Economic emergency

TBENSALEM, PA. — Dr. John Rossi questions his decision to become a veterinarian.

The debt trap: "The good news is they're going to be a veterinarian," says Economist Richard Vedder. "The bad news is they'll be miserable."

The 2005 Penn graduate practices at a suburban small-animal hospital outside of Philadelphia. At 29, he owes more than $150,000 for veterinary school, and, combined with $50,000 in undergraduate debt, maxed out on federal loans during his fourth year. Even some private lenders won't let him borrow anymore. Now unsatisfied with his career, he's finishing a master's degree in bioethics and plans to start a PhD program this fall. His current monthly loan payment: $800. In the end, Rossi will rack up close to $300,000 in loans. His wife, a resident, owes nearly as much.

Rossi represents a generation of veterinarians accustomed to living on borrowed money and forfeiting a larger percentage of future earnings to pay down educational loan obligations. It's a check most will write until they near age 60.

While indebtedness appears intrinsic to the veterinarian-in-training, the reality is it's becoming unmanageable, borrowers say. Average educational debt is rising faster than the consumer price index, and experts warn that if left unrestrained, the pattern will erode new veterinarian numbers and have global implications.

Being shackled with monthly loan statements the size of mortgage payments is tough, Rossi says, but when starting salaries are less than $55,000 a year, it's a slap in the face.

"I once saw a study that suggested well over 50 percent of doctors and lawyers would not recommend their profession to a student," he says. "I think the number's even higher for new veterinarians. We want to make more money and have a better schedule rather than see 40 cases a day and script out steroid after steroid because owners don't want to do anything else to treat patients."

Statistics paint an even darker picture. A review of American Veterinary Medical Association (AVMA) data reveals educational debt represented 184 percent of entry-level salaries for new graduates in 2007, compared to 91.6 percent in 1980. The association's most recent survey shows last year's mean educational indebtedness totaled $106,969, although students saddled with $250,000 or more in loans exist. Tuition increased nearly 100 percent since 1997, yet starting salaries rose just 46.5 percent during the same 10-year period. Interest rates now top at 6.8 percent, and the vast majority of 2007 graduates reported to AVMA that they accepted positions paying between $47,000 and $58,999 a year.

Backed in a corner: $200,000 in educational loans makes Dr. John Rossi typical of other recent graduates. "Knowing it on paper and being confronted with it are two different things," he says.

Upheaval is inevitable, contends Richard Vedder, PhD, former senior economist with the U.S. Joint Economic Committee and Ohio University distinguished professor. The debt burden students face compared to salaries is "shocking." If the cost-earnings ratio fails to soon balance, students simply won't be able to afford a career in veterinary medicine, he claims.

"This trend will be unsustainable in far less than a generation," predicts Vedder, who sat on the U.S. Secretary of Education's Commission on the Future of Higher Education in 2006. "At some point, no one will want to go to veterinary school. The word will be out that you're assigning yourself to a life of utter poverty. I can only predict that disaster is a few years ahead."

Sounding the alarm

If Vedder's assessment seems exaggerated, consider Dr. Andrea Honigmann, who lives paycheck to paycheck on what she deems above-average earnings working as an associate at a suburban Philadelphia small-animal practice. Graduating from Iowa State University in 2006 nearly $300,000 in debt, she describes her $1,670 monthly loan payments as "crippling."

"I knew I would be saddled with loans, but I don't think I realized how this would affect me once I got married. My debt will restrict how many children I can have," she says.

Table 1

That reality manifests in a nine-page paper authored by James F. Wilson, DVM, JD and University of Pennsylvania School of Veterinary Medicine (Penn) adjunct professor. The work, titled "Inviting the Elephant into the Room" has incited traveling dialogue among the profession's leaders, with meetings at January's North American Veterinary Conference, the AVMA show in July, and this month's American Animal Hospital Association convention.

Wilson, who's donated hundreds of hours to researching the numbers, says it's no secret that the current veterinary-school model is "broken." Yet to identify the crisis, he says it's impact must be recognized by a critical mass, and only then will leaders develop an action plan.

The task is daunting. Fixing the problem is like trying to save Social Security, tackle global warming or take on the nation's health-care system, he says.

"No one wants to face this because it's too disheartening, it's political and there are no easy, clear solutions," Wilson says. "That's why this is so frustrating, I think. The bottom line is the return on investment is a lousy one, and it's now being recognized. It is not what it used to be for veterinary medical students."

Table 2: Annual Average Private Practice and Internship Salaries and Indebtedness in Nominal Dollars (not adjusted for inflation)

That change will lead to a drop in the quality of applicants, he adds.

"I think it's already happening. Part of the reason we have 80 percent women in vet school is buried in this issue," Wilson says.

Popular thought indicates the gender shift largely relates to economics as veterinarians make up one of the lowest paid medical groups, the National Commission on Veterinary Economic Issues reports. Gender studies show women traditionally are not as interested in the bottom line, which has lured men to more lucrative professions.

Dr. Michael Chaddock, spokesman for the Association of American Veterinary Medical Colleges (AAVMC), acknowledges the demographic shift and admits applicant numbers are flat.

"It's discouraging. We want to be sure we're competing with other health professions to get the brightest students," he says.

