Photos by Meribah Knight
AVMA economist Michael Dicks (left) offered a rosier outlook for indebted veterinary students than Ryan Blake Williams (right), an economist from Texas Tech University who says the debt-to-income ratio of new graduates hovers around 3:1.
There is a debt problem in veterinary medicine. The size of the problem is up for debate.
Presenting at the annual American Veterinary Medical Association economic summit Oct. 21 in Chicago, economists offered starkly different interpretations of the average debt-to-income ratio of graduating veterinary students. Their summations are based on preliminary results of several studies.
For years, the mounting high cost of tuition and low starting salaries have saddled the veterinary profession’s new graduates. Michael Dicks, who heads AVMA's newly formed economics division, reported that the debt-to-income ratio of veterinarians entering the workforce is holding steady at about 2-to-1.
Specifically, the average starting salary of new veterinarians is $70,000 a year while their debt, Dicks said, averages roughly $135,000. Some maintain Dicks' debt figure is artificially low because it includes those with no debt. Dicks' figures also omit American graduates of Caribbean or foreign-based veterinary programs.
Similarly, AVMA economist Bridgette Bain presented findings showing the debt-to-income ratio for men at 1.8-to-1 and women at just under 2-to-1.
However, Ryan Blake Williams, an economist from Texas Tech University in Lubbock, Texas, crunched the numbers looking at only those who had debt.
What he found was more troubling.
"This leads to a debt-to-income ratio from graduates that is a lot scarier than was presented earlier," Williams said during his presentation.
By his calculations, the average debt-to-income ratio for new veterinary graduates is just shy of 3-to-1. He added that between 2002 and 2014, the total inflation-adjusted student loan debt increased an average 5.1 percent a year. What’s more, the share of students graduating with debt rose to 88 percent from 86 percent over the same period.
"The reality is that the data is lacking to be able to accurately explain some of these market realities," Williams said by email, expanding on his presentation in response to questions from the VIN News Service. He cited the Association of American Veterinary Medical Colleges' annual self-reported survey among seniors in veterinary college as problematic. "There is a lot of missing information," he stated.
"I chose to present the numbers that I did," he added, "because I knew that others would present them differently."
Dicks did not respond to a request for comment on the varied findings of the debt-to-income ratio for new veterinary graduates. Williams explained that he'd been asked by Dicks to provide his perspective on salaries and student loan debt.
"I don't think that the results that I presented challenged the thinking of the AVMA, they just approached the problem from a slightly different perspective," he said by email. "Because I don't have any skin in the game, I wasn't looking to support or refute any existing claims."
Williams said that the hefty debt burden from an advanced degree could be offset by the earning potential that comes with it. Graduates of veterinary medical schools can expect to earn $25,000 a year more than those who have only bachelor's degrees. That's likely an overestimate, Williams explained by email, but it's based on the difference between average reported starting salaries of those with bachelor's degrees ($45,000 a year) and what the AVMA reports is the average starting income for new veterinarians ($70,000 a year).
Over a 30-year career, that premium of a veterinary degree is worth $310,000, he estimated. That figure, he explained, is based on assumptions about dollar valuations, the terms and interest rates of student loans and the initial difference in earnings and the rate at which those earnings grow. Not tallied in the analysis are the foregone earnings of the student during his or her four years in veterinary school.
At face value, William's calculation shows that it makes financial sense to invest up to $310,000 for an advanced degree in the veterinary profession. Williams noted by email that the reality of making such decisions are more nuanced.
"Students will choose to accumulate student loan debt if that is what is necessary to achieve their desired outcome, regardless of field of study," he said. "If the potential total debt is too great for a student, they should choose to not pursue the degree. The benefits of the DVM include financial returns as well as non-monetary benefits to the professional."
Dr. Paul Pion, president of the Veterinary Information Network, the parent of the VIN News Service, suggested during the summit that future AVMA studies should exclude students without debt because they skew the calculations lower, thereby offering a rosier picture of the average new graduate's student loan tab.
An AVMA study released in April shows the breakdown: In 2014, the average veterinary school debt was assumed to be $135,283. When recalculated excluding those with no debt, the figure came out to $153,191 — a difference of nearly $18,000.
AVMA economists maintain that everyone must be included in their figures. "An average value for students includes all students," officials said in response to a comment Pion posted on an AVMA video about paying for veterinary school. "Excluding those students with zero debt from the estimate but not removing those with excessive debt — debt that is well above the cost to attend veterinary college — would not be appropriate. We include them both because they are part of the population of students and are all included as such in the calculation of mean."
Pion countered that to be fully transparent, AVMA economists should clarify that their analysis does not include data from the 1,000 or so veterinary students attending Caribbean schools and other foreign programs accredited by the AVMA — a population that makes up nearly one-fourth of all veterinarians entering the U.S. market per year.
"The costs for students to attend those schools like Ross, St. George's, Glasgow, Dublin, etc., are often much higher as compared to in-state tuition rates," he said. "By not stating that these are not counted in the average reported debt of $135,000, we risk setting unattainable and false expectations for many future colleagues who are currently in veterinary school or have yet to start."
AVMA figures, Pion said, also fail to tally the cost of interest accrued on student loan debt. "We also need to be transparent regarding the $135,000 number cited," he added. "That figure includes only their debt from veterinary school and was for students who started veterinary school in 2010. The costs for a student starting next fall, in 2016, or beyond, will be much higher."
Regardless of educational costs, findings presented at the summit showed students are willing to pay a high price for their dream career, according to Lisa Greenhill, AAVMC associate executive director for institutional research and diversity. Greenhill explained a recent survey showed veterinary school applicants estimated they would incur an average of $162,050 in student loan debt by graduation.
