Economics of Higher Education: Veterinary schools pressured, too

The March issue of DVM Newsmagazine highlighted an increasingly critical issue in veterinary education: the escalation of student debt. Discussion around this topic is widespread and is bolstered by fact and emotion. Finding a solution is vital to the future of the veterinary profession, but robust analysis of the situation requires full information from the student, employer and academic perspectives.

Dr. James W. Lloyd

Although veterinary student borrowing, starting salaries for graduates and the challenges of debt repayment were explored in some detail in the article "Economic emergency," there was less focus on the escalating financial complexities of maintaining a world-class academic program in veterinary medicine. In that regard, several striking trends in the financial environment of veterinary education warrant more attention.

On the expense side of the ledger, costs of delivering veterinary education have increased substantially in recent years. As health-insurance costs rise, benefits packages for faculty and staff have escalated accordingly. In concert, the exploding market for clinical specialists in veterinary medicine has combined with a widespread trend often characterized as a "graying professoriate" to put a crippling upward pressure on faculty salaries.

On top of these, rapid advances in medical and surgical technologies greatly increased costs associated with state-of-the-art educational programs in veterinary medicine. Combined, these factors have been key drivers of the 99.8 percent actual increase in total expenses reported by Association of American Veterinary Medical Colleges (AAVMC) member institutions in the United States during the 10-year period of 1997-1998 to 2007-2008. Corrected for inflation, the increase remains astounding at 54.7 percent.

While costs escalate, substantial shifts also have impacted the primary sources of funds for colleges and schools of veterinary medicine. As a percentage of the total academic enterprise, state appropriations at AAVMC member institutions in the United States have experienced a rapid and dramatic decline, on average, from nearly 45 percent in 1997-1998 to less than 33 percent in 2007-2008. At the same time, sponsored programs (primarily research contracts and grants) have markedly increased from 20 percent to 24 percent of the total, and service incomes from veterinary teaching hospitals and diagnostic laboratories have risen from 18 percent to 23 percent.

There is no doubt that the average of the AAVMC students' tuition, fees and living expenditures has increased during the past decade (50 percent higher for non-residents and 62 percent for residents at U.S. schools, after correcting for inflation). As a source of revenue for AAVMC institutions in this country, tuition and fees actually have increased a bit more (67 percent, inflation adjusted) due to increasing enrollments. However, the proportion of the total enterprise derived from tuition and fees at these schools only slightly increased (from 12 percent to 13 percent). Obviously, these numbers don't support the DVM Newsmagazine article's contention of tuition-supported research.

Hidden in these averages is the fact that the situation is much more extreme at some institutions, where in certain cases the absolute number of dollars received from state sources has decreased, even without adjusting for inflation. Clearly, the overall trend is one where state support is being replaced with revenue from sponsored programs (research contracts and grants) and clinical services.

And, although gifts for current use only offset 4 percent of total expenses across the AAVMC's U.S. members in 2007-2008, this category has seen the greatest proportionate increase of all revenue sources considered (114 percent growth during the last 10 years). In reality, sponsored programs, clinical services and other nontraditional sources of funds are carrying an ever-increasing proportion of the costs associated with operations (including teaching) and overhead.

In effect, administering academic programs at U.S. veterinary medical institutions is becoming more like running a business. As we continue to evolve in this manner, demands increase for efficiency and accountability in administration of academic programs. Just as in private veterinary practice, the ability to improve the bottom line by raising prices can only go so far. We recog-nize the ability to enhance the academic enterprise solely through growth in revenue from tuition and fees is limited. In working to contain increases in tuition and fees, academic veterinary medicine has found other revenue sources to grow as the previously presented figures demonstrate.

This is a great time to be a veterinarian; career opportunities never have been greater or more diverse in our professional history.

However, escalating levels of student debt present a real challenge for academicians, employers and students. Sustaining our growth and success as a profession will require that we work collaboratively in an aggressive manner to identify innovative and perhaps entrepreneurial approaches to address the challenge.

The colleges and schools of veterinary medicine remain engaged and willing to assume a leadership role.

Lloyd is associate dean for budget, planning and institutional research at Michigan State University's College of Veterinary Medicine.