Veterinary Professionals – Good Debt, Bad Debt & Some Answers
So you have successfully started that professional veterinary career you worked so hard to achieve. You expected it would be a tough road getting there, but you persisted and you’ve made it and you are really enjoying being a practicing Veterinary Professional – Veterinarian, Vet Tech, Veterinary Nurse, and more. What you hadn’t anticipated was a pandemic – no one does – and it’s impact on how many weeks, months, or years may be being added to your journey until you can enjoy the satisfaction of making that final student loan payment.
You are not alone. Student loan debt is now the second-highest consumer debt category, the first being mortgage debt. Here are some essential tips to help you successfully manage your Veterinary student debt in these challenging times…
The good news
- Educational debt is considered “good debt,” in that it is debt that is accrued for the purpose of advancing your earning power, worth, and marketability
- You have found a career you are passionate about that makes a difference in the lives of humans and animals
- According to the Bureau of Labor Statistics, the employment of veterinarians is projected to grow 19% over the next four years. This is much faster than the average for all occupations
This is one profession where borrowers who manage their money sensibly are likely to pay off their debt and go on to earn a good salary, as well as grow professionally. It’s still going to take a while, but there is light at the end of the Veterinary Student Debt tunnel.
The bad news – a worldwide student debt crisis
Sixty-nine percent of college students who graduated in the class of 2018 took out student loans to help finance their education. Upon graduation, their average debt was $29,800. This figure included both private and federal debt.
According to a 2018 article in Forbes, USA student loan debt totals an astounding $1.52 trillion, and there are more than 44 million borrowers in the United States alone who owe money on student loans.
(Student Loan Debt Statistics In 2019: A $1.5 Trillion Crisis.)
Information from the Federal Reserve Board Survey of Consumer Finances, indicates nearly 19% of borrowers owe $50,000 or more and 5.6% of those borrowers owe more than $100,000.
More than 5 million borrowers are in default on student loans.
The Bank of England recently began a review into how the UK’s growing student debt could affect the country’s financial stability.
We may be in a pandemic crisis, but we are also still in a student debt crisis, and the Veterinary world is feeling it too.
Some answers – What to do if you owe student debt
We are in such a crisis that the CBS Evening News recently featured a segment on how families can tackle student debt. CBS News business analyst Jill Schlesinger made a few recommendations to borrowers looking to pay off their student debt.
- List out all of your loan debt, including student loans, car loans, and credit card debt, based on the interest rate of each loan.
- Determine if it is possible for you to pay more than the minimum amount monthly.
- Try to pay more than the monthly minimum payment to pay off your debt faster.
- Once you understand these factors, you might consider options such as refinancing and consolidating your debt.
Refinancing and Consolidating
Refinancing your student loans
If you are considering refinancing your student loans, lowering your interest rate and saving money should be top on your list of reasons to look into this option.
For example, if you owe $50,000 on a federal student loan at 8% interest and you can refinance that amount with a private lender at 4.75% or 5%, you will lower your monthly payments slightly, freeing up some needed cash. Not to mention, you will save several thousand dollars in interest over the remainder of the loan.
What to consider before you refinance
Before you rush to refinance your federal loans with a private lender, remember that federal student loans come with various protections that are not provided by private lenders.
Some of these include:
- Forgiveness for borrowers based on hardship or depending on their employment. For example, people in government jobs, military, teaching, and some nonprofit work may be able to have portions of their federal loans forgiven.
- Lower monthly payments to low-income students.
- The Federal Direct Consolidation Program, by which you can consolidate multiple federal student loans into one. With this program, the new interest rate is an average of your current rates.
- The U.S. Department of Education may forgive loans if your school defrauded you or has closed.
*information provided by www.debt.org/
All benefits and protections for federal student loans disappear if you choose to refinance these loans through a bank, a credit union, or an online lender.
Consolidating your student loans
Many people with student loan debt owe money to several lending institutions. Consequently, they have several payments due on different days of the month.
One advantage to consolidating student loans is it simplifies your payment schedule. You make one payment to one lender each month.
Consolidating your loan payments may make it possible to refinance your debt at a lower interest rate. This could result in lower monthly payments.
Keep in mind, consolidating your student loans is not guaranteed to lower your payments. However, it will simplify your busy life, freeing up time to focus on your new career in the veterinary field, as well as on other activities you enjoy.
