Exploring cost of education, generational differences

EDITOR'S NOTE: The current economy is touching many sectors of veterinary medicine, including the job market, academia and specialty medicine. The most recent DVM Newsmakers' Summit brought together a diverse panel of thought leaders to talk about the issues facing new graduates, academia and general and specialty practices. The discussion took place at CVC Baltimore in late April.

Panelists:

DR. ALAN M. KELLY, professor and dean emeritus of the University of Pennsylvania's School of Veterinary Medicine

Kelly

DR. TED MASHIMA, associate director, Association of American Veterinary Medical Colleges

Mashima

DR. MICAELA SHAUGHNESSEY, relief veterinarian in Washington, D.C.

Shaughnessey

DR. NANCY SOARES, Macungie Animal Hospital, Macungie, Pa.

Soares

DR. JAMES F. WILSON, Priority Veterinary Consultants, Yardley, Pa.

Wilson

Moderator:

DANIEL R. VERDON, editor of DVM Newsmagazine

Verdon: Let's set up the issues facing new veterinary graduates. What's the reality for a new graduate entering private veterinary practice today?

Wilson: This subject is what I call the good, bad and ugly. Annual debt, tuition and fees for veterinary students have been troubling me since the 1990s, when I started teaching at veterinary institutions. So many of the public are oblivious to the immense cost of veterinary education relative to the salaries of veterinarians, even after several years.

Clearly a lot of our students enter veterinary school with a complete disconnect as to the cost of education and their salary and earning power once they graduate.

Debt level is skyrocketing. Fortunately, AVMA has been tracking this data. Here is what we know: Debt was 95 percent of starting salary in 1983. By 2008, it was 194 percent. Why is that going on? It's all buried in the cost of education and the absence of the same level of funding. Governmental funding for advanced education has been deteriorating while the volume of information veterinary students have to learn for an advanced degree has been getting broader and broader.

Debt levels were up to 173 percent. When Jim Taylor developed this one year ago. We were using trend levels up to 2007. In 2007, we were estimating that, by the year 2017, debt would be double a starting salary. Then last year we included a couple more schools with high debt levels, and it shot up to 194 percent.

For students, the average debt is $120,000. If it's payable over 10 years at a fixed rate of 6.8 percent, that's $1,377 a month. They can't afford it. Now they are looking to extend the loan payments to 25 years, which equals $830 a month.

If you move the payment period to 25 years, it increases the interest from $49,000 to $125,000. There are very few options for today's students.

If you go to 2015, mean debt — which I think we will be at $176,000 — the cost is $2,000 a month for 10 years. Keep in mind that 10 percent or no more than 15 percent of one's income should be used to pay off student loans. Assuming that we had 10 percent of our new grad's income devoted to paying their debt, they should have an annual salary of $243,000 by 2015. If we increased the debt ratio to 15 percent of salary, it would equal $162,000. We know that is not feasible.

Extending the loans to 25 years, the payment drops to $1,221 a month. But now they are paying $190,000 in interest.

I hear vets ask, "Why don't you just save money while you are in veterinary school? You don't have to drive those new cars." Trust me, many of my students are living on peanut butter, jam and pasta. There aren't a lot of good options out there. According to financial aid, if we keep repayment to 15 percent of gross monthly income and increase the loan repayment time to 25 years, by the year 2015 they could get by with a starting salary of $97,000. I don't know if we can achieve that in a recessionary economy.

So, here is what they are facing: They face forestalling having children, buying a new home, saving for retirement and even buying a new car.

New veterinarians are looking at a very different time than when I did when I graduated. My debt then was about 50 percent of my starting salary, and now it is almost to 100 percent.

I ask students if they are ready and excited about your future. The answer is blank. ... They sit there stunned.

Mashima: I would say that is an accurate depiction of the current landscape. And if that doesn't depress you, I don't know what would. We are facing an exceptional set of circumstances today. Exceptional. The portrayal that Dr. Wilson put together was prior to the economic challenges of today.

So what are we going to do? Just like the financial experts in the United States, the answer is that we just don't know. It's going to take everybody working together.

It's the students; it's the schools; it's the profession; it's societal obligations, including federal government inclusions, if we are going to come out of this.

Let me paint, just for a little bit, the other set of issues emerging. Let's focus on cutting costs.

