Borrow Better while in veterinary school and reduce your future stress

Tune in on this VIN Foundation Borrow Better webinar replay with student debt expert Dr. Tony Bartels.

 

Paying for your veterinary education is complicated. FAFSA, Direct Unsubsidized and Grad Plus Loans, Health Professions Student Loans, private loans, family loans, spouse support, savings, summer job — how do you know which loans or resources are best to use now to decrease stress now and during repayment?

 

If you’re borrowing, you undoubtedly have received your financial aid award for this semester. And you also have a special surprise this year — no interest so far! This webinar will help you assess your award, the current interest suspension information unique to this year, and Borrow Better for the remainder of veterinary school. Learn how to create the best plan for you!

In this episode we mention the following links and information:

• VIN Foundation Borrow Better: https://vinfoundation.org/resources/borrow-better-veterinary-school-loan-debt/
• VIN Foundation Borrow Better Checklist: https://vinfoundation.org/borrowbetterchecklist
• VIN Foundation My Student Loans Tool: http://www.vinfoundation.org/mystudentloans
• VIN Foundation In-School Loan Estimator: http://www.vinfoundation.org/isle
• Student Aid.gov: https://studentaid.gov/
• Drip.vet Personal Financial Success FREE Course: https://drip.vet/vin/

You may learn more about the VIN Foundation, on the website, or join the conversation on Facebook, Instagram, or Twitter.

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TRANSCRIPT

Intro

Jordan Benshea: Welcome to the Veterinary Pulse podcast. My name is Jordan Benshea. I’m the Executive Director of the VIN Foundation. Veterinary Pulse is the heartbeat of the profession. Join us as we talk with veterinary colleagues about critical topics, from student debt to mental health, and share stories. Stories connect us as humans, as animals, as a veterinary community. This podcast is made possible through individual donors like yourself, and our technology partnership with VIN, the Veterinary Information Network. Thank you for being here. 

VIN Foundation Borrow Better Webinar Overview

Jordan Benshea: This episode, we’re sharing a replay of the VIN Foundation Borrow Better webinar with student debt expert, Dr. Tony Bartels. This webinar provides tangible steps you can take to borrow less while in veterinary school and reduce your future stress. Please check the Episode Notes for helpful links and information mentioned in the recording. Thank you for listening.

Pre-Session Homework and Feedback

Tony Bartels, DVM, MBA: Thank you everyone for attending. Also thank you to those who submitted the pre-session student debt and income signalment homework. I saw that many of you submitted that completely. Thank you very much. Also, many of you tried that. It is something new that we’ve been playing with recently, so, if you had any trouble with the form and all filling it out, or logistically, please feel free to type it in the chat. I’d love to hear your feedback especially the folks who didn’t complete the homework. If you found it to be too long or too hard to use, or maybe it didn’t work well on your phone, it’s something that we’re playing with to help collect some of that information a little bit more easily because then when you ask questions after the sessions and things like this, we can help you a little bit better knowing what your situation is. It also helps us to get an overview of what you’re thinking before we do things like this and I have some of that data that we’ll use tonight for examples of cases and try to maybe help clarify some of the concepts that you all asked a lot of questions about. 

We do have an all-star cast here in the panelists section to help with questions. I know a lot of you asked a lot of questions about repayment. 

Focus on Borrowing and Repayment

Tony Bartels, DVM, MBA: We are going to focus a lot on borrowing in the first part of this because kind of like veterinary school, when you get in the first year you want the scalpel. Where do I make the cut? Right, but you don’t necessarily get to do that in the first year. You still have some time left before you graduate and have to worry too much about repayment. So, we want you to focus a little bit on borrowing, and just knowing your student debt and getting familiar with it, because then that’s going to make repayment a lot easier. 

We do have a lot of tools that we’re going to share with you tonight and show you how you can do those sorts of things. All of these are really designed to help remove a lot of the anxiety around student debt. I think many of us tend to stick our head in the sand and wait until we graduate, and then pop out and expect to figure out exactly the best way to pay back our student loans. At that point, it’s a little bit too late, and it’s really stressful to do it that way. So, if we take it in small chunks along the way, and do what we can to manage it, it makes it a lot easier going forward. 

Please feel free to type your questions in there. We’ve got everybody here. We have students, we have recent graduates, we have not so recent graduates. All there to help answer and provide the perspective in terms of understanding student loans and how to deal with them once you get out of school. 

Alright, well I’m going to dive in. 

Identifying and Managing Student Loans

Tony Bartels, DVM, MBA: We’re going to talk a little bit about how to identify your student loans and know what you’re dealing with, and here’s a little bit of the structure that we’re going to follow tonight. Again, I’ve already mentioned the taking your head out of the sand kind of thing, but you can’t manage what you don’t measure. So, knowing what you have with student debt, even if you’re just starting your borrowing as a first year, is really going to help make borrowing through veterinary school and the whole repayment process a lot easier. There’s a lot of different student loan types out there. I can see it from the submissions that you all provided in the student debt income signalment homework that a lot of you are not really that clear on the types of student loans and where they fall in the system. All of that is going to be really important when it comes to repayment. Knowing your finances, again, you’ve got some time to figure this out, but living like a student is one thing. Once you graduate and you become a veterinarian and everybody starts calling you doctor, knowing what you can expect to earn in various areas of veterinary medicine can help you not only craft a repayment plan, but if you work far enough back to where you are now, it can also help you borrow better. 

So, if you have an idea of what you’re going to earn after you graduate, that can actually inform some of your borrowing decisions that you’re making now in school. That’s what we’re going to make sure that everybody’s familiar doing by the time we finish tonight, is figuring out what your student debt is going to be at graduation. For some of you, that’s a little bit farther around the corner than others, but we want you to have a good idea of what your student debt balance is going to be. Not just the stuff from veterinary school, everything that you’re bringing to the table. Some of you are bringing some student debt from undergrad, or whatever education you had before vet school, we want to make sure that we’re counting all of that. 

Understanding Loan Types and Income Expectations

Tony Bartels, DVM, MBA: Then we’re going to start to talk about income. We have some data we can share with you. It may not be entirely up to date, but it will at least get you in the ballpark in terms of what you can expect to earn in various areas of veterinary medicine once you graduate. Acknowledging that you’ve got some years before that happens, so those numbers can change. All of that is going to help set you up for success and repayment. Knowing what your student debt is at graduation, knowing how to use that information to maybe reduce the amount that you’re borrowing now, and then factoring your income in after you graduate can all help develop that repayment plan that you’re all asking about after graduation. 

COVID-19 Impact on Student Loans

Tony Bartels, DVM, MBA: We do have this elephant in the room to deal with. So, COVID-19 has really thrown a curveball for pretty much everybody. It has directly impacted your student loans. I saw a lot of questions about whether or not the CARES Act and the interest in payment suspension applies to you. We’re going to make sure that you understand that as well. The tools that we have that we’ll review tonight will help shed some light on that as well. 

Personal Experience with Student Debt

Tony Bartels, DVM, MBA: Alright, so why do I care? Why am I even talking to you all about this? This was something that caught me off guard, and I’m a career changer, if you will. I came to veterinary medicine as a second, or even third career at this point, but I thought I was doing all the right things to keep my costs low to borrow as little as possible, and I still ended up with a lot of debt – so even if you have the best intentions, and you’re pretty well informed. I came from a finance background. I thought I was doing all the right things moving to the state that I applied to first on my list, which was Colorado State. Getting admission there, paying in state tuition, I got my MBA for free as part of that. But then I met my now wife in veterinary school, which is also not uncommon, and she brought a little bit more student debt to the table than I did. So together, we have a combined student debt total of more than $400,000. This was the best that we could get, the lowest we could keep it. 

We currently use an income driven repayment plan to manage that. The plan that we use is called REPAYE or Revised Pay As You Earn. Some of you may have learned or heard through the grapevine, there are these income driven repayment plans out there that have you make payments that are based on your income, but they can come with a tax bill down the road. We are planning and saving for that tax bill because we anticipate hitting it. We’re about 60% of the way towards saving to that goal with about 17 years to go with repayment. Essentially, what that means is we’re ahead of schedule. We have been able to manage our student loans and build the rest of our financial plan without having to pay too much towards our student debt. All while being able to save towards the anticipated forgiveness that we anticipate having in about 17 years. 

Navigating the Student Aid Data File

Tony Bartels, DVM, MBA: So, if you borrowed for undergrad, if you are borrowing for vet school, this is the time to obtain that student aid data file. It looked like some of you, many of you were successful in retrieving that. But we’re going to go through that process right now because it looked like some of you also had some trouble finding that, the studentaid.gov website. So, we’ll start there tonight. 

[First demo:]This is pretty much the central repository for everything student loans now. Used to have to go to different websites, but now they all have it in one place, which is great. You can log in. This is the same credentials that you used to apply for federal student aid while you’re in school. You will see my share on the student debt, but when you’re in here, what we’re looking for is the Student Aid data file. This is your dashboard. It gives you a summary of what you have. So, I’ve got $164,000 in principal and I’ve got $7700 of unpaid interest, which is a whole other topic that we might get to tonight. 

What you’re looking for in here is ‘view details’. In this view details section, you’re going to get to this ‘my aid page’, and you’re going to find this link in the top right-hand corner of your screen that says ‘download my aid data’. This is your federal student aid data file. This is the ugly looking text file that I encourage everybody to download. 

Using VIN Foundation Tools

Tony Bartels, DVM, MBA: If you click on this, it will download it to your computer, and then you’ll be able to take that student aid data file over to the VIN Foundation Student Debt Center. VINFoundation.org/my student loans or you can go to Student Debt Center, that will get you there. We’re going to use the My Student Loans tool. 

When you get to the VIN Foundation Student Debt Center, you’re going to see three options. If you haven’t borrowed any student loans yet, but you will, then you’re going to go right to the In-school loan estimator, which we’re going to talk about in a second. For most of you, you already have student loans, so if you already have student loans, and you’ve already borrowed through the federal student system, you’ll have a federal student aid data file. So that file that you just obtained from studentaid.gov, you’re going to come here, click this button, and we’re going to upload it into our system. I’ve got a number of these that we’re going to use as demos tonight. We’ll pick a 2024 grad. This is a Michigan State student, a nonresident who has borrowed looks like just for this first year so far, and this is the loans that they have so far. This is the first disbursement that they received for the first semester of veterinary school. As a nonresident, you we can see that the interest rates are zero. Those of you that asked about the CARES Act and the impact of COVID-19 on student loans, this is where you’re going to see that. You can take that data file, it’s got all the student loans that you’ve borrowed so far, and if your loans are covered under that CARES Act, you’re going to have a 0% interest rate listed in your student aid data file, which will also be reflected in this my student loans tool. 

