December 15, 2015

 

 AVMA report gives specifics on student debt quandary

Graduates with excessive debt concentrated at certain institutions

By Malinda Larkin
Posted Dec. 1, 2015

The 2015 AVMA Report on the Market for Veterinary Education makes no bones about the potential consequences if nothing changes with regard to the debt veterinary students are incurring relative to their starting salaries.

“As the debt-to-income ratio continues to increase for new graduates, veterinarians’ lifestyle satisfaction will be reduced, the demand for veterinary education will decline, and filling the expensive seats at veterinary colleges will become more difficult. Our current estimates of willingness to pay and real costs of seats require further refinement to improve accuracy. However, current estimates suggest that excess capacity in the market for veterinary education may be on the near horizon without significant changes in the market,” according to the report, published Oct. 19.

The veterinary education report is the final of six published this year by the AVMA Veterinary Economics Division examining veterinary markets. Findings were based on preliminary results from multiple studies.

Overall, this last report sought to get a better grasp on who is applying to veterinary colleges and why (see story). The report also explores how each of the veterinary colleges has become highly differentiated by cost despite “any major statistically significant differences of outcomes between the U.S. veterinary colleges” with respect to technical skills, according to the report. The rapid increase in educational costs relative to income-earning potential could become an increasingly important factor in the school selection decision, the report says, especially in light of the fact that 2015 veterinary graduates who had excessive debt—given their estimated living costs—seemed to be concentrated at specific veterinary colleges.

Further, while veterinary colleges at land-grant institutions offer seats at a substantially lower cost to in-state applicants, their costs for out-of-state applicants match those that private institutions charge. And the percentage of out-of-state residents at veterinary colleges in the U.S. continues to increase, with about 47 percent of all students enrolled in the 30 U.S. veterinary colleges classified as out-of-state students—a 25 percent increase in just the past four years, according to the report.

Cost of education

Dr. James Lloyd, dean of the University of Florida College of Veterinary Medicine, said at the 2015 AVMA Economic Summit this past October that starting about 30 years ago, a belief in smaller government really took hold nationally, with a subsequent decrease in spending on higher education at the state level. That trend accelerated with the Great Recession that began in December 2007, resulting in a further erosion of public funding for universities. Increases in tuition and the number of seats were used to fill the financial gaps created by this loss of funding. Since 2008, the number of seats in U.S. veterinary colleges has increased from 9,983 to 12,395, or about 24 percent; this includes the opening of two new schools in 2014—Lincoln Memorial University in Harrogate, Tennessee, and Midwestern University in Glendale, Arizona. 

From 2001-2014, tuition rose by a mean rate of 5.1 percent per year for in-state veterinary students and 3.4 percent per year for out-of-state veterinary students. During the same time period, the share of total veterinarians who graduated from an out-of-state institution increased from 19 to 28 percent, a mean increase of 3.2 percent annually. That’s according to data from the study “Factors affecting student loan debt accrued by graduates of U.S. veterinary medical colleges,” which is currently in review. It was co-authored by Ryan Blake Williams, PhD, and Aaron Benson, PhD, economists at Texas Tech University, along with Michael Dicks, PhD, director of the AVMA Veterinary Economics Division, and Bridgette Bain, PhD, statistical data analyst with the economics division.

“The combined impact of increasing tuition and an increasing share of veterinary graduates paying out-of-state tuition results in an average annual increase in four-year tuition costs of 4.86 percent,” according to the AVMA market report.

“While these changes are clearly the primary factor in the overall average debt of graduating veterinarians, there is still an approximately .25 percent per year increase in debt that is not explained by increases in tuition. Furthermore, the above analysis doesn’t help to identify the factors that are correlated with whether or not a student chooses to borrow for their education, and if so, how much total debt is accumulated.”

The combined impact of increasing tuition and an increasing share of veterinary graduates paying out-of-state tuition results in an average annual increase in four-year tuition costs of 4.86 percent.”

2015 AVMA Report on the Market
for Veterinary Education

Notably, none of these figures includes U.S. students studying abroad. In the 2014-2015 academic year, 110 were studying at Canadian veterinary colleges, while 2,243 studied in Australia, Europe, and the Caribbean. Comprehensive data on how much educational debt these students accumulate aren’t available.

