We’re starting a new phase in our journey! The issue of student debt has long plagued the veterinary profession. Looking at the averages, veterinarians are said to have some of the highest student debt to income ratios among any profession. Entire conferences and working groups have been formed to “fix the debt.” When discussing student debt with veterinary students, it seems they are staring into a dark abyss. They know student debt is a problem, but they don’t know exactly what the issue is. This gives them a feeling of uneasiness and anxiety, a fear of the unknown. Even worse, there’s a ton of myths and misinformation out there about student debt. It’s truly like a mythological character is waiting in the abyss, giving veterinarians nightmares and stealing their lunch. 

Maybe that’s you? Maybe you’ve heard the myths or maybe you feel like you’re sailing into the abyss. This course is designed to shed light on the topic of student debt, to define and control it. It is also designed to give you everything you need to know to control and conquer your student debt. 

We feel that the more you know and the more you understand; the better off you are. Then you will feel less fear and anxiety. And more importantly, the more knowledge you have, the better decisions you’ll make concerning your student debt. 

So with that, let’s jump in. We’ll work through some definitions and statistics today. Then we’ll take deep dives into borrowing, repayment plans, debt forgiveness, consolidation and taxation. 

Along the way, we’ll address the common questions and misconceptions that we get from students and recent graduates every day. And we’ll play mythbusters. We’ll point out the information and plans that are wrong. Hopefully at the end of these 17 weeks, you’ll be more informed and more comfortable with student debt and you’ll know how to gather the resources you need and make the right decisions regarding it. 

What is student debt? What are we discussing? Where does student debt come from? Well…loans. Student loans to be more exact. 

We’re talking about all the money that a veterinary student borrows to pay for their education. We have to lump in undergraduate debt, any other advanced educational debt and of course money borrowed during veterinary school.

Now, where does this debt come from? What kind of loans are out there? 

The common loans originate from the Federal student debt system, through the Department of Education. You might also see these loans called Stafford Loans and the “official” name is William D. Ford Federal Direct Loan Program. But we’ll just call them Direct loans! 

These include:

Direct Subsidized loans - used to pay for undergraduate education. The subsidized means that the interest is paid for by the government as long as the borrower/student is in their undergraduate program in an in-school status. 

Direct Unsubsidized loans - used to pay for graduate education and professional school. The “unsubsidized” means that the interest accrues (in years without COVID relief) while the borrower is still in school. Currently, subsidized loans are not available to professional school students.

Direct PLUS loans  - sometimes these are used to pay for additional expenses (these are less favorable due to higher fees and interest rates, a credit check, and sometimes the need for a co-signer). Parents will sometimes refinance as a co-signer through the Direct PLUS system, but this help is not always a good thing.  Always take advantage of the direct unsubsidized loans before using any PLUS loans! 

Direct Consolidation Loans - this is when multiple loans from multiple servicers are combined and refinanced into one account, with one payment. This direct consolidation keeps your student loans within the federal system and all of the benefits remain available, such as forgiveness, income driven payment and even death benefits. 

This is opposed to Private Consolidation. In private consolidation, a private bank is paying off federally guaranteed debt with their private money. Then the borrower owes the private bank, not the federal government. This can be thought of as refinancing the loans, out of the federal system. Once a loan is paid off from the federal system, the benefits of the federal system are gone and the potential future benefits are gone as well. Private consolidation is generally a bad idea for federal borrowers, although it’s heavily marketed! 

What is a co-signer? 

A co-signer is someone who signs the loan with the borrower and therefore guarantees the loan. Meaning if the borrower doesn’t pay, the lender can pursue the co-signer to repay the funds. Usually this is a parent or other family member. It’s not a good idea to have a co-signer on your loans unless it’s an absolute requirement. 

What is a servicer? 

Under these Direct Federal Student loans, the money borrowed comes Directly from the federal government. The servicer is contracted by the Federal government, (the department of education) to administer the loans, communicate with you, track the loan and your address, and collect payments. This is known as servicing the loans. Several companies specialize in servicing federal student loans. 

What other types of loans are out there? 

Private student loans 

There are banks that will provide private student loans. Some veterinary students are enticed because private loans will sometimes have lower interest rates. But in the repayment section of this course, we’ll show you that’s not the whole story! Some medical school loans are available to veterinary students. Private student loans operate much like a loan for a car, house or business, without the protections of the federal student loan system. For example, most private student loans will seek repayment even if the borrower dies! Under the federal student loan system, if a borrower dies, the loans are automatically forgiven. Additionally, private student loans are unsecured. This means they are not backed by an asset and they are more risky for the bank.  To summarize, private student loans should always be a last resort. Please exhaust all other federal direct loans before taking any private loans! 

We’ve seen veterinary students take out mortgages on their house (or their parent’s house) or find other creative ways to finance veterinary school. This usually requires a co-signer and guarantor. At first glance they are attracted by the lower interest rates but this is a high-risk move without the protection of the federal system. And their calculations don’t include income driven repayment and debt forgiveness. Please exhaust all options before you even consider a risky 2nd mortgage! 

Keep in mind that there are other types of student aid, such as grants and scholarships. These are NOT loans because you don’t have to pay them back! 

Also, there are other types of debt. The most common among veterinary students is credit card debt. Credit cards are NOT an adequate way to pay for veterinary school or your living expenses. If you find your credit card debt growing during veterinary school, YOU’RE DOING SOMETHING WRONG! Let’s get back to the basics of budgeting, emergency sayings accounts and income and expenses. 

In this drip, we covered the types of loans that are available to you and some of the pros and cons. 

Soon we’ll discuss the types of repayment programs. Taking the loan out is the first step, and repayment is the last step. Income driven repayment (IDR) programs include Income Based Repayment (IBR) and Saving On A Valuable Education (SAVE). Certain types of Direct loans are subject to different types of repayment programs. 

If this seems confusing, that’s because it is! We’ll walk through this alphabet soup slowly and on the other side, you’ll be in complete control of your student debt!