Veterinarians want Congress to roll back recent hikes on federal student loan interest rates, and the Higher Education Act’s reauthorization might provide an opportunity to do that.
That’s according to the American Veterinary Medical Association’s Washington lobby, the Governmental Relations Division (GRD).
The AVMA, veterinary medicine’s largest membership group, was directed last month by its policymaking body, the House of Delegates, to actively pursue passage of federal legislation that would ease the student loan burden for veterinarians, many of whom graduate $160,000 or more in debt.
“What the resolution does is gives a sense from the House of Delegates that they feel this should be a high priority for the AVMA,” said Dr. Mark Lutschaunig, director of the AVMA GRD. “We’ve been working on this issue for months now. We think the Higher Education Act reauthorization is where Congress will hopefully address student loans and interest rates.”
Reauthorization of the Higher Education Act — a law that governs the nation’s student-aid programs and federal aid to colleges — typically occurs every five years, the last time in 2008. Scheduled for reauthorization this year, the task likely will be pushed to 2015, Lutschaunig said, owing to Congress’ schedule and upcoming general elections.
“There’s not a whole lot of legislative time to move something as big or complex as this,” he said.
Meanwhile, would-be veterinarians are paying higher interest rates on loans following a spike in June that impacts all borrowers of federal student aid.
Interest rates rose from 3.86 percent to 4.66 percent on undergraduate Stafford loans while graduate loans went from 5.41 percent to 6.21 percent. PLUS loans for graduate students or for parents paying their child’s tuition increased to 7.21 percent, up from 6.41 percent.
The increases reflect a bipartisan deal brokered in 2013 by Congress and signed by President Obama.
The legislation tied federal student loans to fluctuating yields of the 10-year Treasury note, one of many government securities available to investors. Interest rates will be recalculated annually after the United States Treasury completes its final auction of the 10-year note prior to June 1.
Experts predict that next year’s interest rates could go higher, though the law mandates caps. Undergraduate loan interest rates cannot surpass 8.25 percent while graduate loans are capped at 9.5 percent and PLUS loans are capped at 10.5 percent.
Melanie Lang, in her third year at the University of Pennsylvania College of Veterinary Medicine, said the higher interest rates are cause for worry. By the time she graduates in 2016, she will likely have amassed nearly $175,000 in student loan debt.
“This is after in-state tuition, a scholarship from the University of Pennsylvania, rice and beans and Ramen," she said. "... It’s a scary number, especially with average salaries for new graduates being what they are."
The mean starting salary of veterinarians in their first year of employment is about $67,000, according to AVMA statistics.
“Some of my peers who are paying out-of-state tuition and who are taking out loans for living expenses will graduate with twice the debt load I will,” she said. “It’s unfortunate that many of us will have to plan the next 20 years of our lives around our debt just to do the thing we love most, which is practice veterinary medicine.”
Students and veterinarians across the country have long lamented about the high cost of veterinary education, prompting the California Veterinary Medical Association to create the resolution addressing interest rates.
The measure was proposed last month in Denver during the AVMA House of Delegates meeting.
Dr. Richard Sullivan, California’s delegate to the House, said the resolution stemmed from a recent survey of veterinarians in the state showing that debt weighs heavily on the minds of veterinarians who have graduated during the past decade.
“Thirty-eight percent of the respondents who graduated between 2004 and 2013 said their debt was still a significant burden to them,” Sullivan said during the House meeting.
“We see this (resolution) as a vehicle to get this issue before the Legislature. It’s an important issue to our members and I think it’s something we need to do,” he added.
Tradeoffs tied to lower interest rates
Michael Dicks, the AVMA’s economist, pointed out that while low interest rates ease the debt burden for current borrowers, they extend the ability of colleges to raise tuition, thereby negating any savings due to interest rate reductions.
What's more, they could postpone a decline in demand for veterinary education. Subsidizing students’ demand for education via interest rates could immediately “make the cost of education lower, and that will expand the supply,” Dicks said during the House meeting.
Growing numbers of new graduates entering the profession coupled with seemingly stagnant demands for services are creating economic stress, some maintain. Rising tuition, six-figure student debt loads and the nation’s recent economic downturn have added to the problem.
High interest rates, Dicks explained, pressure veterinary colleges to lower costs to compete for students. And fewer graduates entering the market means that those in the workforce can demand higher compensation due to the smaller pool of candidates.
“It’s very complicated, what I’m telling you,” Dicks said to the House. “But if you’re waiting for the market to correct, and you put a subsidy in one part of the market, it’s not going to correct itself as quickly. If you think that there are too many veterinarians … at what point will we have an adjustment?"
AVMA President Dr. Ted Cohn interrupted Dicks’ speech to remind the audience that discussions about how to steer the veterinary market could run afoul of the Federal Trade Commission.
“We need to be careful if we talk about this subject,” he warned Dicks and the audience. “We can impinge upon restraint of trade, and I’m not going to allow for that.”
With no more discussion, 91 percent of the House voted for the resolution’s passage.
Though the resolution specifies veterinary medicine, Lutschaunig suggested that the AVMA unite with other professional groups to make headway in Washington.
"It’s going to take a coalition of groups to take this to Congress,” he said. “I don’t think they’ll make a carve-out for one professional group and leave others out. We’ll be right along with them as we talk to the Legislature."