You can see a different breakdown of the loan types. This is another I can see source of confusion. The different loan types, direct unsubsidized loans versus direct grad PLUS loans. These are two different loan types, but they’re still within the federal student loan system, are both direct loans, which is a type of loan, which means it comes directly from the Department of Education. Here, we can start to decode some of our student loans. It will show our loan servicer, in this case, it’s Mohela. 

One of the most valuable tools that is probably in here is showing you which income driven repayment plans that you are eligible to use. This is for later on down the line, but basically what you’ve borrowed so far, no matter when you started borrowing, or whether it was this year or 10 years ago, is going to determine which income driven repayment plans you are eligible to use. So, if you upload your student aid data file, this is going to give you an idea of the income driven plans that you’re going to be eligible to use and income driven repayment plans are really the only ones that have these goofy eligibility requirements. Those requirements are based on the loan types you have, as well as when you started borrowing. This has all the algorithms built into it that will help to determine which income driven repayment plans that you qualify for. 

So, we know this person is a first-year student, and they have some borrowing left to go. When you upload it as a student, you’re going to end up with this button up here that says send your loan data to the in-school loan estimator. This is the next tool that we’re going to focus on a lot tonight. This is going to help us estimate how much student debt we’re going to have at graduation. We know that this person is a Michigan State student, and they are a nonresident. They’ve got three years left to borrow. We also know that this interest suspension that is dictated by the CARES Act and then was extended by presidential action through the end of the year is going to be extended through the end of the year here. Since our interest rates are zero, we’re going to have to make some guesses. Because we only have two student loans here, I’m going to guess that it’s somewhere between 4.3 and 5.3, which are the interest rates right now. We’ll say 4.8 for now. This is basically going to calculate how much more interest this is going to accrue through graduation. Then we have to figure out how much more we’re going to borrow. This person is borrowing roughly $70,000 per year. So, if we assume that if they stay on that same schedule as a nonresident just to give us a ballpark estimate, we also have to figure out what we think interest rates are going to do. This is actually the lowest we’ve seen these interest rates under this current structure that’s 4.3%. So, chances are they’re probably not going to go any lower. They could, but I tend to think they’re probably going to go up. So, this is a little bit of guesswork, but whatever number you want to put in here is at least going to get you a ballpark figure. When we generate our loan details, we can see that if our estimates are correct, this person would have a starting repayment balance of about $265,000 at graduation with a weighted average interest rate of about 4.4%, which is actually really good. 

So those of you that are starting veterinary school now, your interest rates are some of the lowest they’ve ever been, that we’ve ever seen them, and they’re shut off right now. You’re going to be the beneficiary most likely of some of the lowest interest rates that we’ve seen for graduate school in quite some time. That’s great! So, timing wise, even though COVID and everything is tossing our worlds upside down, there are some silver linings in terms of costs, and in particularly when we see interest rates. This helps to generate that ‘D’ in the debt-to-income ratio equation that we’re going to talk a lot about tonight. 

That’s the first example of how you can use the tools that are available to start working through that analysis for you. So, why are we doing this now? So, everybody knows and if you haven’t figured it out yet, I mean, you’re probably figuring it out, but veterinary school is expensive, and debt really stresses people out. Student loan repayment has gotten extremely complex. It’s very difficult to choose, I guess, the right or “best” repayment plan without doing some research and homework. That’s what we’re here for. We’re here to help provide some of that information so you can make that decision when the time comes. Your income and family specifics are going to matter more than ever. That has to do with the income driven repayment plans that are available. They take into account your income and your family size when they calculate the payment. Finance might not be your forte yet, but that’s why we’re here to help with. 

We’re super excited that VIN Foundation now has a partnership with drip.vet, Dr. Roasa, to provide financial education. This personal financial success course is available to you for free. If you go to this link, drip.vet/VIN, you can sign up based on your class year. You will start receiving a whole bunch of information to take the mystery out of what is finance and I invite Dr. Rossa to add anything that he wants to add here.

Lance Roasa, DVM, JD, MS: Yeah, thanks, Tony. Thanks, Dr. Bartels and the rest of the VIN and VIN Foundation teams. We’re thrilled to be a part of this. The thing that I’ll add in here is this is an overwhelming amount of information for the folks that are out there. This is the true firehose approach of information, which is phenomenal. I really encourage you guys to get everything that you can and then come back and listen to the recorded webinar and soak up every bit of information that you can out of this. However, we do a lot of similar things not in this depth on student loans, but we trickle it out in small drips of information where you’re getting a little bit at a time over your entire, veterinary school career. So, a couple of different ways to approach things. Get it in the firehose, but then also, think about your finances basically on an every other day basis. That’s what the personal financial success course helps to do.

Tony Bartels, DVM, MBA: Very cool. I think for a lot of students, particularly, student debt really opens the door to the whole world of finance. There’s just so much that that entails that we can’t cover it all, but with the supplement of a resource like drip.vet, you can get a lot of that information and that curiosity just kind of feeds that curiosity. A lot of this stuff will start to make a lot more sense as you immerse yourself into it.

Lance Roasa, DVM, JD, MS: Yeah, a lot of what we do is just basically “you can do it.” I mean, this stuff seems overly complex, and it seems very convoluted at this point, but I guarantee if you can understand and get yourself through organic chemistry, you can certainly understand the world of personal finance, and even student loans. You’re doing the right thing. You’re here. You’re listening. You’re playing along. However, you can do it for the long term. Thanks, Tony.

Tony Bartels, DVM, MBA: Yep. Cool. So, to know who’s here tonight, we’re going to do a poll. I’m going to share that as soon as I find the button that allows me to do that. Okay, so you all should see a poll on your screen. It helps me understand who we’re talking to here tonight.

Lance Roasa, DVM, JD, MS: Dr. Bartels, while folks are voting, I think, a common theme that’s popped up in the q&a box and I know you’re going to get to it eventually, but what do we do with those 0% interest rates, those very low interest rates? Do we go back and pay other loans off? Do we pay the interest on the loans that we currently have? That question has been asked multiple times.

Tony Bartels, DVM, MBA: Yeah, that’s a great one. It really depends. We’re going to get into that in a little bit more depth. I would say for the time being enjoy it. This is like we took a time machine back in the day when Paul was borrowing his student loans. They used to all be subsidized, which means you didn’t accrue interest during school. Well, that changed a long time ago. So, we’ve kind of been thrown right back into that subsidized loan benefit, which is nice. For you early year students, it’s really going to knock off a lot of the interest that tends to accrue until you get to graduation. For those of you that are knocking on the door of graduation, you tend to have the maximum loan balances you’re going to have now. So, to have all of the interest rates shut off at this point, is going to be a maximum benefit for those of you that are about to graduate. 

Alright, let’s share the results here. It looks like we’ve got mostly first-years which is great. Always great to get you all engaged in this as early as possible, because you have the most difference you can make when it comes to borrowing. That’s great that you’re already thinking ahead of what you can do with those low interest rate loans. It looks like we’ve got some people, class of 2021 and 2022, that are knock on the door to graduation. Again, you probably have a little bit heftier student loan balances at this point. Having that 0% interest rate is really going to be beneficial for you right now.

Okay. So, again, why do we do this now? Really, the cake is in the oven here, but it’s not baked yet. For some of you this is your first loan just like that example that I went through from Michigan State. That was the first set of loans that they appear to have tied to their name. Maybe you’re kind of a borrowing pro. Some of you have borrowed for undergrad, or maybe the classes you had to take before you went to vet school and you might have a student aid data file that looks more like mine, when there’s dozens of loans in there. That’s okay, too. You just want to be able to upload that file and look at those student loans and understand what you’re dealing with. 

A couple of common themes that usually come up are that loans are inevitable. What can I do to change that? I mean, they are, you do have to unless you’re sitting on a pile of cash, or your family’s willing to pay for your veterinary education. You probably have to borrow, but just because you have to borrow doesn’t mean that you have to max out that borrowing. So, anything that you can do between now and when you graduate to lower that amount is going to make repayment easier. It is always easier to manage less than it is to manage more. While you can manage more, it’s still always easier to manage less. A lot of folks take it all and worry about it later, I’ll throw my wife into that can. 

For many of us, particularly those that have known we wanted to be a veterinarian since the time we were a toddler, this stuff is just a speed bump. It’s just kind of an unfortunate side effect of becoming a veterinarian. But if you wait until you graduate to take a look at this and really try to figure it out, that’s when the stress really sets in. That’s not the time to hit the panic button and start making rash decisions. We’ve also got these special circumstances. I think this has really highlighted some of the, I don’t know, uncertainties that can exist, as well as some of the benefits that you all carry with federal student loans. For the most part, I have some data on that too, based on what you showed me, the overwhelming majority of you are using federal student loans to finance your veterinary education. While that is scary, because the numbers are pretty big, it’s also pretty beneficial, because we can have things, when we hit unforeseen things like a pandemic where we do have a legislative body in this country that apparently still works occasionally, and we can turn the student loan interest rates off for a period of time, because it seems like it makes sense to do so. 

I think that those are some encouraging things when it comes to student loans and you guys are all beneficiaries of that right now, as well as myself. Those of us that are in repayment are experiencing not only the interest rate being set to zero, but also our payment is not due. So, we have nine months of a payment reprieve, and that time still counts towards forgiveness. It has been extremely beneficial for those of us in repayment. Setting yourself up for repayment starts now. Don’t overlook what you can do. It’s always easier to manage less than more, regardless of the repayment strategy that you’re going to use. 

Cost of Attendance and Budgeting Tips

Tony Bartels, DVM, MBA: We do have to talk a little bit about cost of attendance. This is what determines how much you’re allowed to borrow. That’s all of you that have used student loans have filled out this free application for federal student aid. What you’re offered is determined by your expected family contribution, which is almost nothing because you’re considered independent from your parents when you reach graduate school. So, unless you were a millionaire before you started veterinary school, your expected family contribution in most cases is zero, which means you’re going to be offered the entire cost of attendance that is published by the school. That financial aid award is fulfilled through direct unsubsidized loans, direct grad PLUS loans. If you do provide your parents’ financial information, you might be considered for health professionals student loans [HPSL] or loans for disadvantaged students [LDS]. I did see that many of you indicated that you have these. There’s a little bit of a disconnect there, right? You’re considered to be independent from your parents for the most part when you fill out this application, but there are these two loan types that do require your parents’ financial information for you to be even considered. Then they provide those loans based on need, and they use your parents’ financial information to determine that need. Not all schools have them all, most of the state schools have access to the HPSL and LDS but I don’t see them very frequently with private loans or any of the Caribbean schools or foreign accredited schools. 

