Student debt: Why it's your problem too

Wendy Labrousse entered higher education with a dream. She wanted to save animals' lives. She wanted to watch children's faces flood with relief when they found out their pet would survive. She wanted to spread the same joy she experienced in her own past, when a veterinarian labored throughout the night to save her puppy after it ingested antifreeze. When the weary doctor told her the dog would pull through, her passion ignited and she decided what she was going to do with her life: cultivate this beautiful bond between people and pets. She didn't hesitate to sign on the dotted line to borrow hundreds of thousands of dollars for school. Heck, she would have done anything for the privilege.

The bottom line

Then reality set in. After graduation, her monthly loan payment was more than her rent. She had a newborn baby and a husband finishing college, so she was the primary wage earner. She was working 60 hours a week, missing out on time with her new daughter, and still there was nothing to show for it at the end of the month. No retirement savings. No financial security. Despite six years of education, she had a paycheck-to-paycheck existence. "I didn't realize the implications of my debt until I was living with it," she says. ?

Dr. Labrousse's story isn't unusual. Veterinary graduates are struggling with their debt load, especially in their first few years of practice, and some are even leaving the profession (see "Economic emergency" in the April 2008 DVM Newsmagazine). As Dr. Ron DeHaven, executive vice president of the AVMA, notes, "There are some challenges there if we're going to continue to attract the best and the brightest to the profession."

The issues at stake

Some analysts fear that the student debt issue is endangering the very future of veterinary medicine. And when you look at the statistics (see the figures), it's easy to share their nervousness. Other experts believe student debt is not the crisis it's been portrayed as recently. So, depending on who you talk to, either this is the end of veterinary medicine as we know it, or we all need to calm down and look at the big picture.

But even if they disagree, at least these groups are talking about the issues. There are some folks—mostly private practice veterinarians whose loan payoff days are behind them—who don't see student debt as their problem, so they think they can ignore it. This is a dangerous attitude. If you will ever need a young veterinarian to work in your practice or buy your business, this is your issue. A job at your practice, or a stake in its ownership, must make economic sense in a young doctor's life.

That doesn't mean that you, as a practice owner or other type of employer, are responsible for solving the student debt problem on your own. Change needs to come from all stakeholders—students, academic institutions, federal and state governments, and professional organizations, as well as the employers of young veterinarians. However, private practitioners are uniquely positioned to increase earnings. If the profession is to survive and thrive, average salaries must increase, and private practitioners must help drive this change.

The current low "market rate" for veterinarians is heavily influenced by private practices' cost structure and profitability. And many practices are simply not profitable—even if they provide a good living for their owners. If these practices were run more efficiently, not only would the owners make more, but young veterinarians would earn more: Changes in pricing, staff leverage, and business systems would let them be more productive.

Skyrocketing education costs

In the last four years, the cost of a veterinary education has risen dramatically—about 31 percent for tuition, fees, books, and equipment, according to the Association of American Veterinary Medical Colleges (AAVMC). The change in the consumer price index, a gauge of the cost of living, was about 16 percent for the same period. Interestingly, room and board, personal expenses, transportation, and healthcare costs for veterinary students have risen as quickly as tuition, according to the AAVMC—31 percent in four years. What's more, the interest charged on student loans has increased, and it's become more difficult to obtain a loan in the first place.

Of course, none of this is taking place in a vacuum—universities don't raise tuition and fees for the fun of it. The reality is that many veterinary programs are facing declining budgets. For example, in 2007, federal and state funding to the University of Georgia's College of Veterinary Medicine was cut by more than $1 million. This is not uncommon, and the choices raised are difficult: Cut faculty? Eliminate programs? Raise tuition? No alternative is attractive.

Dr. Wendy Labrousse, shown here with her Boston terrier, Baby, radically changed her spending habits to manage her student debt payments and provide for her family. She now owns a practice in Coos Bay, Ore.

However, these realities aren't isolated to veterinary medicine. Read about student debt in the journals or Web sites of any other profession, and you'll see our concerns mirrored. For example, while veterinary student debt increased 70 percent from 2000 to 2007, dental student debt increased 79 percent. A fundamental shift is occurring in the cost of education in all fields. A report by the U.S. education secretary notes with concern that "college costs ... have outpaced inflation for the past two decades and have made affordability an ever-growing worry for students, families, and policymakers."