Tips for managing your debt
Know what you owe
Do an inventory of your student debt. If you were not as organized and detail-oriented when you borrowed the money as the educated professional you are now, you might have to do some research to get a clear picture of your debt. Start here:
- To find any federal loan you owe, you can check the National Student Loan Data System (NSLDS).
- To check what debts you owe to private lenders, you should contact them directly.
Know the loan specifics
Once you have done an inventory of your loans and you know the balance and interest rate of each loan, determine which of your loans, if any, qualify for things such as a deferment, loan forgiveness, or a better payment plan.
Get a copy of your credit report
Having a copy of your credit report is essential because your credit report is a tool for you and for anyone you may want to borrow from in the future.
Your credit report:
- Enables you to see your lenders
- Allows lenders and businesses to evaluate your applications for credit, loans, insurance, and buying or renting a home.
*information provided by https://www.myfico.com/credit-education/credit-reports
You should check your credit report at least once a year. If you see any incorrect information, dispute it.
To increase your credit score, focus on your open accounts and make sure to keep them current.
You can get free credit reports from these sites:
- Credit Sesame
- Credit Karma
Understand your payment options
Some loans offer the chance to switch to an income-based repayment plan (also known as an income-driven repayment plan) where your payment is calculated based on the amount of money you are earning.
A temporary deferment might be an option if you are financially unable to make your payments. For example, some federal loans allow you to apply for a temporary deferment while you are unemployed and seeking full-time employment.
These options are not available for loans taken out through private lenders.
Choose the payment plan that’s best for you
Before deciding to refinance or consolidate your loan debt, make sure you have explored all of your options such as Income-Based Repayment plans or Pay-As-You-Earn (PAYE) Student Loan Repayment Plans.
These options give you a more manageable minimum monthly payment based on what your current income is.
Take advantage of tax deductions
Don’t forget to use the interest on your student loan debt in your favor where you can. Chances are you can deduct the interest on your federal taxes.
In the USA the student loan interest tax deduction allows you to reduce your taxable income by up to $2,500 for interest paid on student loans for the year you are filing – there are similar deductions available in most countries.
Look into jobs that offer debt payment or loan forgiveness
Some employers offer assistance with student loan payments as part of a workplace benefits package. This is becoming more standard, much like 401(k)s, medical, and dental insurance, as an added incentive to attract talented employees.
Make the most of your money
Regardless of how you opt to pay down your student debt, there are actions you can start taking today to help your finances while you pay down your loans.
Stick to a budget
Once you have determined what your monthly student loan payment will be, create a monthly budget that figures in all of your fixed monthly bills. Seeing your budget written out is a helpful way to know exactly where your money is going and where you might be able to trim back.
Try to eliminate anything you don’t think you need and put that additional money toward your loan debt.
The more ways you can find to save money that can go toward debt repayment, the sooner you will pay off your debt and the less you will be paying in the long run.
Think about whether you would be willing to move for a period of time to pay off your loan.
Several locations offer some form of student loan assistance to professionals who are willing to move there. This perk is designed to attract more young, educated, professional people to move to specific areas.
Kansas; Detroit; Niagara Falls, N.Y.; and Saskatchewan, Canada are all places that are willing to give you some reimbursement for moving there.
Keep in mind that there are usually strings attached. You might have to live or work in a particular community or neighborhood, work at a certain company, or make a commitment to stay in the location for a designated amount of time.
Hold off adding more big debts
Of course, you have plans and goals for the future and getting your degree(s) is a step in making that happen. However, if you have to get another year or two out of the hand-me-down Honda instead of accruing more debt, it’s probably your best option.
Programs that may help pay off your loan debt
Just as certain locations are offering perks to attract young professionals, certain shortage areas also offer assistance paying off student loans in order to entice new professionals into the field.
Quality veterinary professionals are always in demand.
Look into programs such as:
Back to the good news
Remember what we said at the very beginning of this article – educational debt is considered “good debt,” in that it is debt that is accrued for the purpose of advancing your worth and marketability, plus you have found a career you are passionate about that makes a difference in the lives of humans and animals.
The veterinary medical field has grown to such a degree that it is now able to offer procedures and specialty treatments comparable to many treatments offered in human medicine. This being the case, there is no shortage of jobs for professionals in the veterinary field.
This is one profession where if you manage your money wisely, you are likely to pay off your debt and go on to earn a healthy salary, as well as grow professionally. It’s still going to take a while, but there really is light at the end of the Veterinary Student Debt tunnel, and a brand new day awaits.
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