement—yes, we went to school, and yes, we put in a lot of hard work. But having a nice home, a nice car and nice things are not going to come immediately unless you make sacrifices elsewhere or have significant financial help. If your goal is to be financially free of student loan debt, you need to be committed to a lifestyle without immediate gratification. The sacrifices you make (the smaller, cheaper apartment, the extra shifts, the lack of date nights) will pay off in the long run.
“The end is near for me, and it tastes so sweet,” Daly said. “I finally have the freedom to dream about what my future will look like. Without debt I can afford to be more imaginative. I can follow a path that is true for me. I can have a healthier relationship with this profession because I no longer feel like I have to go to work; I want to.”
AAEP Table Topic Advice
At the 2020 AAEP Annual Convention, Dr. Martha Mallicote, clinical assistant professor of large animal medicine and director of the Veterinary Business Certificate Program at the University of Florida College of Veterinary Medicine, presented “Loan Repayment: Programs and Strategies for Equine Vets.”
The first step, she said, in determining the best repayment strategy was identifying all of the outstanding loans, the loan servicer, any grace period and the interest rate, then determining what monthly payment amount will be possible a er graduation after consideration of expected compensation. Utilization of a repayment calculator can be very helpful and remembering to apply several months in advance of the end of the grace period, for whichever repayment program is chosen, is important. She recommended choosing automatically deducted payments, which can reduce the interest rate by 0.25%, which can add up quickly.
Loans in repayment or the grace period are eligible for consolidation, Mallicote noted, and although not all types of loans are eligible, most federal loans are. Repayment plans, she explained, can be standard fixed plans or income driven. There are a variety of income-driven plans, and a borrower must be careful to understand the specifics of each type. Most importantly, borrowers must plan for the income tax that will come due on any amount that is forgiven in the year the repayment ceases. This can be a large sum, all due in a single year, she warned. By carefully analyzing repayment strategies, graduates can plan their approach to this financial challenge.
Other Debt Repayment Strategies
Equine veterinarians adopt many different strategies for debt repayment. Many utilize sources of income outside of their salaries from veterinary medicine. Drs. Bret and Chelsea Luedke earned money from real estate. Their educational loans totaled $160,000, but they were able to pay them off in six years.
Bret Luedke said, “We had steady income, but with internships and young associate positions, we made only modest payments monthly on Income Based Repayment. The only way we paid the debt off so quickly was two real estate ‘fix and flips’ where we did all the work ourselves. We had lucky timing both times when we were ready to sell, but really it was just a lot of hard work in the evenings and on weekends (mostly before kids), even though we were exhausted from long hours at the practice. I don’t think we could ever have made progress with our associate salaries alone.”
Dr. Tony Bartels has focused his career on helping veterinarians manage their educational debt. His blog at https://vinfoundation.org/author/tonyb is a source of excellent information and recommendations. He co-facilitated a Table Topic on Student Debt at the 2020 AAEP Annual Convention, where he recommended investing money in a robo-advisor investment account to save for future taxes on loan forgiveness if an income-based repayment program is undertaken. In this type of account, the investor chooses his/her risk tolerance, then the investments are set up automatically.
He said, “We are not investment professionals—we are veterinarians. So we should not try to manage our own investments. We are better off using an index fund or robo-advisor.”
Because stock market values have expanded so dramatically in the last year, many have seen large increases in their equity accounts. It is important to keep in mind that these gains are taxable, but equally important to plan for the big tax bill that will be due in 20 years at the time of debt forgiveness.
VIN (Veterinary Information Network) has a simulation program to help people decide the best way to proceed in paying their educational debts and to determine the least costly options. This is found at www.vin.com/studentdebtcenter. It is Bartels’ opinion that the Pay As You Earn Repayment Plan (PAYE Plan) for a 20-year term might be the best plan for veterinarians, as long as they invest enough monthly to earn sufficient funds to pay the eventual tax on the forgiven amount.
Some veterinarians with high debt levels have chosen a spartan lifestyle, adopting the approach advocated by Ramsey, an American personal finance personality, radio show host, author and businessman. He is an evangelical Christian, and he hosts a nationally syndicated radio program. According to Dr. Brittany Burroughs, she and her husband are a “Dave Ramsey almost success story.”
Her husband graduated with $10,000 of undergraduate debt and $195,000 in loans from veterinary school. She graduated with $86,000 debt from her undergraduate degree and $340,000 from veterinary school. They bought a small starter home once graduated ($80,000) and opened a practice a year later.
Brittany Burroughs said, “I worked ER double shifts and picked up small animal relief on the side. We use the Every Dollar app for budgeting. Vacations are conferences or camping. We buy salvage vehicles and manage our practice with low overhead. Every extra dime goes toward loans. We are nine years out of school now and our educational loan balance is down to just $160,000. The soul-crushing debt is leaving, and the end is in sight. It takes focus and dedication, but it’s possible!”
Living in an area with a low cost of living and low housing prices, having a spouse contributing income to the family, and having a dedication to eliminating debt as fast as possible are all seemingly necessary or positive contributing components to this approach.
Others take advantage of income-based repayment programs and save for the future tax consequences. Dr. Eric Kates worries that the financial opportunities that are missed due to debt repayment can be substantial. He said, “Paying off school debt is admirable and the sacrifices that these stories tell are amazing, but the long story and cost is far higher. Failure to put money away for your children’s college education, inability to buy real estate (which will significantly appreciate over time), delaying fully funding your retirement accounts, and ultimately saving and investing in passive income accumulators will be lifelong issues. The multiplication factor (opportunity cost) for money that is not invested as a young person and put to work is extraordinary. It is a sad commentary on our industry. To me, the answer would always be finding ways to earn more, not spend less.”
Young veterinarians in areas with a high cost of living might struggle more than others. Personal circumstances differ considerably. Dr. Brigitte Gravitt explained, “I am married with a mortgage and two young children. My biological time clock could not wait any longer to have them. In my area, renting is very expensive. We looked into living in a camper, but we wouldn’t have saved enough money on rent to make it worthwhile, and we didn’t want to take the risk with hurricanes and small children. We have absolutely no family around to help with kids. I’m an equine practitioner, so I’m working the most hours I can (more than full time), but I cannot take a second job.”
As Dr. Jennifer Lorenz commented, “I think it’s really important people understand all their options. Recently AAEP had a Round Table on student debt, and it was refreshing to hear it is OK not to pay off your debt as quickly as possible. As someone who has not been able to pay off debt as quickly as I would like due to a variety of circumstances, it was a relief to hear someone say it’s OK to not plan on paying it off—that there are other options or plans that are just as valid.
“The programs in place for debt forgiveness can be the plan for many of us,” she continued. “VIN has a free computer program to help decide what may be the best path of repayment. It’s also important to understand that student loans changed in 2005/06 when the loan program was turned over to private organizations. What might have worked before may not work now for multiple reasons.”
As educational debt among veterinarians has grown, innovative solutions are needed. Minimizing the amount of loans, exploring repayment options thoroughly and having a financial plan (“Hope is not a strategy”) are all necessary ingredients to a successful student loan repayment plan.
Ways to increase equine veterinary compensation include improved efficiency, increased fees and practice ownership as soon as possible in a doctor’s career. There are many paths to the same goal of being unburdened by educational debt.
James Rohlfing, Ryan Navarro, Omar Z. Maniya, Byron D. Hughes & Derek K. Rogalsky (2014) Medical student debt and major life choices other than specialty, Medical Education Online, 19:1, 25603, DOI: 10.3402/meo.v19.25603