annual incomennual income,, tuition and fees, debt load dbtl d · the good james f wilson dvm jd...

Annual IncomeAnnual Income,,

D bt L dD bt L dTuition and Fees,Tuition and Fees,

The GoodJames F Wilson DVM JDJames F Wilson DVM JD

Debt LoadDebt LoadThe BadThe Bad

James F Wilson, DVM, JDJames F Wilson, DVM, JD

with assistance fromwith assistance from

Jim Taylor, DVMJim Taylor, DVM

University of Tennessee ’08University of Tennessee ’08University of Tennessee 08University of Tennessee 08

The UglyThe Ugly

Debt:SalaryDebt:Salary TrendTrend

Mean DebtMean Debt

Data As Data As OfOf

JuneJuneS.A. Practice SalS.A. Practice Sal

JuneJune2009 2009

JAVMAJAVMA

Advanced Study SalariesAdvanced Study Salaries

SurveySurvey

The Future of Debt to Salary RatiosThe Future of Debt to Salary Ratios

Private

The Future of Debt to Salary RatiosThe Future of Debt to Salary Ratios

Year DebtPractice Salary Debt/SalaryDebt wasDebt was

$106,989$106,989in 2007 within 2007 with

1983 $18,897 $19,872 95.1%

1995 $45,251 $31,925 141.7%

in 2007 within 2007 withSalary at Salary at $58,106…$58,106…

With ratio of With ratio of $ , $ ,

2009 $129,976$129,976 $65,185 199.4%

184.1% 184.1%

Debt isDebt isup 21%up 21% ii

2012 $137,000 $71,000 193.0%

2017 $176 000 $88 000 200 0%

up 21% up 21% in in the past the past 2 years2 years

2017 $176,000 $88,000 200.0%

Note: The last two rows above were projections made in 2007, included here to show how unrealistic they turned out to be.

The Ugly

Tuition, Fees, & Expenses by Class Year$60 000

$50,000

$60,000

10.66%/yr10.66%/yr

$40,00012.75%/yr12.75%/yr

$20,000

$30,000

$10,000

$-2004 2005 2006 2007 2008 2009 2010

Resident Non-resident2006 & ’08 data unavailable2006 & ’08 data unavailable

RealReal Debt toDebt toRealReal Debt to Debt to SalarySalary

Th G dyy

• 25.1% increase in realreal private practice income between 1983 & 2007

The Good

income between 1983 & 2007

•• 173% 173% increase in real (after inflation) d ti l d btd bt b t 1983 d 2007educational debtdebt between 1983 and 2007

• 0 87% average annual realreal income• 0.87% average annual realreal incomeincrease

• 4.7% average annual in real debt increase between 1983 and 2007

Other TrendsOther TrendsThe Bad

• 0.36% average annual DECREASE in realrealinternship salaries 1983 to 2007p

• ‘83 -3% grads internships 43% -09

• 5.2% average real debt between 2002 & 2007! (12% nominal in 2008 & 8 5% 20092007! (12% nominal in 2008 & 8.5% 2009 – included Penn & Western)

Finaid.org Loan Calculator

2009 Mean Loan Balance: $129,976

Loan Interest Rate: 6.80%Loan Fees (assumes no 0.00%private loans): Loan Term: 10 yearsStandardStandard

TenTen--YearYear

Monthly Loan Payment: $1,496 Number of Payments: 120

TenTen--YearYearLoan Loan TermTerm

Number of Payments: 120

Cumulative Payments: $179,520 y $ ,Total Interest Paid: $49,554$49,554

According to Finaid.orgAccording to Finaid.orgAccording to Finaid.orgAccording to Finaid.org

Assuming that the ideal 10% of one’s gross monthly income will be devoted to

repaying student loans over 10 years ,It is estimated that grads will need an

l l f l $179 520 bannual salary of at least $179,520 to be able to afford to repay this loan

If we increase repayment to 15%15% of their gross of their gross monthly incomemonthly income for the same 10 year, they yy y , yonlyonly need an annual salary of $119,6800$119,6800

