Crunching the numbers

Caribbean schools could see impact from federal regulations
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Dr. Brendan Bergquist loved practically everything about his time at Ross University School of Veterinary Medicine in St. Kitts, West Indies. He says he received a great education, experienced a different lifestyle than he would have in the U.S., and met his closest friends. The one thing he didn’t enjoy: The fact that he left Ross with more than $300,000 in student debt after graduating in 2012. Currently, he’s working as a shelter veterinarian and making less than $70,000. He has since enrolled in an income-based repayment plan.

The front entrance of Ross University School of Veterinary Medicine soon after the campus was built in the mid-1980s. Ross has been owned by DeVry Inc., one of the largest publicly held, international, higher-education organizations in North America, since 2003. (Courtesy of Dr. Bobby G. Brown)

“When I went to clinics (in my fourth year) and then practice, I felt prepared, so I don’t feel shorted in terms of education, but there’s definitely that debt load. If I could do it over again, I might have tried to be tighter with my money—I would think about it more in terms of what I took out,” Dr. Bergquist said. “You always have the option to take the full amount per semester. I would have maybe tried to cut down a bit. I tried a little to rein in expenses, but not to the extent I could have.”

New federal regulations, which go into effect July 1, attempt to address concerns about the cost and quality of career education programs, specifically those offered by private for-profit institutions. The goal of the new rules from the Department of Education is to ensure that these institutions improve their outcomes for students—or risk losing access to federal student aid.

The programs that are affected consist of all instructional programs eligible for federal student loan funds, whether degree or nondegree, at U.S. and foreign for-profit institutions; nondegree programs (e.g., certificate and diploma programs) at public and private nonprofit institutions are also included.

That means the veterinary schools at Ross and at St. George’s University in Grenada, West Indies, which are both housed at for-profit institutions, must meet the new regulations. At Ross, 97 percent of veterinary students and at St. George’s, 87 percent, are U.S. citizens.

St. George’s University established its School of Veterinary Medicine in 1999. The university itself got its start six months after Grenada won its independence from Britain on Feb. 7, 1974. That’s when Charles R. Modica, now chancellor, pursued funding for SGU. This past year, St. George’s landed a $750 million investment from a group led by Canadian private-equity firm Altas Partners LP and a fund advised by Baring Private Equity Asia, according to news reports. The new investors hold a majority stake in the for-profit college, though the original owners, including Modica, collectively remain the largest single shareholder. (Courtesy of SGU)

Rules and regulations

So, from July on, to qualify for Title IV federal student financial aid programs—the Federal Direct Loan, Federal Family Education Loan, and Perkins Loan programs—for-profit institutions must prepare students for “gainful employment in a recognized occupation.” A program would be considered to lead to gainful employment if the estimated annual loan payment of a typical graduate does not exceed 8 percent of his or her total earnings or 20 percent of his or her discretionary income.

A program would be considered passing if it were below either of these debt-to-earnings rates. A program would be considered failing if its total debt-to-earnings rate were to exceed 12 percent and its discretionary debt-to-earnings rate were to exceed 30 percent. Programs that fell between passing and failing would be in a “zone status.” Failing twice in a three-year period or spending four straight years in zone status would result in the program’s loss of federal student loan eligibility. Until that point, the only consequence for programs that failed or were in zone status would be that the year before they could possibly lose eligibility—that is, after one failure or three years in zone status—they would have to provide a warning disclosure to enrolled and prospective students. Official data will not be released until starting in early 2016.

The final regulations were published in the Oct. 31, 2014, Federal Register, giving institutions time to make immediate changes to improve their programs and avoid ineligibility. In addition, the first several years will include a transition period that will take into account any steps by institutions to reduce costs and student debt.

In response, the Association of Private Sector Colleges and Universities sued the USDE days after the rules were released, calling them arbitrary and arguing that the metrics are “beyond institution control.” The case remains undecided.

Limiting expenses

Assuming the regulations do go into effect, the impact of losing federal loan access could be substantial for these schools.

Federal Stafford Loans, the most popular student loans, for the 2014-2015 academic year had an annual fixed rate of 6.21 percent for direct unsubsidized loans and 7.21 percent for direct graduate PLUS loans. Meanwhile, fixed-rate loans for graduate students from Sallie Mae—the largest private lender—currently range from 5.75 to 8.875 percent, compared with as high as 13 to 15 percent previously. Rates for variable-rate private loans for graduate students now range from 2.25 to 7.5 percent, compared with as high as 10 to 12 percent previously.