Paltry income levels

The difference, of course, between veterinary medicine and other professions is low veterinary income. While earnings have increased significantly in the past 10 years, they're still much lower than other professions with similar educational requirements and skills (see the chart). But these figures don't tell the whole story. While the average 2007 salary of a full-time private practice veterinarian, according to the 2009 AVMA Report on Veterinary Compensation, is $115,447, owners of private practices earn much more—an average of $146,374. Twenty-five percent of private practice owners make more than $187,000, and 10 percent make more than $285,500.

Veterinary earnings compared

So managing student debt payments on average earnings might be difficult, but it's clearly possible for veterinarians to make significantly more. Practice owners can not only manage student debt, they can also achieve the things most people want in life: home ownership, a comfortable lifestyle, and the financial wherewithal to raise a family. "I think we need to take a broader viewpoint, to look beyond just the total-debt-to-starting-salaries cash flow issue," says Dr. John Tait, AAHA's president-elect. "Debt must be weighed against the long-term career options a degree in veterinary medicine brings."

However, these long-term career options still need to include increased earnings. Private practices' low-profitability problem, which is being documented by a growing body of anecdotal evidence, restricts practices' ability to pay not only associates but also owners and support staff. Many studies have highlighted the need for better business practices in veterinary hospitals. If we adopt these practices, they will help boost average earnings to the levels enjoyed by the most successful people in our profession—and in others.

The solutions

While there are many thorny, deep-rooted factors that feed into the issue of rising student debt and much we still need to learn about causes and potential solutions, there's one area where we as a profession have a great deal of control: veterinary earnings. If practices become more profitable, they will have more money to pay associates. The good news is that almost 75 percent of U.S. veterinarians work in private practice, and the vast majority of these businesses are owner-operated, which means veterinarians control their own destiny—they can increase earnings without having to deal with corporate bureaucracy. Here are some of the ways the profession can increase earnings and address the student debt issue:

Improve efficiency and productivity in practice. Boosting young veterinarians' earnings does not mean current practice owners simply hand over a greater share of the business profits while receiving nothing in return. But it does mean owners and employees need to focus on improving efficiency and productivity. For example, leveraging staff through additional training allows the doctors in the practice to see more patients in a day. This raises revenue without incurring a lot of additional costs. If associate pay is either directly or indirectly related to production, their compensation will increase because they're seeing more cases per day.

What's more, the practice owner's bottom line will also increase significantly. If associates are paid 20 percent of production, owners keep 80 percent of the additional revenue related to the increased caseload—less, of course, direct costs such as drugs and medical supplies. Any strategy that allows doctors to see more cases is a win-win for both the practice and the associates. Both the Brakke Management and Behavior Study and the AVMA-Pfizer Business Practices Study demonstrate the link between better business practices and increased earnings. For example, in the Pfizer-AVMA study, the difference in annual earnings between veterinarians who regularly reviewed their financial data and those who didn't was $42,570. The difference between practices with strong employee development programs and those without was $34,470.

Prepare students better. A veterinary education must provide students with the medical, business, and life skills necessary to be more practice-ready when they graduate. This type of training has dramatically increased in the last 10 years, but there's still room for improvement. Some schools have developed innovative programs, such as the fourth-year elective offered by Louisiana State University's School of Veterinary Medicine in conjunction with the School of Business. In this course, students evaluate local practices and gain hands-on experience in practice economics and management.

Of course, students must take advantage of these opportunities, both in school and after graduation. There is much a young doctor can do to be productive even in a practice with owners who haven't updated their business systems as much as they should have. For example, new graduates can focus on delegating to technicians and assistants, which will enable them to see more patients. They should also focus on building strong relationships with the clients they see. One way to do this is to call back every client a day or so after they were seen to find out how the pet is doing and see if the owner has any questions.

Boost student confidence. Twenty years ago, about 15 percent of graduating veterinarians went on to do internships; in 2008, almost 40 percent did so. Many of these students have no intent to pursue specialization but feel they need an additional year of supervised training before entering the job market. Why this shift in attitude? And what can be done in the veterinary curriculum to give students more confidence? These are questions worth exploring. It should also be noted that a year spent in an internship program exacerbates the debt issue—intern pay is less than half of the average starting salary for private practice employment, and while student debt payments can be deferred for this year, interest accrues on the debt.

Create realistic workload expectations. Young veterinarians must also have reasonable expectations about the hours they need to work in order to justify a higher salary. It's not reasonable to expect everyone to work 60 hours a week, but do highly paid professionals in other fields work only 45 hours—the average for non-owner private practice veterinarians? Increasing efficiency will help increase associate compensation, but there is a strong correlation in any field between production, compensation, and hours worked.