Finaid.org Loan CalculatorFinaid.org Loan Calculator

2009 Mean Loan Balance: $129,976

Loan Interest Rate: 6.80%Loan Fees (assumes no private 0.00%loans): Extend Loan Term: 2525 yearsyearsExtendingExtending

Monthly Loan Payment (from $1,426) $902

TheTheLoan Loan TermTerm


C l ti P t $270 638

TermTerm

Cumulative Payments: $270,638 Total Interest Paid: $49.5k vs.$49.5k vs. $140,624$140,624



repaying student loans over 25 years,It is estimated that grads will need an


If we increase repayment to 15%15% of their gross of their gross monthly incomemonthly income for the same 25 year, they yy y , yonlyonly need an annual salary of $72,160$72,160


Big Borrower’s Big Borrower’s Mean Balance: $176,000

Loan Interest Rate: 6.80%6.80%Loan Fees: 0 00%Loan Fees: 0.00%Loan Term: 10 years

Monthly Loan Payment: $2,025 Number of Payments: 120Number of Payments: 120

C l ti P t $243 099Cumulative Payments: $243,099 Total Interest Paid: $67,050



repaying this student loan in 10 years,It is estimated that grads will need an


If we increase repayment to 15%15% of their gross of their gross monthly incomemonthly income for the same 10 years, they yy y , yonlyonly need an annual salary of $162,000$162,000

Finaid.org Loan CalculatorFinaid.org Loan CalculatorBig Borrower’s Big Borrower’s Balance: $176,000

Loan Interest Rate: 6.8%6.8%Loan Fees: 0.00%Extend Loan Term: 2525 yearsyearsExtendingExtending

TheTheMonthly Loan Payment (from $2,205)

$1,221


Loan Loan TermTerm

y

Cumulative Payments: $366,470 $366,470

Total Interest Paid: $67k vs.$67k vs. $190,70$190,70



repaying this loan amount in 25 years,It is estimated that grads will need an




Cut Expenses 2,500/year:Cut Expenses 2,500/year: $1666,000

Loan Interest Rate: 6.8%6.8%Loan Fees: 0 00%Loan Fees: 0.00%Extended Loan Term: 25 years25 years

Monthly Loan Payment: $1,152 Number of Payments: 300Cumulative Payments: $345,647$345,647Total Interest Paid: $179,649$179,649

Difference:$70/mo $20,822$70/mo $20,822


If we keep repayment at 15% of one’s 15% of one’s gross monthly incomegross monthly income but increase the i 2525 h ll dtime to 25 25 years, they onlyonly need to pay

$1,221/ month and, thus, can get by with a salary of $97,680 per year$97,680 per yeary $ , p y$ , p y

All of these scenarios may/will require that they forestall having children buying athey forestall having children, buying a

home, buying/starting a veterinary practice, and/or saving for retirement or even buying

a new car for many years!a new car for many years!


High Roller’s Loan Balance: $250,000

Loan Interest Rate: 6.80%6.80%Loan Fees: 0 00%Loan Fees: 0.00%Loan Term: 25 yearsHow About How About

TheTheMonthly Loan Payment: $1,735 Number of Payments: 300

The The High Rollers?High Rollers?

y

C l ti P t $520 554Cumulative Payments: $520,554 Total Interest Paid: $270,554

Finaid.org Loan Calculator

Cut Expenses 2,500/year:Cut Expenses 2,500/year: $2440,000

Loan Interest Rate: 6.80%6.80%Loan Fees: 0 00%Loan Fees: 0.00%Loan Term: 25 years25 years

Monthly Loan Payment: $1,666 Number of Payments: 300Cumulative Payments: $499,732Total Interest Paid: $259,752$259,752

Difference:$80/mo $20,813$80/mo $20,813


Using $250,000 debtUsing $250,000 debtAssuming that the ideal 10% of the High

Rollers’ gross monthly income will be devoted to repaying this over 10 years,

It is estimated that graduates will need an l l f t l t $208 000 t bannual salary of at least $208,000 to be

able to afford to repay this loan


The Only Hope?The Only Hope?