Dicks' calculations, using raw data of applicant demand and tuition fees, showed that this year's applicants expected to borrow, on average, $172,853 to pay for their advanced degree.
"They are willing to pay a lot more than the costs," he said.
Dicks went on to say that a few institutions are graduating students with what he characterized as "excessive debt." According to a recent AAVMC survey of fourth-year students, the most heavily indebted would-be veterinarians are coming from Tuskegee University, Auburn University, Oklahoma State University, Oregon State University and Mississippi State University.
"We need to do a lot more work to identify students and prevent that from happening," Dicks said. "It behooves us to look at that and see what is going on."
Applicant-to-seat ratio 1.6-to-1
The summit marks the third major economic update from the AVMA, which has devoted an unprecedented level of resources to better understand the financial forces shaping the profession. The organization employs three full-time Ph.D. economists. A public report on the findings presented during the summit is slated for release in January.
The resounding consensus among experts and economists at the summit was that student debt is one of the most critical issues facing the veterinary profession.
"There is a real concern here about this profession becoming for applicants a profession of the affluent," Greenhill said.
She cited a lack of financial literacy among applicants: "Doom and gloom, I am saying that all of our applicants are probably a bit challenged in the art of financial decision-making."
Student enrollment has continued to grow, Greenhill said, and the majority of applicants at the time of application have an interest in companion/small animal practice. In 2015, U.S. colleges of veterinary medicine enrolled 3,586 first-year students, up from 3,310 in 2014.
"There is certainly a concern among applicants about the economics of the profession," Greenhill said. "But you also see this tenor of, 'I know and I don't care because I have always wanted to be a vet.' "
Even so, Greenhill's research shows that roughly half of veterinary applicants are "extremely" and "moderately" concerned about their ability to pay down their debt within 10 to 25 years.
Since 2000, she added, the number of applicants to veterinary colleges has increased by 50 percent while the debt-to-income ratio has also increased by 50 percent. "There is a disconnect there," she said.
However, Greenhill noted that the number of applications slightly decreased last year (6,600) compared with 2013 (6,769). At the same time, the number of seats in institutions increased, thus lowering the applicant-to-seat ratio to 1.6-to-1, according to her figures. Last year, the applicant-to-seat ratio was 1.7-to-1. In 2008, it was 2.4-to-1.
A narrowing appilcant-to-seat ratio does not mean the pool of candidates is academically shallow. Grade point averages, Greenhill said, hover around 3.5. "The pool is deeper than I think we give it credit for, and it can absorb some of the growth in the schools," she said.
Apart from the financial struggles of many new veterinarians, the profession's unemployment rate is just 4 percent, and average starting salaries are up from the previous year, to $70,000.
Bain, the AVMA economist, said that between 2014 and 2015, starting salaries and numbers of new veterinarians finding employment have increased by about 5 percent and 10 percent, respectively.
"The economy is coming back, and that’s trickling down to those new vets," Dicks said.
Women do not fare as well as men, however. Studies show that women — who make up 87 percent of veterinary college applicants — earn less than their male colleagues and assume more debt. Male students borrow, on average, 4.3 percent less than female students to pay for their education, the AVMA stated.
At the same time, economists acknowledge the high price of veterinary education. In his presentation, Williams cited data showing in-state tuition increased 5.1 percent a year, on average, while out-of-state tuition rose 3.4 percent.
Excess capacity concerns
Apart from rising debt, another significant issue facing the profession revolves around what AVMA economists call "excess capacity," the ability to produce goods and services above the quantity demanded. AVMA economist Ross Knippenberg said the AVMA recently changed the way it asked survey respondents to self-report the excess capacity in their practices.
What came back was a number down only slightly from the previous year — about 7 percent compared with 8 percent. "We can’t say with very high certainty that excess capacity has actually dropped in this case," Knippenberg said. He went on to forecast that excess capacity will fall to roughly 6 percent within the next two years.
Experts at the summit were quick to point out that the profession's excess capacity is not simply a glut of newly minted veterinarians but rather a surplus of services in the marketplace.
It’s an "excess capacity problem not an oversupply," said Matthew Salois, an economist with Elanco, the animal health division of pharmaceutical giant Eli Lilly.
The prevailing message from summit participants: Better marketing, competitive pricing and creative ways of increasing demand are a better route to fixing the issue than contracting enrollment to stem the flow of new veterinarians into the marketplace.
"Our research shows when practitioners believe there is excess capacity, there is still opportunity for revenue," said Raymond Correia, a regional manager with Henry Schein Animal Health.
"Seems to me like there is a lot of demand that we are leaving on the table," Dicks said in his concluding remarks. He suggested that instead of cutting costs, veterinarians would fare better using innovation and technology to drive more business to their practice.
Still, Knippenberg acknowledged that how AVMA measures excess capacity in the self-reported survey is hardly a science.
"There is really no standard as to how excess capacity is measured," he said. "We have some methods that we think are good, but it is always open to interpretation."
Dicks said his team plans next year to focus on how AVMA can better educate the profession on issues such as debt-to-income ratio and capitalizing on excess capacity in a practice. "Now we are turning our focus to practices," he said.
To do this, he said, AVMA will continue collecting data across the profession. He proposed launching an annual census of veterinarians as well as forming a council of economic advisers. Additionally, Dicks said he wants to focus on "veterinary deserts," areas of the country where practitioners are needed.
VIN News Service journalist Jennifer Fiala contributed to this article