Students have to be accountable. They need to know what the ramifications are for a pizza, a car purchase or an extra loan. With information comes a little power. We also need to think about ways to access private funding to help defray the cost of education. Right now, veterinary students compete against one another for a limited pool of money. I would say we need to go after money that is available to other health professions.

Kelly: There is no doubt that what Dr. Wilson presented was exactly accurate. That's what is happening in terms of loans. I have to tell you there are some things that are equally disturbing to me. Some 2,600 grads just entered the work force. From 2000 to 2007, there were about 5,000 job ads in the first quarter of each year. The number dropped by 59 percent this year, and that is a huge decline in the number of positions available. That has to be an enormous concern for us in veterinary education and the whole of veterinary medicine. We face the possibility of graduates not being able to find a job. And they have $120,000 to $160,000 worth of debt. That is a huge concern. I hope I'm wrong, but we won't know until July or August.

My feeling is that we have some responsibility to those trying to enter our profession. And we need to find ways to tide them over a difficult period until the economy recovers.

I think it is also of concern to think about where the changes in jobs and the economic downturn are having an effect.

Much of what I know is hearsay, but it seems the higher-priced veterinary care is where clients are pulling back. You begin to wonder what the effect is going to be on specialty practices. Are there going to be changes or problems at veterinary practices as a result?

As you may already know, 40 percent of the students go on for advanced study. They are going to go into an internship. There are about 800 internships in the country. What is going to be their future and what sort of opportunities will they have? What are their starting salaries likely to be? My intuition is they are not going to be what they have been in the past.

Remember that during an internship and residency, you increase your debt because you are getting paid at minimal levels. That is a concern we all must think about, too.

I hope I am wrong about my gloomy predictions. But you can readily see why there is such a downturn in jobs. For myself, and all of us included, if you look at my 401K, well, it's gone down a lot. If you are a practice owner, you just can't afford to retire at this point. There is a very obvious relationship. Extending it further, you wonder what the effect is going to be on the number of applicants for veterinary education.

They know they have gone through this incredibly expensive education. Now they can't get a job? It's a disastrous situation, one that we have to pay attention to.

Dr. Wilson mentioned the 6.8 percent students have to pay on loans. I don't understand why that rate is so high. It used to be 4.2 percent to 4.3 percent. It's a ruinous rate of interest. It would help enormously if we could find ways to lower it. A student with Stafford loan is not allowed to declare bankruptcy. I don't understand what their options are. We never thought we would have to think about this in the past. But it is real.

There are other issues related to veterinarians in the food-animal sector. We have 481 counties across the country with more than 5,000 head of livestock and no resident veterinarian.

The reason there is no veterinary coverage is that people can't make a living there. I worry about the long-term impact of this and the loan-repayment programs. They spend five years in an underserved area, then go elsewhere. I am concerned about that.

Basically what is happening in terms of food-animal practice is that, with consolidation and fewer farms, incomes are lower for veterinarians. Therefore, many practitioners are shifting from purely food-animal to mixed-animal practice to maintain a livelihood in a rural setting.

Verdon: As more and more women enter the profession, what other challenges await them?

Shaughnessey: I am a full-time practitioner. I perform relief veterinary services in the Washington, D.C., area. I have worked in 30 to 40 different practices.

As you know, in the last 40 years the gender dynamics of veterinary medicine have completely changed. In the 1960s, we had 108 females graduating from veterinary schools and 2,000 men. Interestingly, during that decade about 75 percent of the females ended up as practice owners, about the same percentage as men.

In the 1980s, doors opened to women, and they stormed through. Veterinary medicine started becoming predominantly female. Veterinary Economics came out with a survey about ownership from 2000 to 2007. In that period we had about 6,800 women graduating compared to 2,000 men. Only 7 percent of those female graduates became practice owners.

One of the quickest ways to personal economic freedom is to become a practice owner. But women have a different set of challenges in their professional lives. One interesting set of data had to do with the amount of time women spend out of the work force. As of 2002, women were out of the professional work force an average 14.7 years, while men were out only 1.6 years. As you can see, we are not in the work force quite as long, but it is even more important in many ways for us to become economically independent.

By age 44, 81 percent of women in the United States will have a child. Fifty percent will be divorced. Of those 50 percent, five out of six will end up with those children and the full economic responsibility for raising them.