Income Based Repayment Income Based Repayment p yp y(IBR) (IBR) Plans with Plans with

Loan Forgiveness Loan Forgiveness at the end of the 25at the end of the 25 yearyearat the end of the 25at the end of the 25--year year

Repayment PeriodRepayment Periodp yp y

Tale of Two Veterinarians

V t i i A V t i i BCourtesy ofGL Advisor Veterinarian A Veterinarian B

Debt @ Graduation $130,000 @ 6.8% $130,000 @ 6.8%

GL Advisor

Salary @ Year 1 $28,000 $28,000

Salary @ Year 10 $95,008 $95,008

Salary @ Year 25 $148,019 $148,019

Payment Plan Extended Repayment Income-Based Repayment

Monthly Payment $902 $84 to $505 to $807

P t t I R ti O 100% t 10 8% 15%

$115k

$90,516*Forgiven After

Payment to Income Ratio Over 100% to 10.8% 15%

$249k

$271kTotal Paid:

$115k25 years(taxable)

$249k

Based on current IBR Regulations

Tale of Two Veterinarians

V t i i A V t i i B

Courtesy ofGL Advisor

Veterinarian A Veterinarian BDebt @ Graduation $130,000 @ 6.8% $130,000 @ 6.8%

Salary @ Year 1 $28,000 $28,000

Salary @ Year 10 $95,008 $95,008

Salary @ Year 25 $148,019 $148,019

Payment Plan Extended Repayment Income-Based Repayment

Monthly Payment $902 $84 to $505 to $807

P t t I R ti O 100% t 10 8% 15% t 10%

$194,936*Forgiven After

20 years

Payment to Income Ratio Over 100% to 10.8% 15% to 10%

$162k

$271kTotal Paid: y

(taxable)

Positioning for Changes in 2014 is significant Positioning for Changes in 2014 is significant Based on current IBR Regulations as of July 1st 2014

After Hearing ThisAfter Hearing ThisAfter Hearing This,After Hearing This,What Do You Think?What Do You Think?

Should Today’sShould Today’sShould Today s Should Today s Students Be Ready ForStudents Be Ready For

&&& &

Th iTh iExcited About Excited About TheirTheir Future?Future?

Data Is Not An EmotionData Is Not An EmotionData Is Not An EmotionData Is Not An Emotion

“ It Is A Stimulus For Action“ It Is A Stimulus For ActionIt Is Up to Each Party to Choose It Is Up to Each Party to Choose

An Attitude & an Action”An Attitude & an Action”An Attitude & an Action An Attitude & an Action Carin Smith, DVMCarin Smith, DVM

What’s Truly DisconcertingWhat’s Truly Disconcerting

Is That This Scenario IsIs That This Scenario IsIs That This Scenario Is Is That This Scenario Is Playing Out in Playing Out in y gy g

All FieldsAll FieldsOf Higher EducationOf Higher Educationgg

Do You NowDo You NowDo You Now Do You Now UnderstandUnderstandUnderstandUnderstand

Wh L i Ab t P l FiWh L i Ab t P l FiWhy Learning About Personal Finance, Why Learning About Personal Finance, Law, Ethics, Career Development & Law, Ethics, Career Development &

B i A S h A I t t P t fB i A S h A I t t P t fBusiness Are Such An Important Part of Business Are Such An Important Part of The Veterinary School Education?The Veterinary School Education?

Isn’t It The Job of Each School to Isn’t It The Job of Each School to Help Its StudentsHelp Its Students Learn AboutLearn AboutHelp Its Students Help Its Students Learn About Learn About

These Subjects?!These Subjects?!

Th kTh k YYThankThank YouYouDr. Colin Burrows, TNAVC, Dr. Colin Burrows, TNAVC,

Annual Sponsors &Annual Sponsors &thethe VetPartnersVetPartners’™’™the the VetPartnersVetPartners’™’™

Career Development CommitteeCareer Development CommitteeCareer Development CommitteeCareer Development Committeeforfor

ThTh El h tEl h t ii thth R S iR S iTheThe ElephantElephant--inin--thethe--Room SeriesRoom Series

Th k YTh k YThank You Thank You F Li t iF Li t iFor ListeningFor Listening

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