Your accreditation status and where your school is located also will have an effect on the amount or at least the loan types that you’re eligible for. Foreign schools aren’t eligible for the same limits of certain loan types as the schools that are located in the US. Let’s look at an example of this. If I take my alma mater, Colorado State, the cost of attendance for 2021 for a nonresident, this is what I mean when I talked about the cost of attendance. So, this is your tuition and fees, and then the amount that they allocate for your living expenses, all total up to be what is known as the cost of attendance. Colorado State is an accredited US veterinary school. With an expected family contribution of zero, I can expect to be offered the full cost of attendance of $83,464. That’s first going to be fulfilled through a combination of direct unsubsidized loans. This is where the limits and where the school is located comes into play. I’m eligible for $40,500 in direct unsubsidized loans as long as my accredited school is located in the US. If I’m attending vet school outside of the US, I don’t get access to this extra $20,000. 

The current interest rates, when they’re not zero, for this set of loans for this academic year are 4.3% for the direct unsubsidized. Then anything else that I still need to cover that cost of attendance is covered by direct grad PLUS loans, and that’s at a little bit higher interest rate. So, in this example, I would get 40,500 in the direct unsubsidized loans, and 42,000 or nearly 43,000 in the direct grad PLUS loans. You do have to apply. There’s a separate application for the direct grad PLUS loans. I do find that a lot of folks feel, or they think that 40,500 is the max. When you’re in grad school, there is no max. The max is this cost of attendance number. So, if you’re in the 40,500, and you need more, you can always apply for direct grad PLUS loans, although they are more expensive. So, you have to be aware of that. 

If we look at it a different way, this is where you can interject yourself. So that cost of attendance function, you really don’t have any control over that. The school sets that. This cost of living, or everything that’s not tuition and fees is essentially what I call cost of living, which is going to result in about $1,700 per month for a Colorado State student. If we divide this up, in the fall semester you’re going to receive half of your “refund,” the amounts that don’t go towards tuition fees in the fall. Then you’re going to receive another half in January when you have your next semester. So, you’re roughly going to get your living expenses, pretty much anything that isn’t tuition and fees, refunded to you or end up in your bank account. That’s the pile of money that you’re going to use to live from. 

But we want to know what your actual expenses are, and this is where budgeting comes in. You can either take the $10,402, let it sit in your checking account, and hope that’s going to be enough, and then cross your fingers until you get to the next semester, or you can actually build a budget. This is where the rubber meets the road. This is what the school says your living expenses are, but you may have a different situation. Generally, these living expenses are based on a two-person occupancy. When I was in vet school, we had three, four, or five roommates. If you’re one of those people that had a lot of roommates, you probably have a lower living expense. You may not need this full awarded amount. So, you can decline it. You can actually send it back if you don’t need it, but you’re not going to know if you need it unless you have a budget. 

One of the other things that I would recommend that you do, because this is not normal, when you get paid through your student loans, and you get a lump sum of $10,000 in August that’s supposed to last you until January, that’s not normal, right? Nobody really gets paid like that. What you can do to try to get yourself into a better habit is take that refund and put it into an online savings account. So go on to Bankrate.com or Nerdwallet.com and look for the highest yielding online savings account. Transfer what you don’t need to cover that August monthly expenses into that account, and then set up automatic transfers into your checking account that will cover what your projected monthly expenses are. That will get you in a better habit of separating yourself from that pile of money. 

In my college days, if I went to the bars with $100 in my pocket, I didn’t come home with anything. If you’ve got $10,000 in your checking account just sitting there burning a hole in your pocket, you’re probably more likely going to spend it on the front end. Then you’re going to be wondering how you’re going to make it through the end of the semester. So, discipline yourself a little bit. They’ll help you get familiar with how you can set up bank transfers, and you’ll even earn a little bit of interest on that savings account. Then you’ll have a better idea of what you have left as you’re approaching the end of the semester, and you might even be able to return some of that financial aid award, if you find out that you have extra. This is also another area I know we talked about in some of the drip.vet materials, but just budgeting, how to budget, just introducing you to some of the tools that are in there, those are examples of some of the information that you’re going to find through the drip.vet platform.

Lance Roasa, DVM, JD, MS: Dr. Bartels, these are extremely simple concepts, but not a lot of people do them. They’re not complex at all, it’s about getting yourself in the habit to do these things correctly.

Tony Bartels, DVM, MBA: Absolutely, and those things carry over. I use automatic bank account count transfers now for pretty much everything. It really helps the budgeting process.

Lance Roasa, DVM, JD, MS: It makes you a much better veterinarian. 

Tony Bartels, DVM, MBA: Hopefully, with more income than expenses. 

So, let’s take a little bit closer look at some of the different loan types. This gets into some of those questions that you’re asking about. Should we do something different with some of this student loan money because it’s at 0%? So again, I don’t know exactly how long the 0% is going to last? We do know that it’s going to last at least through the end of this year. It could get extended. It was supposed to end at the end of this month, but then it got extended to the end of this year. We may see it get extended beyond that. It really depends on how things are going in the economy, and the perception of how well handled the pandemic is. 

When those loans start accruing interest again, these are the interest rates. Your direct unsubsidized loans are at 4.3%. Your grad PLUS loans are at 5.3%. There are fees associated with these loans, too. They take them right off the top. So, for every $100 of direct unsubsidized loans that you receive, about $1 of that is taken by the Department of Education. For the direct grad PLUS loans for every $100 a little more than $4 is taken. So, you won’t receive as much in the direct grad plus because of the fees and you’re going to pay a higher interest rate when they do accrue. 

You may have some subsidized loans from undergrad, and those tend to have lower interest rates. They are subsidized and not accruing any interest while you’re in school, normally. Leave those alone. There’s no reason to get too stressed out or pay too much attention to those. They aren’t going to cost you anything until you went to repayment after veterinary school. 

For those of you that have health professional student loans or loans for disadvantaged students, sometimes they’re covered under the interest and payment suspension, sometimes not, but they’re always subsidized. So, during school, you don’t get charged interest on these loans anyway. This is actually an anomaly, for the first time we’ve got direct unsubsidized loans for graduate school that have an interest rate that is lower than the health professional student loans, but I still recommend if you can get access to these, these are some great loans to maximize, because you know that they’re not going to cost you any interest for the duration of school, even though the interest rate might be a little bit higher after you graduate. I would still take full advantage of these to reduce your need for any other grad PLUS loans or to knock down some of the unsubsidized loans.

Jordan Benshea: Tony, we’ve just got a quick question I want to interject here, because you just covered it, but I just want to make sure that the answer is very clear to them. So, for first- and second-year students, is taking out the HPSL loans still better than taking out the equivalent amount in the unsubsidized loan, which now has a lower interest rate than the HPSL? What you’re saying is yes? 

Tony Bartels, DVM, MBA: Yes, absolutely, because again, especially if you’re in your first or second year, and we actually did this. There was a UC Davis student that asked this question. It’s in the VIN Student Debt folder, and we went through the math and how this all works. If you want to see that detail, and I’ll show you how you get to that VIN Student Debt folder later, we went through this exact analysis and for first- and second-year students, I wish I could say that your interest rates are going to be zero for the duration of school, but that probably ain’t going to happen. So, you’re going to be charged interest at some point again during school. Your health professionals student loans never accrue interest while you’re in school. So, you can be guaranteed that you will not accrue interest on your health professionals student loans for the duration school. Now, the question the UC Davis student posed in the Student Debt folder was for a fourth-year student. That’s a little bit different right now. That might change the calculation a little bit, because it’s quite likely that interest isn’t going to get turned back on in the beginning of the year here, but maybe it gets suspended again. So, if you’re a gambler, you might actually come out ahead by taking the equivalent in direct unsubsidized loans if you’re a fourth-year, but again, that’s still kind of a gamble. We’re not talking about a huge difference in interest rates here. I still like the security in knowing that they’re subsidized for the duration of veterinary school, versus, kind of this gambling beneficial period that we’re all living through right now.

Jordan Benshea: Then the follow up question, which I think you’re going to cover was, how does the HPSL affect repayment with federal loans? I think that’s later in your presentation.

Tony Bartels, DVM, MBA: It’s also covered in this table. You can consolidate. These are still a type of federal student loan. Health professionals student loans, loans for disadvantaged students, Perkins loans if you have them before they stopped doing those, they can be consolidated into a direct consolidation loan, which would then make them eligible for the income driven repayment plans. So yeah, great question and ahead the game there. 

Alright, so for every dollar borrowed, and this really illustrates that the earlier you take note of this, the bigger impact you can make. So, every year now I update this data based on what the interest rates are, and how much does $1 cost you? The idea here is that the amounts that you borrow in your early years of vet school are going to cost you the most. That’s because you have the longest time for them to accrue interest, and this actually accounts for the interest suspension that we’re in now through duration of this year. I do assume that we’re going to end up accruing interest again after the first of the year, but again, that could change. This is markedly lower than it was last year, because last year the interest rates were higher and there was no interest suspension. So again, you all are really the beneficiary of some really bizarre circumstances when it comes to student loans and interest. But we can still see that anything that you can do earlier in the program to reduce how much you borrow, or to shift those costs to these subsidized loans is going to have the biggest impact. 

So every dollar, we borrow a lot more than $1. If we look at this and extended beyond that to 100,00, 250,000, wherever you think you’re going to be in the spectrum here, this is about how much interest you can guesstimate if you’re a first-year student, and we turn the interest rates back on at the start of 2021. This is something that I do find catches people off guard. This is kind of a side effect of how student loans are treated now and being in graduate school. Interest can and does add quite a bit to what you borrow. So, every dollar that you can knock these down will reduce the amount of interest, which will reduce your total. The less you borrow, the less interest will accrue, the less you might have to pay back in repayment. 

This is where we get into the in-school loan estimator again. That example that we went through with the Michigan State student who borrowed just his first year, and then we estimated when we got that $265,000 estimate, so that person can expect to accrue something north of $25,000 of interest on their student loans. That can give us a ballpark estimate of what that total is going to be at graduation. 

All right. With that said, what do you think your debt will be at graduation? 