Grass is greener

The escalating cost of higher education is not a phenomenon unique to veterinarian medicine. Yet salaries in human medicine and dentistry are healthier by comparison. Eight years ago, the KPMG MegaStudy reported physicians' median income at $160,000 in 1995, compared to $122,860 for dentists and $61,532 for DVM practice owners. More recent statistics compiled by the American Medical Student Association reveal 2006 public-school graduates incurred a median debt of $119,000, and those who attended private institutions owed $150,000. Yet mean starting salaries for general internists in 2002 totaled $124,000 and $109,000 for pediatricians — significantly higher than the starting salaries veterinarians reported earning even five years later.

Table 3: Annual Average Private Practice and Internship Salaries and Indebtedness in Real Dollars (adjusted for inflation)

Dentists, on the other hand, owed an average educational debt of $141,836 if they graduated in 2005. An American Dental Association survey from 2006 also reveals that full-time doctors just two to four years out earned average net incomes of $133,323 a year. Veterinarians that exclusively practiced small-animal medicine and were three years to four years out of school reported earning median annual incomes between $70,414 and $74,027 in 2005, AVMA says.

Measured against those disciplines, veterinary medicine's debt-to-income ratio does more than negatively influence a graduate's ability to own a home, buy a practice or marry. It spills into society's collective consciousness, manifesting in a gender imbalance, flat application numbers, lower-quality candidates and a rush of veterinary students leaving general practice for higher earning potentials promised by specialty-board certification.

Beyond tuition

Still, other factors must be considered, such as lack of affordable housing and health-care costs, says Lisa Greenhill, AAVMC associate director for diversity.

"We often think of these as national issues distinct from their impact on students, but they have major consequences for them," she says. "DVM students have seen room-and-board costs increase almost 20 percent in the last five years. While average health-care costs have risen for our students by just over 30 percent since 2002. We often forget that these students not only pay tuition, but also simply live during their time in their programs."

It's a concern Dr. Jim Lloyd, an associate dean at Michigan State University, says he thinks about daily.

"There's no question that if this continues, there will be some economic distress, more than there is currently," he says. "Most students don't choose veterinary medicine to get rich, and with good financial planning, there are ways to repay the debt. Still, we have a lot of students expressing some great concerns. It's a real challenge."

Blame game

Lloyd attributes double-digit percentage increases in tuition to shrinking state support. Dr. Timothy Boosinger, dean of Auburn University's veterinary medical program, adds that virtually no significant scholarships or grant programs exist for DVM students, who, incidentally, often spend loan dollars on new cars and cable television instead of living the frugal lifestyle of older generations.

"I don't think you can blame it all on that, but it's an influencing factor," he says. "Our costs of heating and health care also have gone up. And loans are contributing as well. It's too easy to borrow money, and I think there's an element of that in this complex issue. Certainly, there is no simple fix."

Vedder, an expert in the economics of higher education, laughs at the excuses he says educators use to mask "highly inefficient operations." He counters that companies are burdened by the same rising health care and utility expenses but have not increased consumer prices in line with higher education.

"The deans always find someone to blame it on other than themselves," he says. "The truth is they are not lying awake at night wondering about the student-debt burden. They're worrying about raising their program's rankings, building new buildings and hiring professors. That, to me, is the underlying problem at work here."

Bloated faculty numbers, accreditation standards that require expensive specialist professors and tuition-funded research initiatives aggravate the problem, Vedder adds.

"Nowadays, indebtedness is forcing new graduates to live a lower middle- class lifestyle when veterinarians have traditionally enjoyed an upper middleclass living," he says. "This market will right this situation by creating a shortage of veterinarians so severe it will manifest itself in higher pay, or we'll put a fix on this loan thing."

Faced with such an outcome, Boosinger, who runs one of the cheapest veterinary medical programs in the country, says the colleges' leaders are doing what they can.

"You can ague that we're not doing much, but we're taking steps to address this," he says.

Taking off the blinders

For Mike Nolan, a third-year DVM-PhD student at Virginia Tech, a fix isn't coming fast enough. The 24-year-old insists he and his classmates do not live an extravagant lifestyle. Still, he is determined to bypass the $55,000-a-year jobs in general practice for a career in industrial pathology or academia. The reason: He wants to be able to pay off the $200,000 in loans he's accrued during his education.

"I figure I'll need around $1,800 a month and a bare-bones minimum annual salary of $85,000, and that's undershooting it quite a bit," he says. "The high cost of veterinary education has pushed me to think about specializing. It's why I'm looking to go into pathology, where starting salaries are over six figures. When I'm done, I'll probably be a quarter of a million dollars in debt."

Wilson says most students aren't as savvy about what they owe, preferring to ignore the burden despite the rash of colleges requiring them to create budgets to assess their living expenses after graduation.

Still, knowing it on paper and being confronted with the reality are two different things, Rossi says.

"I think one of the big sociological issues is that space in vet school programs is still so limited, and there's such fierce competition, that students have blinders on," he says. "You're just so happy to be in school, you don't think about the money you're going to owe compared to what you'll be paid. The schools play up to that with the 'you're so lucky to be here' attitude. Students are the main source of funding, and that environment is not conducive to lowering the cost of veterinary education."