Increase government advocacy. While higher education costs are no doubt a reality in the same way that healthcare and energy eat up more of our budgets, stabilizing tuition costs is essential. This is particularly important and yet increasingly difficult with the troubled economy. Dr. Marguerite Pappaioanou, executive director of the AAVMC, says that while veterinary college deans are actively seeking additional sources of funding, the profession must also advocate for better public funding of veterinary education.

One program for which the AVMA and AAVMC have lobbied extensively is the Veterinary Medicine Loan Repayment Program, which would partially forgive the loans of graduates who work in underserved areas. Another federal initiative is the Veterinary Student Day program, planned by the Student American Veterinary Medical Association Government Affairs Committee for early this year in Washington, D.C. In this program, two veterinary students from each of the 28 U.S. veterinary colleges will be introduced to the legislative process, learn about policy issues facing the veterinary profession, lobby members of Congress, and recruit students to serve as contacts to the governmental divisions of the AVMA, AAVMC, and other organizations.

Create alternate educational models. Academic institutions are already evaluating the efficiency of current teaching models and seeking alternate revenue sources. But the AAVMC's Dr. Pappaioanou notes the need to consider newer educational models, such as virtual or distance education, that might help keep tuition and fees down.

Cultivate core nontechnical skills. In 2001, Personnel Decisions International performed a study to identify the core nontechnical competencies necessary for success in veterinary medicine and then suggested ways to develop these skills in veterinary graduates. The list of skills identified included interpersonal, leadership, communication, and business proficiency. Results from this project have been used to screen veterinary school applicants, design a nontechnical core curriculum, and for other activities. Future projects to capitalize on these efforts would include developing reliable, consistent measures to monitor progress in these nontechnical areas and review how effectively the training programs are working.

Inform students so they can make smart choices. Veterinary students and potential veterinary students must be given information up front to make intelligent decisions about their future. Paying more for a degree isn't a bad choice. But it does require an understanding of the ramifications. Students need to think about their life plans and how education costs fit into those plans. Is paying nonresident tuition a good idea? Would two years of community college while living at home be better than doing all undergraduate work at a major university far from home? How will debt fit in with plans regarding marriage, family, and so on? What will happen if those plans don't work out as anticipated—what if a student eventually becomes a single parent? Obviously no one can identify and plan for every possibility, but students do need to think about the consequences of educational debt beyond their starting salary. It's often the last year in veterinary school before the reality of debt and earning a living sets in. Students still have many options to increase their earnings at that point, but it's too late to make choices that would reduce their debt load.

Dr. Wendy Labrousse knows that all too well. While she participated in an accelerated program and didn't live extravagantly, she recognizes now that she could have done things differently to minimize her debt—things she's learned to do since graduation.

After months of financial frustration during that first year out, she and her husband decided to drastically change their lifestyle. They cut all unnecessary expenses, drove old cars, shopped at thrift stores—anything they could do to scale back. They also committed to pay off credit card debt, save a little every month, and pay more than the minimum on their loans, even if it was just $5 extra. Eventually the couple saved enough to buy a house, and when an opportunity arose for Dr. Labrousse to become part-owner of the practice where she worked, she took it. She became full owner earlier this year and is feeling financially secure.

Still, she's concerned about the veterinary profession. "I've done OK because there's a second income in my family," she says. "But it's tough for single wage earners. As business owners, we need to charge appropriately so we can pay appropriately, but students also need to live as simply as possible and not expect a luxurious salary right away."

Student debt and the economic viability of the profession are complicated problems, but fortunately, many of the early steps toward change have already occurred. And while thoughtful analysis of the issues is critical, we must be careful not to get so discouraged that we end up fulfilling our own gloomy prophecies. If all stakeholders commit to positive change—including private practice veterinarians—we will surmount the challenges presented by student debt.

Dr. Karen Felsted is CEO of the National Commission on Veterinary Economic Issues. Send questions or comments to ve@advanstar.com.

Dr. Karen Felsted

Symposium tackles "the elephant"

The second "Elephant in the Room" forum on veterinary student debt takes place this month, Jan. 19, at the North American Veterinary Conference. The session, a joint effort of NAVC and VetPartners (formerly the Association of Veterinary Practice Management Consultants and Advisors), will tap the collective insight of industry leaders, academic experts, veterinary practitioners, consultants, and students to generate solutions for the benefit of veterinary medicine as a profession. For more information, visit tnavc.org/navc-conference/program/elephant-in-the-room.

Other resources to build productivity

> The National Commission on Veterinary Economic Issues offers free benchmarking tools and other management resources at ncvei.org.

> Management consultants can be researched and contacted through avpmca.org.

>AAHA offers a variety of resources at aahanet.org.