I do see a question here. “My school didn’t mention the LDS and HPSL. Why is that? Does that mean they will not take it, or that you won’t they won’t have access to it?”

It depends, it depends on your school. Like I said, I think the majority of the state schools do have some health professionals student loans or loans for disadvantaged students available, but I would check with your financial aid office. Ask them specifically. They should be able to tell you and then tell you the process for applying for those. 

All right, so we got a pretty good response here. Okay, so I see that we’ve got the majority view expect to be between 100 and 200s, we’ve got some between 200 or 300s. All right. So that’s pretty much what I expect to hear. This is going to give us a good idea of what to expect in terms of how we should borrow for the rest of school. For those of you that are going to fall into this middle distribution range and beyond, you’re going to want to keep as much of your student loan balance in the federal system as possible. That’s the concept that we’re going to get into next.

Jordan Benshea: So, Tony, two things. One, there’s a question here; “Do you recommend paying interest on loans while we are in school? Likely that would mean borrowing a bit more to put savings towards interest rather than towards school?”

Tony Bartels, DVM, MBA: yeah, so I generally do not recommend paying interest while you’re in school, because you have to ask yourself where does that money come from to pay the interest? If that money comes from the student loans, then you’re generally not going to be gaining any ground. There are a lot of other things that we’re going to get into that you can do with your finances before you should get to the point of paying interest while you’re in school. I think of students as in financial damage control. There’s going to be so many other things that you’re going to want to take care of first before you worry about paying the interest on your student loans while you’re actively borrowing. So, you’re generally not going to be able to gain a lot of ground, and the only time that that equation changes is if we’re thinking about potentially eliminating some less flexible, private loans. 

Some of you have some private student loan balances, I saw them in the submissions, that are fairly hefty. Depending on what the repayment terms are for those loans after you graduate that can limit some of your opportunities. If you do have enough in your budget while you have access to the more flexible federal student loans, you may want to try to knock some of those private student loans out. Again, it’s a matter of prioritization. What do you think you’re going to do when you graduate? How is the rest of your financial plan look before you get into using one loan to pay off another loan? 

Yeah, I think that’s generally not a good position to be in.

Jordan Benshea: Okay, the second thing is, since you have cake on the screen, well, at least you did. This seems like a good time to give away our first set of DoorDash e-gift cards. The first five people that type their name into the chat window will get the first five $25 DoorDash. Wow, wow, okay, okay. Okay. Okay. Okay. That’s fine. Don’t worry. Clearly, this is popular, we weren’t sure. Okay. Okay, stop. Now, there’ll be three more opportunities here. Okay. Great job. You guys clearly all know how to use the chat window that went very well. Hopefully you have more pictures of food. Just to give you guys a heads up, we will be doing this after each of the next polls. So, thanks so much for doing that. We will take the first five people and I will type in the chat windows who they are, so that you know that, and you can’t win twice. After the next poll, I’ll be asking again, so just be ready. You guys are very quick on the draw. Good job. Okay. Go ahead, Tony.

Tony Bartels, DVM, MBA: All right. Well, I do have another poll here. So, because we can’t talk about debt without talking about income, before I show you what the new grad income numbers are, I want to know what you all think they are. So go ahead and indicate what you think a new graduate veterinarian earns after vet school. 

All right. Again, you guys are right in the ballpark here. Honestly, the answer to this question is all the above. It really depends on what you do. You can earn less than $30,000 a year or up to $50,000 a year as an intern. Depending on the practice type, you may fall into that 50 to 70. The majority of recent graduates are in that 70 to 90, but some of the newer data that we have is actually above that. You can see incomes into the hundreds. It really depends on where you’re going, what type of practice you’re going to pursue, and where are you going to pursue that practice.

Lance Roasa, DVM, JD, MS: Tony, I’ll weigh in just for a second here, too. A common misconception is that salaries have gone down in a post-COVID world or jobs are harder to find. That’s just not true. The contracts that I’m seeing for this year’s class, the class of 2021, are very strong, and the contracts that the class of 2020 saw, I saw big jumps in the income levels. So, a small animal practitioner at this point it doesn’t scare me at all to see six figures plus on those contracts.

Tony Bartels, DVM, MBA: Excellent. That’s very encouraging. 

Debt-to-Income Ratio and Repayment Strategies

Tony Bartels, DVM, MBA: Where we’re going with that when it comes to student debt is you want to be able to calculate your student debt-to-income ratio. So, what you think your student debt is going to be at graduation, which you all shared in that poll, and then what you think your income is going to be at graduation, that’s going to give you a debt-to-income ratio number – your debt divided by your income. That number is going to really help to determine not only how you should borrow for the duration of veterinary school, but also which repayment strategy you should pursue after.

Jordan Benshea: Okay, so dare I say that we’re going to give away five more? I didn’t even say it and the messages are already coming in. Okay, let’s Okay, you guys are good. You guys are good. We’ve got like 45 names here, and we just needed five. Okay, good, great start. We’re going to take a pause now and then we’ll let Tony continue, but I do want to pause for one minute and let Rachel chime in. Rachel, do you want to remind the VBMA members from UC Davis? 

Rachel: Yeah, I love how fast everybody is and it’s really cool to see. I just wanted to say that if you guys didn’t hear me, if some of you came in a little bit later, this only pertains to the UC Davis VBMA members, that just make sure to sign in to my VBMA and click attend on this meeting. Otherwise, you won’t receive credit for the two hours. Also, just to clarify, do not press leave meeting, even at the end of it. If you press leave meeting, it will be like you’d never came. So just press attend and then you’re going to be all good.

Jordan Benshea: Wonderful, thanks so much. Okay, Tony, go ahead.

Tony Bartels, DVM, MBA: Very cool, onward. All right. We were just alluding to debt-to-income ratios, and the most recent data that I have available is from the 2019 survey of veterinary graduates. This is what we saw. A mean reported debt of about 184,000, for those who did have debt. A mean private practice income of 87,000, which if we took the debt-to-income ratio, so our student debt divided by our income, was a little bit above two. As the debt goes up, the debt-to-income ratio goes up, as the income goes up, our debt-to-income ratio may go down. We tend to see a little bit of a balance between high 1.9s. I’m not sure what we’re going to see for 2020. My guess is based on what Dr. Roasa just said that we might see a dip below two, but vet school hasn’t gotten any cheaper either. So, it really depends on who was borrowing and who responded to those questions when we do these surveys. 

You can also get an idea of, depending on where you’re going, companion animal exclusive tends to garner the highest salaries, followed by mixed animal/food animal, and then equine always seems to have this pseudo-internship, new grad salary, but they do tend to increase thereafter, but it does tend to make things problematic in terms of getting started with student loan repayment when your income is a little bit lower. So, knowing what your anticipated debt-to-income ratio can really help to inform your borrowing. 

Before I get to the guidelines, let me ask you what you think your student debt-to-income ratio is going to be, and I will tell you how you can use that information. So again, what do you think your student debt is going to be at graduation divided by your income? 

Let’s go ahead and end the poll there and share that. It looks like we’ve got a normal distribution here, but somewhere between one and one and a half for a third of you, one and a half to two, and then a third of you are greater than two. This can actually inform not only our borrowing decisions, but also our repayment decisions. If your debt-to-income ratio is going to be less than one, then how you borrow is really not nearly as important, so you can explore the lowest interest rate loans that you can possibly find. This is where we can sometimes see even private loans, if you can get them, to have a lower interest rate than a federal student loan, but that might be tough. Pretty much, if your debt-to-income ratio at graduation is going to be less than one, what your student loan portfolio looks like is not terribly important. You can get away with federal student loans and make your private student loans. If you’re borrowing from your family, you’re generally going to be okay in terms of managing that as long as you stay on that less than one side of the debt-to-income ratio spectrum. What that means is that your income is greater than your debt. That’s generally what the financial experts when it comes to financing education in general recommend that you shouldn’t borrow any more than you expect to earn after you graduate. That’s kind of laughable today, and particularly for veterinary medicine, as evidenced by the poll. 

When you get up into debt-to-income ratios greater than one and particularly greater than two then it becomes much more important for you to keep as much of that balance in the federal student loan system as you can. That’s because when you graduate and this is from running 1,000s and 1,000s and 1,000s of these simulations with new graduate, recent graduate veterinarians, the income driven repayment plan so your Pay As You Earn, your IBRs, your revised Pay As You Earn, they tend to be the most beneficial for folks who have a debt-to-income ratio greater than one. This is how we arrive at these guidelines. The more of the loans that you can keep in the federal student system, by the time you graduate, if your debt-to-income ratio is going to be greater than one, the easier it’s going to be to manage those loans at graduation, no matter what path you choose. 

I saw a lot of questions about what do I do about internships and residencies or if I’m going to be in an area of veterinary medicine that I don’t expect to earn a lot after graduation. This is how you’re going to manage that. Your federal student loans that can be managed with an income driven repayment plan, you want the maximum amount of that balance to be in those federal student loans. So your direct loans, health professionals student loans, loans for disadvantaged students, all of those loans can be consolidated after you graduate, and then paid under an income driven repayment plan.

Jordan Benshea: Okay, Tony, we need to…well, I don’t even need to say anything else. Here come all the names. Okay, we’re good. We’ve got five more. Thanks, guys. Great job!

Tony Bartels, DVM, MBA: Just waiting for you to say something.

Jordan Benshea: I know. I mean, we were thinking we are going need to put Paul with a spinning wheel and some jazz hands, and we don’t even need to do that. 

Tony Bartels, DVM, MBA: Like Pavlov’s dog, it’s just Jordan’s voice. 

Jordan Benshea: Okay, thanks guys. 

Understanding Federal Student Loans

Tony Bartels, DVM, MBA: Alright, so your federal student loans, I want to make sure everybody’s clear on this, because again, I saw a lot of you write in the ‘other’ category if you had direct grad PLUS loans that they are some other type of loan, but they are a federal student loan. They are a Federal Direct student loan. Direct unsubsidized, direct grad PLUS loans, subsidized loans whether they say Stafford on them or not, these are all federal student loans. 

Types of Federal Student Loans

Tony Bartels, DVM, MBA: If you started school before July 2010, you might have a federal family education loan. If you had some undergrad or prior education, career changer, I have some of these types of loans. They’re no longer available, but they are still a type of federal student loan. Same with Perkins, they’re no longer available, but they are a federal student loan. Health professionals student loans, loans for disadvantaged students, all can be consolidated into a Federal Direct consolidation loan. 