What is known, however, are tuition and fees as well as student debt for the two AVMA Council on Education–accredited Caribbean schools. At Ross University in St. Kitts, West Indies, the mean total cost is $191,343, and at St. George’s University in Grenada, West Indies, it’s $173,970, according to their gainful employment disclosures. The median amount of debt for Ross graduates is $281,851 in federal loans; for St. George’s graduates, it’s $191,622. About 97 percent of veterinary students at Ross and 87 percent at St. George’s are U.S. citizens. 

Factors for borrowing

The student loan study found additional variables in predicting the likelihood of borrowing to pay for veterinary college.

According to the study, an increase in the age of a graduating student by one year is associated with 1.6 percent greater loan debt. While this may not mean much for students who matriculate after completing their undergraduate education, it is significant for veterinary students entering at nontraditional ages.

Male students, on average, accumulate 4.3 percent less debt than their female counterparts. This difference is also important, as the share of female students attending veterinary schools in the study period (2001-2014) was greater than 50 percent and, as of last year, has risen to nearly 80 percent.

Students who are married also graduate with less mean student loan debt than singles (7.1 percent), which makes sense, given that they likely have a spouse who works, according to the report.

A final variable of interest was the existence of a child, which was highly significant in predicting students who might have some level of debt but did not predict the extent of debt accumulated.

But obviously the biggest variable in borrowing is geography.

The study found mean four-year cost of in-state and out-of-state seats for class of 2015 graduates was $103,327 and $191,710, respectively. Mean four-year debt of graduates who filled those seats was $132,560 and $187,379, respectively. Thus, although mean out-of-state costs exceeded in-state costs by 86 percent, mean debt for out-of-state students was only 41 percent greater than mean debt for in-state students attending U.S. veterinary colleges. Even after accounting for all other factors, students who attended veterinary college in their state of residence or in a state that contracts with their state of residence for in-state tuition rates accumulated 20.3 percent less debt, on average, than their out-of-state counterparts.

Even after accounting for all other factors, students who attended veterinary college in their state of residence or in a state that contracts with their state of residence for in-state tuition rates accumulated 20.3 percent less debt, on average, than their out-of-state counterparts.
Based on the 2015 AVMA Report  on the Market  for Veterinary Education

“These mean values of costs and debt suggest that, on average, the 2015 graduates were financially frugal. Considering a four-year living allowance of $50,000, the amount of loans needed to cover all tuition and living expenses would be 1.48 times the cost of the seat for residents, and 1.26 times the cost for nonresidents. Debt-to-cost levels above this indicate a problem with personal financial management,” according to the report.

Excessive debt

The study also found that there is a small group of graduates who have debt levels that are excessive. When the percentage of 2015 graduates was broken down by debt-to-cost ratio, 27.2 percent of in-state graduates had a debt-to-cost ratio greater than 1.75:1, and 16.1 percent of out-of-state graduates had a debt-to-cost ratio greater than 1.5:1. 

“Importantly, because much of our data on tuition and costs of living are only estimates, and the debt is what is reported on a survey, there is sufficient information to suggest that there is a problem with managing finances and that the problem is concentrated at specific colleges,” the report states.

The top 10 veterinary colleges by percentage of students with excessive debt-to-cost ratios, in order, are as follows:
  • Tuskegee University
  • Western University of Health Sciences
  • Mississippi State University
  • Oregon State University
  • University of Wisconsin-Madison
  • Louisiana State University
  • University of Georgia
  • University of Missouri-Columbia
  • University of Tennessee
  • Virginia-Maryland
  • Washington State University
  • Iowa State University
  • Michigan State University

“Why do schools with the lowest resident tuition have the highest debt ratios? I don’t know. We want to make sure those numbers are right. Is (their borrowing) just for veterinary education or things not related to veterinary education, like pets or travel costs?” Dr. Dicks said at the economic summit, adding that veterinary colleges should train faculty to teach financial literacy and incorporate the topic more into the curriculum.

On the other side of the coin, the University of California-Davis, Colorado State University, and Purdue University were among veterinary colleges with relatively high costs but where students had lower-than-average debt.

The 2015 AVMA Report on the Market for Veterinary Education can be purchased as part of the series of six reports on the economics of veterinary medicine. The series price is $249 for AVMA members and $499 for nonmembers. Order it online from the AVMA Store. For more information, call 800-248-2862, ext. 6655.  

Related JAVMA content: 

Crunching the numbers (June 1, 2015)