I think it is very important for women going through veterinary school and entering the profession as an associate to think beyond those first five years. Think in 30-year terms. One of the most important things we can do for ourselves is to stay employed full time even and when we have children. The statistics show we outlive men. We live to an average age of 85, while men live to 75. Of senior citizens living in poverty, three out of four are women, and 75 percent of those women were not in poverty when their husbands were alive. That should speak volumes.

Verdon: Dr. Soares, what is your perspective as an owner and a hiring manager?

Soares: My practice is 22 months young. I have a staff of 14 with two associate veterinarians. In the first 15 months we became AAHA-accredited, and became a $1 million company. It took a lot of work. It was very difficult.

Every day, I am an owner and a practitioner. I can say I can do it all, but I'm not doing it alone. I am a mother of two small children, and I have a wonderful support system that has helped me do what I want to do.

The largest issues that practitioners and practice owners are facing is dealing with a new generation that has a completely different work ethic. They demand a lot. They are techno-literate. They are multi-taskers, and they have had instant access to information their entire lives. They come with compensation demands. They have high expectations of what can be done for them, and some are even coming with their own attorney or at least their attorney's business card.

I call it an "attitudinal" work ethic. That means their attitudes toward work are completely different than past generations. They want their work to have meaning, but they don't want their work to define their lives. I see this for both males and females.

The practitioners hiring this generation will need to understand these generational differences and provide the required training to motivate and retain these veterinarians.

Generation Y questions everything. "Why can't I leave by 5 p.m.?"

Their orientation into private practice needs to be designed specifically toward providing them with what they do for a living and why being a good practitioner relates to the success of your business.

Provide reasons for directives, protocols and policies set forth in practice. An ongoing training program is essential. They want it. They demand it. I think this generation can easily become bored if not challenged.

I think it is going to require additional time and mentoring on the part of the practice owner, too. Practice managers can do only so much of this.

Mashima: You can hear the call from the table. Something needs to be different. It's about when a student becomes a veterinarian and meeting a societal need. All the veterinary schools have made some independent moves in terms of how to improve and deliver for their state, region and nation. I think all of them recognize that something needs to be different in meeting society's needs. How do we achieve that? One thing we are doing as an umbrella organization is we started the North American Veterinary Education Consortium to look at curricula, accreditation or licensing to help guarantee future success. These are trying times. And they are different. So, what are we going to do in each of the schools? Do we change the way we recruit students? This has been a complaint across all health professions; we are not getting the same students with the same work ethic. Our pool of students will not change because we want something.

Hope is not a strategy.

Kelly: The reality is these are abysmal starting salaries after eight years of incredibly hard work. Our students work unbelievably hard. Why should we increase the numbers of students and increase competition, when salaries are so low? It only makes it worse. How do you see the argument for restricting the number of graduates to bring up salaries? It doesn't make economic sense, frankly.

Soares: I agree.

Mashima: It depends on who you ask in terms of what the needs are. If you ask different sectors, you get very different answers. Answers from the public-health sector, for example, is that we need more veterinarians. I will say from a personal standpoint, those students aren't deemed to have all the training necessary, which means an increased debt burden.

On the private-practice side, I have heard it said that we need more veterinarians. And Banfield on the corporate practice side is asking for more veterinarians.

The colleges have independently made decisions in terms of expansion of enrollment. AAVMC is thinking that we need a study to indicate what the true needs are because we are getting an entire spectrum of opinion about the needs within the market.

Kelly: In some ways, it is not entirely under our control, either. We have offshore schools that will fill a need that we don't fulfill. It's not something we can control. I have no idea what the answer is, but it is something that is incredibly important to the profession.

How do you improve the remuneration for veterinarians in private practice? Private practice is the benchmark used in other areas of veterinary medicine, etc.

Wilson: I teach 300 students a year or more, and I do believe they are worried about this economy. They are not as convinced they are going to get the jobs they thought they would. I do believe this recession probably will be a depression before we are done. I think 10 percent unemployment is a depression. I do believe this is going to change the work ethic of younger new graduates. It's going to be terribly difficult for them to accept it because it is not the way they were raised.

Of course the problem is they have this monstrous debt superimposed on that. What I am hearing from some of my friends familiar with the U.K. and Europe is that pet health insurance has had a gigantic impact on the provision of veterinary care. Pet-health insurance could improve the potential size of the market for veterinary services.

Shaughnessy: I see it again and again. If clients come in with third-party payment options, they OK everything. They know they are not going to get reimbursed for all of it, but they allow procedures that are medically and surgically necessary. Compliance is unbelievably high.