So, what types of debt did you all tell me that you had? This is a snapshot from the student debt and income signalment summary. The overwhelming majority, 80 plus percent of you, reported US federal student loans. A real good chunk of you, nearly 30% of you, have health professionals student loans, which is great. That’s excellent. Some have some loans for disadvantaged students, Parent PLUS loans. This is a little bit of a sore spot. 

Parent PLUS Loans: A Special Case

Tony Bartels, DVM, MBA: Parent PLUS loans, technically, those are not yours. Those are your parents. They may have borrowed them on your behalf to pay for your undergrad, but they are in your parents’ name. I do find that people have some very well-intentioned plans to pay back those student loans of their parents, in addition to their veterinary student loans, but you can’t combine those. You cannot consolidate Parent PLUS loans in with your student loans. There’s actually no mechanism for you to take those loans from your parents and put them in your name unless you were to use a private refinance. 

What I do tell people, and it seems to strike a nerve, is that worry about your student loans first, and then have a really good plan in place to deal with your student loans. Then you can think about the loans that are in your parents’ name, because there’s physically no way to get them into your income driven repayment plan. Your parents can use it, using their income with one of the lesser known and lesser beneficial income driven repayment plans, but those loans don’t even qualify for a lot of the plans that you have access to. So, Parent PLUS student loans are a little bit of a problem child in the federal student loan system when it comes to repayment. 

Some of you have some family student loans, that’s cool, too, I tend to see those be more beneficial if you’re in that debt-to-income ratio less than one spectrum. 

Managing Private Student Loans

Tony Bartels, DVM, MBA: Private student loans, most of them are from undergraduate. If you can get rid of those before you graduate, great, if not make sure you understand the terms of those private student loans, and when they’re going to enter repayment after you graduate. I’d also want to know what the interest does during school too, because that can be a grab bag. Sometimes they take that interest, and they add it to your principal while you’re in school. Other times they’ll wait until you graduate, but you really have to dig into the contracts for those private student loans. Every one of them is different. 

If you do have federal student loans from before vet school, leave them alone. Those are probably subsidized loans. They’re probably not accruing any interest even when the interest rates are not zero. Those are not the ones that are costing you money long term. Your vet school loans are way more expensive than your undergraduate loans if they’re federal. 

Alright, so we did talk about this. Private student loans, just to reiterate, for veterinary school, they’re pretty unnecessary. You can borrow up to the cost of attendance with all federal student loans. If you don’t find that that’s enough, then I’d really encourage you to look at your budget a little more closely. Make sure that you’re applying for the direct grad PLUS loans. You shouldn’t have to turn to private student loans for accredited veterinary school. More commonly, I see them for undergrad, and the private student loans, unfortunately, are just not beneficial. There’s a few really, really, really rare exceptions out there, and if you happen to have access to some of those, then great, take advantage of them. But to have a bulk of your balance in private student loans, if your debt-to-income ratio is going to be greater than one, it’s going to be very difficult to manage those in the early stages of your career. They’re never eligible for public service loan forgiveness, and they’re never eligible for income driven repayment. So, there’s no way to get them into the federal student loan system. You just have to pay them back based on the terms that you borrowed them under or look for a way to refinance them with another private lender under better terms. 

One of the major problems with private loans, they often require a cosigner. So, in order to get a lower interest rate or more favorable terms, they may rope a spouse or a family member into that, which means that they’re on the hook if you can’t pay or something should happen to you. Your federal student loans don’t have those kinds of strings attached to them. That just means, and I use this word a lot when I talk about student loans, is flexibility. Your private student loans, even if they had a lower interest rate, are generally not nearly as flexible as your federal student loans are. I want something that’s more flexible, rather than less flexible, because I really don’t know where my career is going to take me, particularly when I’m sitting as a student, and the world’s my oyster. Every time I go through a different rotation, I might change my mind in terms of what I want to do. 

Family Loans and Financial Wellness

Tony Bartels, DVM, MBA: All right, so family loans. First of all, these are some of the more stressful cases, if you will, that I come across, because I find that there’s a lot of confusion between the person who was taking the funds and the person who was offering the funds in terms of whether or not it was a loan or a gift, and that’s a big difference. If they’re loaning you the money, then make sure that you both have some established repayment terms on the table. Are they charging you interest? What type of payment do they expect and when? Treat it like it’s a private loan. If you treat it like I’ll pay them when I get some money to pay them back, then that’s going to create some serious issues with your family during the holidays. This is a lot of money that we’re talking about in most cases, so make sure that you know whether or not it’s a loan or a gift. 

I get a lot of questions about whether or not married folks who were in veterinary school or people who have significant others should let them pay for some of their school. Again, that’s some dangerous stuff. I mean, I guess if they’re not taking advantage of their financial wellness in order to help reduce your student loans, then it’s probably not that helpful. So, unless they’re truly paying your education with disposable income that they don’t otherwise need, it’s probably not a good idea. I would be encouraging them to maximize their retirement accounts instead, or things like that or making sure that they have a very robust emergency fund, that you all are saving towards future common family goals. While you’re in veterinary school, you do have access to these student loans that have very favorable repayment terms, and presumably, you’re all going to be compensated veterinarians at some point in your career that are going to be able to manage your student debt. So, it doesn’t make a lot of sense to me to mortgage your spouse’s or your significant other’s short-term or potentially long-term future just to reduce your student debt balance. I think you can do both. I think that you can all, your spouse, your significant other, can build a robust financial wellness plan while you’re still paying for your veterinary education, and you’ll both come out better in the long run as a result of it. So I would focus more on things like emergency funds, eliminating credit card debt, maximizing retirement. That’s way more important than I think foregoing your federal student loans to pay for your education. 

Alright, another poll. What’s more stressful? 

Jordan Benshea: No, don’t put your names in yet. Actually, what we’re going to do is we’re going to wait until the end, instead of doing it right after this poll. We’re going to wait until the end, right before we answer the last questions to get names, so that’ll entice you to pay attention even longer.

Tony Bartels, DVM, MBA: All right, we’re at our 90% responded threshold. Looks like I’ve got a goofy answer in here, too. I didn’t mean to have that ‘only federal direct loans’ there. Thank you to those five people that found that one. So, owing money to anyone or any organization, yeah, I suspected that would be the most common response. This gets into the intangibles of student debt. I’m a numbers guy, I mean I’m going to do what I think is going to result in the least risk and least cost to me. Owing money is not always a terrible thing. I know it stresses a lot of you out, not only as students, but even when you graduate, but most likely student loans are not going to be your only experience with borrowing money. Student debt itself, or debt in general, is not necessarily stressful, it’s the ability to manage it, or manage it well, that is what causes the stress. So, you can have debt and be able to manage it, and still have a very robust financial plan. That’s one of the goals we’re trying to accomplish here is to try to take some of that stress out. I think it really has to do with more of the unknown, and some of the not exactly knowing how to deal with student debt, and all of the options that are that are out there. But debt itself, as long as you can manage it, is not terribly stressful. It becomes stressful when you can’t manage it. 

Scholarships and Grants

Tony Bartels, DVM, MBA: Okay, scholarships and grants, we always have to cover this. Some of you are very good at finding these. Some schools are much better at providing them than others. The reality is there’s not a whole lot out there available, unfortunately. The data that we have of average scholarship amount was about $5,000. Last year, across all veterinary schools, or at least US veterinary schools, in about half of those students receive that. So, if you can get them, great. Apply for them. Free money is always better than loans. You don’t have to pay scholarships or grants back. The timing is really important. I do find that sometimes these scholarships and grants don’t align with your financial aid award, which means sometimes you receive a scholarship or grant but you still receive the full student loan award amount. In that instance, I would encourage you to return those amounts that you receive equal to the amount of the scholarship or grant that you receive later. That can actually reduce how much you have to pay back. You do have 120 days from the time that you receive a student loan to return it, and if you return it, it returns the interest and the fees that were associated with it as well as knocking off that principle. So, when folks were asking earlier about paying on interest, it’s better to return or reduce your student loans than it is to make a payment on the interest, because that makes a direct impact on the principle versus just paying the interest. The $1 that you can knock off the principal is going to knock off the equivalent fees, is also going to knock off the equivalent interest associated with that in the future. If you’re just paying the dollar of interest, you’re just paying the dollar of interest. So, returning the award amounts, using that 120-day window, using your budget to know if you have excess funds, that’s the best way to approach dealing with your student loans, if you find that you have excess. 

Okay, I think this is my last poll. When you graduate, what is your mixture of anticipated student loans?

Jordan Benshea: Tony, while we are waiting for the response here, you have a couple different questions. Some of this we cover in the new grad student loan playbook, which I will put a link for that in the chat window. Everybody that’s registered will be receiving an email within the next couple days with a recording of the webinar, along with a pdf, checklists, and additional helpful links. We will put a link to the new grad playbook in there as well. 

Impact of Student Loans on Future Borrowing

Jordan Benshea: Somebody is asking how does having federal student loans impact your ability to take out a mortgage, car payments, other lines of credit? I know you love that question.

Tony Bartels, DVM, MBA: Yeah, that’s a good one. I’m going to end this poll and share the results while we are talking about it here. Again, having debt, in and of itself, does not prevent you from obtaining more debt and particularly student debt, because it’s still looked at by the banks as being “good debt or favorable debt”. The real benefit of having the federal student loans is being able to pay them based on your income. When you go to apply for financing for anything from a home, practice, car, whatever, they’re going to look at your cash flow. They want to see that if you were to add a new loan to your portfolio, that you have the cash flow to actually make the payments on that new loan. If you’re paying more than you have to towards your student loans, or you’re using an aggressive repayment plan like a standard 10-year plan that has you paying 30 to 40% of your income towards a single student loan payment, then you’re not going to look like a good borrowing candidate. So, it really comes down to how much room do you have in your budget to support another loan. If you’re not showing that you have that room in your budget to support one, then you’re not going to get that loan. Income driven repayment can actually make you look like a better borrowing candidate, because it pegs your payment to 10% of your discretionary income. That is a known and low percent, no matter how much student debt you have. So, that can actually help or increase your chances of obtaining additional financing for things like homes or practices in the future.

Lance Roasa, DVM, JD, MS: Tony, I’ll add in just a second here. I work with a lot of recent veterinary graduates that are buying veterinary practices, and that is probably the most intense set of borrowing that you’ll ever be scrutinized under, much more than a car, or home, or something like that. I have never seen a person denied for buying a practice, for a loan to buy a practice, based on the amount of student loans they have. If they do get denied for a credit application, it’s because they didn’t take care of their credit score, they missed payments on their student loans, or they missed payments on some other line of credit. So, the sheer balance itself does not limit your ability to buy a practice.