Although the difference may not seem substantial, especially since Sallie Mae lowered its rates in 2013, private loans still lack the consumer protections and repayment options that federal loans carry. Those include loan consolidation and income-sensitive repayment plans such as Pay As You Earn, income-based repayment, and income-contingent repayment that cap monthly payments at 10 to 20 percent of discretionary income and extend the repayment period from the standard 10 years up to as much as 25 years, depending on the option selected. Federal loans are also eligible for forgiveness after 10 years of public service; private loans are not.

The debt-to-income ratio (for veterinarians) is just ridiculous. ... Certainly, Ross is a wonderful place. Just hopefully it can make some changes—all the schools, really—in terms of the amount of debt we’re looking at.

Dr. Brendan Bergquist (Ross ’12)

Tellingly, 79 percent of St. George’s graduates financed their costs through loans, practically all of which were federal, while 91 percent of Ross graduates received loans to pay for their education, of which 90 percent were federal. Overall, 85 percent of the Ross veterinary school’s revenue comes from Title IV loans, just below the required standard of 90 percent or less. St. George’s did not disclose this information.

About 73 percent of Ross students in the class of 2014 completed the veterinary program in the expected time of 42 months, and 74 percent of St. George’s students finished in the usual four years.

Dr. Elaine D. Watson, dean of Ross’ veterinary school, said employment of its graduates is high—only 1 percent reported being unemployed within 10 months after graduation—and attrition is low, at less than 2 percent for the 2013-2014 academic year. In addition, the three-year graduate repayment default rate is 0.3 percent since fiscal year 2011.

“However, we remain sensitive to the cost of student tuition, remaining near the median of U.S. schools’ out-of-state tuition and fees, and continue to take steps to control education costs through further curriculum development, to assist our students in managing their finances, reducing student debt, and planning for their future careers,” she said. “We are confident we can comply with any future USDE metric requirements without affecting our students.”

St. George’s dean, Dr. Timothy Ogilvie, declined to comment for this article.

Adding up the costs

As Dr. Watson stated, tuition at Ross—and St. George’s, for that matter—isn’t out of line with what out-of-state veterinary students pay at U.S. institutions. The median total tuition payment for these students is $185,408, according to the 2014-2015 Association of American Veterinary Medical Colleges’ annual data report. Comparatively, total tuition and fees costs are $191,343 at Ross and $173,970 at SGU. However, the cost of living on a Caribbean island greatly contributes to these students’ tendency to borrow more, compared with their counterparts at U.S. institutions. St. George’s, according to their fact sheet,, estimates students’ living and travel expenses range from $13,000 to $21,000 per year.

Illustration: Calculator

Dr. Bergquist says a fair amount of what he owes—spread among his 20 federal loans—arose from living and travel expenses, including airfare home, rent, and the cost of buying a car to get around the island.

So it’s no wonder the median amount of debt for Ross graduates is $281,851 in federal loans; for St. George’s graduates, it’s $191,622. That becomes problematic when one considers that the mean starting salary for new veterinarians taking full-time positions prior to graduation and responding to an AVMA employment survey was $66,879 in 2014, according to the new AVMA Report on Veterinary Debt and Income from the AVMA Veterinary Economics Division. Also in the report, the mean debt of all new graduates responding to the survey was $135,283.

According to Ross alumni surveys, 43 percent of respondents from the classes of 2012 and 2013 were making $60,000 to $79,000 a year or so after graduation.

Dr. Bergquist says the only way he’s able to make payments on his student loan debt and pay other expenses is that he enrolled in an income-based repayment plan. That keeps his monthly payment to $700, but without the plan, he’d be paying $3,500 a month.

“I just kind of just keep the loans on the back burner. It’s doable, but if I had to pay the full amount each month, there’s no way I could do it, based off what I make. The (income-based repayment) is manageable, but I’m not making a dent in the total, either. It’s very difficult with my salary right now,” he said.

Dr. Bergquist says he’s had a hard time saving money and has put big purchases on hold for the time being. He’s looked into programs with the government, but the time commitment of 10 years was too long, and the pay was too low.

Someday when he’s more settled in his career and personal life, he’d love to own a practice.

“The debt-to-income ratio (for veterinarians) is just ridiculous. ... It shouldn’t cost that much to go through vet school,” Dr. Bergquist said.

“Certainly, Ross is a wonderful place. Just hopefully it can make some changes—all the schools, really—in terms of the amount of debt we’re looking at.”

Related JAVMA content:

Foreign school federal loan eligibility requirements changing (June 1, 2015)

Market improving, but value of veterinary degree unclear (Dec. 15, 2014)

St. George’s accredited by COE (Nov. 1, 2011)

St. George’s inching closer to accreditation (June 15, 2011)

Ross attracts a different breed (May 1, 2011)

St. George’s eligible for U.S. federal loans (April 15, 2011)