Statistics on veterinary student debt can be frightening. Here are just two:
• According to the American Veterinary Medical Association’s (AVMA) 2015 Report on Veterinary Debt and Income, veterinarians’ average debt load is more than twice the level of starting income. Considering the ratio of student debt to starting salary should be 1-to-1, this discrepancy is trouble for veterinary associates and their employers.
• Recent graduates of the University of Georgia’s College of Veterinary Medicine had an average student debt burden of $160,000, according to Jeff Sanford, director of entrepreneurial studies at the University of Georgia. Some estimates suggest that figure may be low compared to national averages.
So, when it’s your new associate coming face-to-face with the financial realities of student debt, there are a few things you can try to make him or her feel you know the situation and that you’re going to help. Here are my three ideas for mentoring cash-strapped, debt-ridden new doctors:
1. Be understanding
New associates may not have considered the return on their investment of blood, sweat, tears and big loans when they chose a veterinary education, but now they’re here and working for you. Not only must they make good on their outlay, they now need to prove they’ll be a great investment for you.
These new doctors are ready to begin their lives. They want to get married, buy homes and have kids (big and expensive assumptions, I know). They feel misled about their financial opportunities to accomplish these goals. They thought their troubles were over as soon as they donned their stethoscopes and white coats.
The ideal situation from these associates’ perspective, of course, is that you will increase their pay, but many practice owners feel trepidation at the thought of giving unproven associates outsized salaries just to balance debt load. That’s where my second suggestion comes in.
2. Offer financial support
We could all maximize tax advantages for employer and employee if practice owners could offset some student debt under an educational assistance program. This idea has been repeatedly proposed to Congress but hasn’t passed yet.
An employer paying part of a student loan does not qualify as an educational assistance program, according to Mary Lou Paoletti, CPA, with practice management consulting group Wutchiett Tumblin and Associates in Columbus, Ohio. The payment would be deductible for the employer, but it would be subject to taxes for the employee. Many people feel more deductions shouldn’t be allowed because the employee can already deduct the interest on their student loans.
A veterinary practice owner could still directly pay toward an associate’s debt and reap some tax benefits, according to Paoletti. This assistance would be deductible as “other wages” and subject to Social Security and Medicare taxes, but not federal unemployment tax (and, in most cases, not state unemployment tax).
Employees might prefer just being paid more wages, but if the new veterinarian is paid a fair wage and budgets his or her lifestyle around that wage, this would truly be a benefit (almost like a bonus). [Editor’s note: Cool idea, but we don’t know a private practice owner who’s tried this yet. You should always check with your accountant or tax professional.
3. Give guidance
Encourage employees to seek debt counseling. Financial planners can be integral in giving someone a plan and a sense of control over their situation.
And don’t undercut the importance of a willing ear. Merely the act of acknowledging your associate’s student debt issue—one you probably didn’t face—shows your willingness to work with the associate to guide and maximize his or her time, energy and earning potential in your practice.
Making new associates feel like there’s a future with you could be the inspiration they need to buckle down and prove their worth to you and prove to themselves they can find a happy, healthy, financially stable future in their own lives.