Tony Bartels, DVM, MBA: Yes, absolutely. Thanks for adding that. In the stories that I hear from those folks who do get turned down, it’s also because they don’t have any cash on hand. So, they’re dedicating all of it to try to pay off their student loans, which means that they don’t have any cash reserves, and the bank also wants to see that you’re going to have some skin in the game. That you’re going to bring some cash to the table. If you don’t have any reserves, you’re not going to be able to show them that you’re a responsible person to lend to.

Lance Roasa, DVM, JD, MS: Honestly, that works the same for a house as well, Dr. Bartels. So, if I was saving for a house, I’d rather put some money into savings and defer a few student loan payments to go ahead and get that house bought, versus waiting till I pay off my student loans, or come into a situation like that with nothing down.

Repayment Strategies and Income-Driven Plans

Tony Bartels, DVM, MBA: Absolutely, and that’s going to lead us into what we’re going to talk about with the repayment stuff. How you can set yourself up for repayment, so you can actually jumpstart your financial plan. So, you can build some cash reserves in those first couple of years after you graduate, no matter how much student debt you have.

Jordan Benshea: We’re waiting until Tony’s done before we answer the last questions. That’s when I will ask for names again, just to give it a little bit more time because we only have one more set of five to go through. 

Tony Bartels, DVM, MBA: It looks like majority of you here have reported that you have federal student loans, which means that you’re setting yourself up nicely for being able to take advantage of an income driven repayment plan if your debt-to-income ratio was greater than one. For those of you that do have those mixture of loans, what we recommend there is that you get your eligible loans into an income driven repayment plan and then you pay back those less flexible loans first. Similar to how we would treat almost credit card debt. We try to get rid of those less flexible loans first that don’t allow us to pay based on our income, and then take advantage of the income driven repayment plans for managing the federal student loan part of the balance. 

Alright, so the tools you’re going to need to do this. We’ve looked at some of them already tonight. So, the school cost of attendance, depending on what school you attend, you can get that from your school. The financial aid award, you’re going to get that at least once a year, if not every semester. Your budget, building a budget is really important. And the Student Aid website, if anybody has any questions about obtaining that student aid data file, I can certainly go through that again. 

I would like to do another example of the My Student Loans exercise. So, the VIN Foundation Student Debt Center, we’re on the My Student Loans tool. Now you choose this middle box, grab that text file that I’ve already obtained. I’ve got a UC Davis student here, and this person is a little bit farther along in the borrowing process, has a couple of years before they finish. So, it has a little bit more in the student loan category. Also looks like they have some undergraduate student loans. So, all of this will show up in your student aid data file, depending on when you started borrowing. We see that all of these interest rates are zero, which means they all fall under the CARES Act provision. They’ll also be subject to the extension provided by the executive order. You can see our loan servicer in this case is Mohela again. We’ve got our various loan types. We’ve got some subsidized loans here. This is good to know these weren’t going to cost us anything while we were in school anyway, which is why they don’t have any unpaid interest balance. This unpaid interest, this is the interest that accrues on your principal when we’re in normal circumstances when the interest rates are not zero. This unpaid interest accrues on the principal, but this unpaid interest doesn’t get added to your principal until after you graduate into repayment. So, you don’t get charged any additional interest on your interest until after you graduate. Your interest is essentially not compounding while you’re in school. That’s not always the case for private loans. That’s one of those things that you want to check, how they handle unpaid interest. Sometimes the private loans require you to make a payment while you’re in school. Other times, they may allow you to not make a payment, but they’re going to take the interest and add it to the principal, monthly, quarterly, semiannually, something like that. So, make sure you understand that. The more frequently they add that interest to your principal, the quicker you want to pay those off, because then it behaves more like a credit card. 

Alright, we still have our button up here. We can send this information over to the in-school loan estimator. We know that this person has a couple of years left before they graduate, and we’re going to extend this interest waiver for another three months. I’m going to guess based on the loan portfolio. The unsubsidized loans tend to have a higher interest rate than the subsidized loans, in general, so just to get you there. We do know that we have another loan to expect this following year, and at Davis, the fourth year is a little bit more expensive than the third year. That’s something that you’re going to have to know for your particular school. If your school charges extra tuition for that fourth year, you’re going to want to know that. I can click this button here and it’s going to take our estimate for the remaining school year. That’s what we borrowed, everything, as a resident with living expenses. Then I would have to add a little bit more in that fourth year, because I know Davis charges about, I think it’s about 4,000 more or something like that for your tuition. So, if we did that, we again assume that interest rates next year presuming they’re turned back on are going to be a little bit higher, and maybe a little bit higher after that. I can generate my loan details, and this is going to give me an estimate of how much I can expect to have in student loans at graduation. 

If you’re using those health professionals student loans, you can put those here. Let’s say we were getting $5,000 a year and we can knock this down to 58. I mean we did over 5,000 that fourth year that comes to 62 and it will factor that in. Put this in here, you won’t accrue any interest on that $10,000, and that will save you a little bit of interest before you graduate. So, this can be our starting repayment balance, and that’s what we can use to then send over to the student loan repayment simulator that will give us idea of what your repayment looks like after graduation. 

Okay. 

Navigating the VIN Foundation Resources

Tony Bartels, DVM, MBA: Let me talk about the Student Debt folder really quick. A lot of you, and I know it’s hard to answer all of these individual questions that come up and to be honest, your circumstances really drive the answers to many of the questions that you have. So, to handle that, we have an area that’s special on VIN for you to post your questions. Then we can go into and analyze it like we do any kind of medical case. For those of you that are not familiar with VIN, you all have access to VIN for free as students. When you log in, if you haven’t activated that free account, I would encourage you to do so. There’s an enormous amount of information on VIN and student debt is just one tiny, 0000.0% sliver of it. If you want access to a whole bunch of medical information, but also want to get answers to your student loan questions, this is where you’re going to start. You’re going to get dropped on this VIN Student Center. I would go up to the message boards. It’s under the Vet-to-Vet section. This is where you get to find all of the different medical folders, but we also have a Student Debt folder in here. I can look at all of the different discussions that are happening in here recently. So, we’ve got a fourth-year student one, we’ve got Casey’s commentary who is a panelist on here who has generated quite the stir contributing her experience with repayment being a couple of years out of veterinary school. You can see how that’s going and see how other veterinarians view income driven repayment. That’s been kind of an eye opener for all of us this week. You can start to see all of the different questions and answers. We’ve got one here about Parent PLUS loans, what to do, how to handle consolidation, what to do when your loan servicer behaves badly, which will also be another common theme when you enter repayment. 

All of this is really geared at helping you understand the questions that are specific to your circumstances. If you want to post your circumstances in here, you can hit the post new button while you’re in the Student Debt folder here. We’ve got some instructions that will help wade through this information, then you can type your questions in. There’s an anonymous checkbox. This is one of the only places on VIN where you’re allowed to post anonymously. It’s because we’re very aware of the sensitive nature of a lot of this personal financial information. So, if you have specific questions that are unique to your circumstances that we can’t necessarily answer in a forum like this tonight, this is where you want to go for follow up to answer those questions. 

Preparing for Loan Repayment After Graduation

Tony Bartels, DVM, MBA: So, let’s dive right into the payment parts. Based on what the data that we’ve covered tonight, and what you told me in the polls, it looks like a good chunk of you are going to have a student debt-to-income ratio greater than one. It was probably more than two thirds of you. This is what I want you to do. Before you graduate, file a tax return. I know that you’re probably not earning very much income, if any at all, but you can still voluntarily file a tax return. If you file a tax return before you graduate, you will have a document on file that says that you likely have an adjusted gross income, which is a measure on your tax return, that is probably somewhere near zero, if not zero. You can use that as documentation for entering an income driven repayment plan after you graduate. 

Most of you are going to graduate some time in April, May of that calendar year, taxes are also due April 15th, right before you graduate, for the previous calendar year. So right before you graduate, make sure that you pencil in on your calendar to file a tax return. Then after you graduate, we’re going to want you to consolidate, end your grace period early, and apply for an income driven repayment plan. That’s going to be Pay As You Earn [REPAYE], Revised Pay As You Earn [REPAYE], Income Based Repayment, one of those repayment plans that are going to help get you started in repayment. If you have that tax return on file, or you can consolidate and apply for an income driven repayment plan before you start your first job or internship or whatever you’re going to do after graduation, you will receive a $0 per month payment for the first 12 months that you’re in repayment. That tax return just guarantees that you will have a document on file that the loan servicers will always accept, no matter what your situation is. If your last tax return says zero, they will always accept that as valid documentation of your income. You can get that $0 payment for the first 12 months you’re in repayment. After that, you’re going to have to provide that income documentation each year to have your payment recalculated based on whatever your income has changed from the prior 12 months. This process is started at studentaid.gov, the same site that we were on earlier that allows you to obtain your student aid data file is the same site where you can start your consolidation loan and apply for an income driven repayment plan. 

Thinking ahead, and I think Jordan already shared this, this is the most recent, if you’re really dying to get some more information about how repayment works. We do a session similar to this that’s specifically for new graduates every year to talk about how to take stock in your student loans, get the consolidation process started, and choose your income driven repayment plan. What you all told me your anticipated repayment plan or strategy after graduation, I was actually a little surprised by this. This is great that 40% of you haven’t decided yet. That’s why you’re here. Get some information and learn more about this stuff. Usually, the highest response is the repay as fast as possible, which is great, but you’re going to have to know how much your student debt is and how much income you’re going to have to support that strategy. 

This one caught me off guard. I wasn’t expecting this. Income based repayment. I think this has more to do with the fact that everybody generally refers to all of the repayment plans that allow you to pay based on your income as income-based repayment. You have to be a little bit careful because Income Based Repayment [IBR] is actually a specific type of repayment plan in this larger income driven repayment universe. For most of you, IBR is not going to be your most beneficial repayment plan. It’s going to be Pay As You Earn in most cases. For those of you that it’s not going to be Pay As You Earn form, it’s going to be Revised Pay As You Earn form. I told you earlier that we use Revised Pay As You Earn, and that’s because we don’t qualify for Pay As You Earn. We didn’t meet the cutoff requirements. But we would use Pay As You Earn if we could. 

