Fighting a market failure

Report indicates education cost unsustainable, given current benefits
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Debt among veterinary college graduates is rising at a faster pace than salaries, and the current 2:1 ratio of educational debt to starting income for new veterinary graduates is unsustainable, according to an AVMA report. 

The report, published in April in collaboration with the Association of American Veterinary Medical Colleges, suggests that this ratio represents a series of market failures. For example, federal and state governments are paying less for education that provides public goods, such as zoonotic disease control, pushing greater education costs onto students.

“Other factors contributing to increased costs per student include the cost of administration, increasing pension and health care costs, and the increasing state and federal regulations that require reporting for compliance,” the report states.

Remarks near the end of the 76-page report, the 2016 AVMA & AAVMC Report on the Market for Veterinary Education, describe changes that could increase demand for veterinarians’ services and reduce education costs. The report sets a goal of eliminating interest on student loans prior to graduation, as well as more general goals of finding ways to reduce education costs by 10 percent, increasing starting salaries by 10 percent, and helping veterinary students manage expenses.

Debt-reducing scenarios

Among other proposals, the AVMA and AAVMC report recommends collecting information on loan defaults, which could be used to advocate for lower interest rates for student loans.

Reducing the amounts of unpaid “service” hours provided by veterinary college applicants may prevent such work from reducing incomes and sending a harmful message, it states. Developing lower-cost techniques for veterinary care could bring in more clients. Adopting new teaching models could reduce time in college or costs per year, and use of distance education could share specialized instruction. Collecting more financial data could help provide financial performance standards for practices and graduates.

The report also suggests that education costs could decrease if more universities were held accountable for graduates’ abilities to receive gainful employment that would let them pay off student loan debt. For-profit institutions operating veterinary education programs, for example, already can lose access to federal student aid programs if their typical graduates pay more than 20 percent of their discretionary income and 8 percent of total earnings toward student loan debt (see JAVMA, June 1, 2015).

Dr. Andrew T. Maccabe, executive director of the AAVMC, clarified that his organization would not advocate for such a requirement, which he noted is intended to prevent “diploma mills” from taking advantage of people and of federal loan programs by not providing paths toward meaningful employment, conditions he said are not applicable to AAVMC member institutions.

Instead, Dr. Maccabe thinks universities and the broader veterinary profession can provide more effective help by reducing the amounts students pay for education, particularly through increases in scholarships or other types of support. The veterinary profession can work to raise funds through philanthropy to endow scholarship funds, he said.

Dr. Maccabe said he graduated from veterinary school in the 1980s, and taxpayers had subsidized his education—good fortune that he wants to share with today’s students.

Falling public support

From 2001 to 2015, mean starting salaries for graduates of veterinary colleges rose, on average, by $1,050 each year, but mean debt rose by $5,700 each year, according to the AVMA-AAVMC report. The report also indicates that for women graduating in 2015, mean starting salary was $2,400 lower and mean debt was $7,500 higher than mean values for men graduating that year.

Students of all types at public institutions have taken on an increased share of education costs during each of the three recessions since the early 1990s, yet the increasing burden remained with those students after each recession ended, according to the report. As a result, budget cuts in each recession provided another step upward in the portion of costs borne by students.

“Veterinarians provide both a private service and a public service and thus should receive compensation for both,” the report states. “The compensation from the public occurred in the past through the public support of the veterinary education. This support reduced the cost of education to the veterinary student and allowed them to obtain a standard of living that was somewhat unfettered by student debt.”

Today, many veterinarians pay the full cost of their education.

Cost and debt comparisons

Figures in the report also seem to suggest that some veterinary college students are paying part of their education costs prior to graduation, receiving aid that reduces costs, or both, since most 2015 veterinary college graduates had less debt than expected on the basis of estimated costs of receiving a degree. About 9 percent of the 3,000 veterinarians who graduated in 2015 from U.S. veterinary colleges had debt that exceeded the estimated combined costs of tuition, fees, living expenses, and interest, according to figures in the report. About 11 percent had zero education-related debt.

Other figures indicate 2015 graduates had a mean of about $140,000 in debt, and they paid a mean of about $210,000 in tuition, fees, and living costs. The latter figure excludes costs such as interest. 

The report also indicates 2.3 percent of students who graduated in 2015 had more than $320,000 in debt, a figure two standard deviations higher than the mean debt. A chart in the report also indicates Western University of Health Sciences graduates had the highest mean debt in 2015, about $260,000, triple the mean debt for Texas A&M University graduates, who had the lowest mean debt.

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