Almost all of you, as long as you don’t have any student loans from before 2007 that still have a balance on them, you’re going to qualify for Pay As You Earn. That is almost all recent veterinary graduates these days. Even if you’re career changers, it’s quite likely that you’re probably going to qualify for Pay As You Earn and if not, we still have Revised Pay As You Earn. Revised Pay As You Earn can also be beneficial for those folks that are at the higher end of the student debt spectrum, so when your student debt starts to get above 350, closer to 400,000. I met with somebody this year who graduated from vet school that had over $600,000 in student loans. That’s when we’re going to start looking at Revised Pay As You Earn, because there are some benefits from Revised Pay As You Earn that we’re not going to have time to go into tonight, that can help to limit the impact of the tax that’s due at the end when your student debt balance tends to get into that higher spectrum. 

I refer to this as jumpstart to your financial wellness. Let’s come back over to one of the examples that we ran. 

Jordan Benshea: Tony, I want to jump in with a question here while you’re getting there. Somebody asked, “I’ve heard the income-based repayment plans don’t allow you to make payments more than the monthly amount. You can’t pay more or you get penalized for it. Is this true and how much of a disadvantage is this in the long run? It makes me nervous, as I might like to dedicate an extra chunk to my loans if I get a bonus or something.”

Tony Bartels, DVM, MBA: yeah, you can always pay more towards your student loans if you want to, but you should make sure first that it actually makes financial sense to do so. This is the value of the simulator. Let’s fast forward in the future, May 2024, let’s say that you’ve got close to $300,000 in student debt, which is similar to the one that we ran recently, and your weighted average interest rate is somewhere a little bit less than five, which could be very real for many of you. Let’s say that your income after graduation is $100,000. This is what I want you to consider based on what I told you about jumpstarting your financial wellness. Even if your income is $100,000 in June or July after you graduate, if you file that tax return before you graduate, your income driven repayment amount is going to be zero. When you start your job, in that year, you’re going to be halfway through the year already, so even if you’re earning $100,000 a year, your tax return for that year is only going to be about half of that, because your tax returns are based on a calendar year. Here, you have the option to have a very low payment towards your student loans for the first two, almost three years that you’re out of veterinary school. That’s going to free up a lot of cash flow for you to build an emergency fund, to work towards a down payment on a house, start saving for the down payment on a practice, or to maximize your retirement savings. All of these things are things that you can take advantage of instead of trying to pay your loans off faster than your income allows. So even if you’re earning more than $100,000 a year and you’ve got $300,000 in student debt, to pay that balance to zero in 10 years or less is going to require a $3,100 per month payment. 

If you use an income driven repayment plan, you don’t have to pay anything in the first 12 months, you’re going to pay very little in the second 12 months, which frees up a phenomenal amount of money. Let’s say that you wanted to try to pay your loans off in 10 years, because you’re just dead set on doing it. So, 3156 times 12, those first 12 months, that’s nearly $38,000 that you would have to dedicate out of your budget. Even though we know that you’re really only going to earn about $50,000 in that first calendar year. That’s probably not even really doable. You can free up immediately $38,000 in that first year to jumpstart your repayment. If I keep working my way down the loan repayment summary here, I can see that my total costs in this scenario is even less than it would be under a standard 10-year plan. Even if I did figure out some magical way to live out of the back of my car or make that $3,100 a month payment for 10 years, I’ll still end up paying more than I would’ve had to if I use an income driven repayment plan, even though I’m still going to end up hitting this forgiveness. 

Then if I am going to hit the forgiveness, and this gets back to the question that Jordan just posed about paying extra, if I am going to hit the forgiveness, again, this is a value, it’s not necessarily the exact numbers here that are important, but it’s just knowing if I’m going to hit forgiveness tells me that I shouldn’t be paying extra towards my student loans. If I’m going to hit forgiveness, the least expensive strategy is going to be to pay the minimum your income requires and plan for the forgiveness. It would not make financial sense to pay more just to reduce the tax. You’re actually going to voluntarily pay more than you have to, and you’re going to give up some of that extra cash flow that you can use in better ways those first years after you graduate. So, this is going to tell me that it looks like I’m going to hit forgiveness. I’d better think about planning for that. 

This module here does give you some information on how to start thinking about saving for that tax that is potentially due. If we start breaking this up into small chunks, what seems like an insurmountable, what people like to refer to as the tax bomb, yeah, $110,000 twenty years when I start repayment seems like a ridiculous way to pay back my student loans, but if I start breaking this up into manageable chunks, I’m still not paying anywhere near the amount that I would have to pay to eliminate that balance faster than my income allows. This is really what I consider a game changer when you think about how to pay back your student loans. I don’t immediately run to how fast can I pay back my student loans unless your student debt-to-income ratio is less than one, because that’s when we start to see your monthly payment under an income driven plan be about the same as it would be under a standard 10-year plan. Where your debt-to-income ratio is one or less, that’s when it makes more sense to pay aggressively.

Jordan Benshea: There’s another question here, which sort of fits in here. “How should we best take advantage of the current 0% interest rate? Is it ideal to take out more loans during this time?”

Tony Bartels, DVM, MBA: yeah, I guess it depends on what you were going to do with that flexibility. If you were going to use those loans to pay back credit card debt. About 10 to 15% of you indicated that you had credit card debt. If I was carrying a credit card balance, then yes, I would take that extra 0% money, and I would pay off that credit card debt, and then I would take that credit card and stick it in a freezer. Don’t use it again unless it’s an uber emergency. If I didn’t have an emergency fund, I would allocate some amount for an emergency fund, even as a student, stuff happens. Any of the three legged or one-eyed animals that you’re all housing in your houses, if it ends up in the emergency clinic tomorrow, and you can’t get that taken care of for free, and you get a whopping emergency bill, how are you going to pay for that? So, make sure you have enough on hand to handle emergencies. If you have to travel home unexpectedly for any reason, I mean, COVID has put a highlight on that one. Anything, the amount that you would guesstimate that you would have to have on hand to not have to put something like that on a credit card, use your student loans for that, this is 0%, they’re super flexible. It is okay to keep a little bit of an emergency fund, even if you’re creating that emergency fund from student loans. Don’t get crazy with it. You don’t need to end up graduating with 30,40, $50,000 more of student loans than you actually needed, but you can use, particularly this flexibility that we’re experiencing now, to shore up some of those other areas of your finances.

Jordan Benshea: Another question, since you’re on this right now. Somebody is asking, “I heard that the forgiveness is not something we should bank on. Do you think it’ll still be there for us?” 

Tony Bartels, DVM, MBA: absolutely. Yeah, that’s where I would encourage you to pull open your master promissory notes, which also live in the federal student aid website. When you’re logged in here, you can pull up the master promissory notes, and you’ll see that that’s essentially the contract that you signed with the Department of Education. All of these plans are laid out in that contract. Master Promissory Note for graduate professional students, you can read this. This is exciting reading, so make sure you bring a cup of coffee. This is going to outline all of the repayment options that you have for your student loans. All the stuff that we’re talking about are baked into those contracts. It is highly, highly unlikely that Congress is going to eliminate or change those contracts for people who are already borrowing or who are already in repayment under those contracts. They can, it’s certainly a possibility, but I would put it on the order of getting struck by lightning kind of thing. I think it’s quite unlikely that those things are going to get changed. If you follow any of this student loan repayment stuff for any amount of time, we’ve actually seen the opposite. Over the last several years, at every turn, Congress and every president since these income driven repayment plans have been in effect, have made the provisions stronger and more beneficial to the borrower than they ever were laid out in the contracts. It’s probably more likely that we’re going to see them become more beneficial rather than less, but the worst-case scenario is that they’re going to behave exactly as they’re written in the in the Master Promissory Note.

Lance Roasa, DVM, JD, MS: Dr. Bartels, I’ll weigh in legally there for a second. If the programs do go away, if Congress does decide to take them away, and this is a very common question by the way, so thanks for asking, and a lot of folks have it, they’re probably going to change the Master Promissory Note and take those programs away for future borrowers, basically, for those people that are still in high school or junior high right now. So, you’re in, you’ve already borrowed, you’ve already signed the Master Promissory Note. So, technically, you are in the system even though you’re not in repayment yet. You’re likely “grandfathered in”.

Tony Bartels, DVM, MBA: Yeah, absolutely. To me, it’s how we saw student loans treated with the CARES Act, too. It is just another data point that illustrates that they’re likely to be more beneficial than less. What they did with the student loans was, in my opinion, completely unnecessary. If you were to lose your job because you had to shut your business down because of COVID-19, you could have gone to your loan servicer and said, “I don’t have any income” and they would set your minimum monthly payment to zero. There is already a mechanism for keeping our student loans in good standing when the worst should happen to us, when we lose our income, our ability to pay something like our student debt. That already exists, that’s already baked into these plans, but they went the additional step to say we’re not going to charge you any interest, we’re not going to require you to make any payment if you were making a payment, and we’re also going to count the time towards forgiveness. So, there was a triple fold benefit that was handed to all student loan borrowers who had federally held student loans that really wasn’t entirely needed. 

It certainly is extremely beneficial, and probably a pandemic warrants something like that, but the programs are already set up to handle something exactly like that. So if and when your income ever does decrease for any reason, this is another one of the benefits of income driven repayment, because you can have the payment set to zero, and until your income comes out of that stage or whatever it is you’re going through during that timeframe, your student loans are not going to be that added stress on top of you having to deal with that low income situation. 

Same applies to those of you that are going into internships and residencies. If you’re not making very much income, keep your loans in an income driven repayment plan because the payment is going to be very low or zero, because you’re not making very much money, but you’re still going to be logging time towards that forgiveness and the unpaid interest that accrues won’t get added to your principal balance, which is another benefit the federal student loans provide. 

I know we’re getting away into the weeds here, but I really want to boil that down to your federal student loans have some amazing benefits baked into them. Don’t give that up or take that for granted lightly. So, by making extra payments on student loans before your income can support it. Refinancing federal student loans or private student loans, these are some really, really dangerous things to do, and you ultimately end up hurting your own financial wellness if you go down that road. 

I added this one at the last minute here, because I saw a lot of you submit questions as part of the registration. How much should I pay? Hopefully, we’ve covered that with the income driven repayment plans. Pay what your income requires, depending on the plan that you choose. Then for how long? How long are you going to be in repayment? Here’s what you all told me. You expect to pay on average, $1,100 a month towards your student loans. Some of you said as much as 4,000. I excluded this person who plans on paying $200,000 a month towards their student loans. I’m thinking that was a goof. All of these numbers are way more than what you have to pay. When your income reaches a level that’s maybe 150 to $200,000, that’s when you’re going to hit those kinds of payments under an income driven repayment plan. We can test that out. Let’s try $150,000 a year, and we rerun our simulation and see what our payment is. So, not even to $1,100 yet, under a plan like Pay As You Earn or revised Pay As You Earn with $150,000 of taxable income. 

So, when do we get to $1,100? At $160,000? Now we’re close. You all, on average, told me that you expect to pay $1,100 towards your student loans after you graduate. For your income to justify a payment that high, you’re going to have to be making $160,000 a year. Until, if and until or when, that happens, then pay the $1,100 but you don’t have to pay that much before then. Let your income determine how much you pay towards your student loans, and the repayment plans will determine how long you’re in repayment. 

So, Pay As You Earn worst-case scenario, you will be in repayment for 20 years. That’s the maximum amount of time that you can spend in Pay As You Earn. If you have a balance remaining at the end of that 20 years, that’s what triggers forgiveness. In this case, even if you started with $160,000 balance, we still have forgiveness. So, I’m probably still going to pay the minimum and plan for the forgiveness if I’m in this scenario, because I don’t want to pay this. It’s still going to free up more than $1,900 a month in my budget to do other things that are going to generate a much higher return than paying a little bit extra towards my student loans. You have to make a surprising amount of money to justify paying your loans back aggressively, and when that happens, great, congratulations! But don’t try to do it. Don’t try to force it before your income reaches that level. 

This is another one of my favorite questions. What is a reasonable amount of time for you to pay back your student loans? The majority of you said 10 years. The reality is the majority of you are not going to have an income out of school to support a 10-year repayment strategy, so don’t fight it. Don’t forfeit money that you don’t have to towards your student loans. You can use that money in other ways, a lot more beneficially, than throwing it towards your student loans. Four years, that’s really aggressive. I would really encourage you to figure out, based on what you think you’re going to have in student debt when you graduate, and calculate what a monthly payment would be to pay back your loans in four years. For most of you, that’s going to be more than you’re earning. That’s probably not going to work. 

Thirty-five years, there’s no scenario under the federal student loan repayment system where you’re going to be in repayment for 35 years. The concern that I’m going to be in repayment forever, for the rest of my life, 20 years is a worst-case scenario for those of you that use Pay As You Earn, and if you can’t use Pay As You Earn, or you have to use Revised Pay As You Earn, 25 years is the worst-case scenario. The average I find really interesting. So, I’ve been asking this question now for nearly a year, and we’ve got 1,000s of responses now, and the average always seems to end up somewhere around 15 years, which I find kind of fascinating. I don’t know what to make of that yet, but the average always seems to end up there. 

So, the reality is, you’re only going to be in repayment for 20 years or less. The maximum amount of time you’ll be in repayment is 25 years. If you earn more, you’ll pay more towards your student loans, you may even pay them off before you hit forgiveness, in which case, congratulations, but you let your income make that decision for you. If you hit forgiveness, again, congratulations! It’s okay. Student loan repayment is still going to be over, but if you’re going to hit forgiveness, use something like the student loan repayment simulator to know what amount you have to save so you can pay the taxes associated with it. Either way, you let your income decide and you’ll be done with student loan repayment. 

The rest is just questions and answers. I think we’ve covered this one, “Is it better to take out more and to pay interest?” Again, if you’re just paying interest, unless they’re private student loans, I probably wouldn’t. 

Usually, somebody who sits through one of these tends to make the observation that if I can pay based on my income, and I’m just going to plan on the forgiveness, why shouldn’t I just take out the maximum of my student loans, and then have them all forgiven? Because you don’t know what the future is going to hold, and it’s always easier to manage less than it is to manage more. That gets you more into the realm of speculation, which I find that most people are not very good at. I would want to have it the least amount that I can while managing a reasonable financial wellness plan as a student and beyond. If I’m going to hit forgiveness, I’m going to plan for it. If I’m not, then I won’t have to deal with the tax. 

Trying to play the interest rates is probably a little dangerous. Again, we’re in a very, very beneficial period now. You can use that to your advantage to eliminate some less flexible debt or build an emergency fund, but I don’t know what the interest rates are going to do next year. They could easily be lower than they are this year. I really don’t know, and that’s, again, we’re kind of getting into that speculation realm where we probably shouldn’t be making decisions based on things like that. 

The last one I added in here I find is a really common question. People tend to confuse these two, and I think they’re in direct opposition to each other. Tips for paying off debt quickly that don’t affect my quality of life. Those two things are kind of antithetical. There’s really no way to square that circle. If you’re going to pay your debt off quickly, you’re either going to have to have the resources to do it, or you’re going to have some significant impacts to the quality of your life and then you’re really kind of crossing your fingers and hoping nothing goes not as planned during that strategy. I believe you don’t have to necessarily do that. You can take a more balanced approach. You can let your income determine the payment, and you don’t necessarily have to live like a college student after graduation. You can build a very robust financial wellness plan and you can accomplish all of the goals that you all mentioned in the concerns that you listed. You can start a family, you can buy a house, you can buy a practice, you can save for retirement. All of these things are eminently doable, as long as you’re not paying more than you have to toward your student loans, particularly as your income isn’t very robust in those early stages.

Q&A and Final Thoughts

Jordan Benshea: Okay, we’re going to open it up now to – yep. Okay. Well, there we go. Great. Great. You guys got it. Thank you. We’ve had some people guessing the name of that fish, Tony.

Tony Bartels, DVM, MBA: Oh, I didn’t see that. I see a bunch of names in there. Should have made that the…

Jordan Benshea: Well, I thought about that, but then I thought that’s probably not fair if they don’t have fishing in their lives like you and I do in our lives. People have said trout, rainbow trout, and steelhead. You want to give them the right answer? 

Tony Bartels, DVM, MBA: Yeah, it is a rainbow trout from Colorado. We don’t have any steelhead in Colorado. I caught this a couple of weeks ago on the Blue River. I bought a raft, and this is the maiden voyage with the raft. This is an area that they call Jurassic Park and it’s because there’s ginormous trout in there. This was one of them I got lucky enough to catch. Any other questions not related to rainbow trout, because otherwise you can take me on a two-hour tangent?

Jordan Benshea: There was a question earlier on paying last year’s loan at 6% with this year’s loans at 4.3%. Can you touch on that?

Tony Bartels, DVM, MBA: Yeah, I think it depends on how much extra you have. This is where, and we did this too, in the Student Debt folder recently with a student from Virginia, Maryland, who was wondering if she should pay some towards her higher interest rate loans. It really depends on how much extra we’re talking about. When I look at student budgets, there isn’t a lot of wiggle room in there, so it probably is not going to be enough to make an appreciable dent in those student loans and if you have unpaid interest on those loans, the problem is you can’t pay directly towards the principal, you have to pay the unpaid interest balance off first. If you have any kind of significant unpaid interest on those loans, then you essentially are just paying the interest. Until you can actually get to the principal, you’re really not making a dent worthy of doing that. I would probably focus my efforts elsewhere, or think about even returning the funds if you truly have that much extra

Jordan Benshea: someone said, “Can we take out an additional graduate PLUS loan if the one we took out at the beginning of the school year will not cover a dental emergency that came up afterwards?” 

Tony Bartels, DVM, MBA: you can only borrow up to the cost of attendance. So, if what you took out represented the maximum that you can borrow under your current financial aid award, then no, you can’t. You can’t take out any extra, but if you reduced the amount that you chose to accept, so let’s say that you had a $65,000 award and you chose to reduce that down to $60,000 and then you had an emergency pop up, you can go back and still request the additional five, but you can’t request anything in addition to that. So, it depends on whether or not you had reduced the amount that you were offered. There may be some depending on your school too, and you can reach out to your financial aid office, sometimes they have some in case of emergency provisions where you can get an extension and it might be in the form of like an institutional loan or a loan directly from the school to cover things like that. That, to me, is another example of highlighting the need for an emergency fund. If you have the ability, I know that’s not going to be any comfort for the person who had the dental emergency now, but that is a perfect example of why if you do have some extra money rather than paying it towards other student loans which you can’t get that money back after you do that, you might want to start an emergency fund so you don’t have to worry about how you’re going to come up with the money for an unexpected dental emergency.

Jordan Benshea: Okay, last question I see here is the average scholarship amount per year or overall?

Tony Bartels, DVM, MBA: That was per year. That amount is updated each year by the AAVMC and that was the average award amount for roughly half of those folks who received it in the 2019 – 2020 academic year.

Jordan Benshea: Wonderful. That was the last of the questions. I want to thank all the rock stars in the background here that have been answering furiously. It’s made this process wonderful. Hopefully all your questions have gotten answered. If you registered for this webinar [which is everybody that’s here], you will be receiving an email within the next couple days, tomorrow or Friday, with the recording of this webinar, along with a pdf checklist and additional helpful links. We will also be notifying the winners of the DoorDash e cards by email. So, we’ll be notifying you via your email that you signed up and registered for the webinar with so keep an eye out for that. If you don’t see it, look in your spam. If you have any questions, you can email us at studentdebt@VINFoundation.org. I will put that in the chat window as well. Tony, Lance, anything else you guys want to add?

Lance Roasa, DVM, JD, MS: Keep those questions coming. I mean move them over to the debt folder, and let’s keep answering them. Go ahead, Dr. Bartels.

Tony Bartels, DVM, MBA: Yeah, keep asking questions. This stuff is really confusing. It’s really going to change as your plans evolve and become more clear. At that point you’re also going to know more about how much student debt you’re going to have, what income you can expect to receive, and what your financial goals are. All of those should factor into your ultimate loan repayment strategy. We really just want you to know that there are a lot of ways to pay back your student loans, no matter how much student debt that you have, that will also help you to have a fairly robust financial plan as a veterinarian.

Jordan Benshea: Thanks, everybody for being here. We really appreciate it. Again, if you have any questions, studentdebt@VINFoundation.org. Keep an eye out for those emails. We really appreciate you guys being here. We’re here to help. Thanks so much for being here.

Tony Bartels, DVM, MBA: Thank you.

Jordan Benshea: Thank you for joining us for this episode of the Veterinary Pulse. Please check the Episode Notes for additional information referenced in the podcast. If you enjoyed this podcast, please follow, subscribe, and share a review. We welcome feedback and hope you will tune in again. You can find out more about the VIN Foundation through our website, VINFoundation.org and our social media channels. Thank you for being here. Be well.