Case study: I'm drowning in debt


Our expert shows a young veterinarian how to spend smarter and chip away at her debt.

As a child, you loved animals and dreamt of caring for them as a career. You worked hard through years of veterinary school and sweated through a tough interview before landing your first job. So what's your reward for all your dedication? A heaping pile of student debt, laced with ever-increasing interest charges.

The debt's not going to disappear anytime soon, either. More than half the veterinarians we surveyed said it would take them 11 or more years to pay off their student loans. Add in car loans, credit card debt, and other consumer debt, and our survey showed that veterinarians' mean amount of total debt was more than $55,000.

So what's the solution? Perhaps veterinary practice owners should pay associates more. Or maybe these veterinarians simply need to spend smarter and work harder to reduce their student debt load. After all, 59 percent of the veterinarians we surveyed have little to no credit card debt, and most feel they make enough money to live comfortably and pay off student loans. Read on for more about your colleagues' personal finances.

A closer look

Case study

Drowning in debt: A real-life case study

Here's the story of one zoo intern who wonders how she'll ever repay her student debt.

Dr. Kristina Delaski has a problem. A $150,000 problem. Dr. Delaski, like most recent graduates, carries a heavy student debt load. And now, as she works through a two-year internship, she wonders how she'll pay off her student loans while living a relatively normal life. It's the same problem that has faced young veterinarians for years—and a problem that keeps getting worse.

Dr. Delaski graduated from Tufts University in 2007, then took a position at a private practice. Knowing her goal was to work in zoo medicine, she chipped away at her student loans while keeping her eyes peeled for new opportunities. After a year at the practice, she found her dream job—albeit a low-paying one—as an intern at the Cincinnati Zoo. While she works toward completing the internship in July 2010, her loans remain in deferment, looming over her head until she finds a permanent position.

So how will she pay back the loans? Put simply, it won't be easy. Take a look at Dr. Delaski's monthly finances, then read on for advice from a personal finance consultant on how she can spend smarter and knock off the debt.

Dr. Delaski's finances

Personal finance analysis

Penny pinch like a pro

As veterinary students and recent graduates are well aware, student debt is an increasing problem. Fritz Wood, CPA, CFP, owner of H.F. Wood Consulting in Lake Quivira, Kan., recently consulted with a student who had $320,000 in student loans. Though the student was following her dreams, that's a high price to pay to work in her ideal career field. Wood has even heard of students committing suicide due to the stress of paying back loans. "It's not a pretty picture right now," Wood says.

But repaying the loans isn't impossible, Wood says. The first thing Dr. Delaski should focus on is paying off her credit card debt. She's likely paying a relatively high amount of interest, so eliminating that should be a priority. Next, she should establish an emergency fund of about three months' living expenses in an easily accessible savings account. This will help cover those unexpected costs—like car repairs or medical bills—without infringing on her ability to repay the loans or incurring credit card debt.

Now, for the loan repayment. Assuming Dr. Delaski finds a full-time, permanent position following the internship, she should consider structuring the loan repayment over 25 years, Wood says. She'll pay more in interest than she would with a 10-year plan, but she'll free up more money each month to pay other bills—about $700 more per month.

After deciding on a repayment plan, Wood says, Dr. Delaski should think about the future. Many financial experts recommend putting 10 percent to 15 percent of your paycheck away for retirement. Dr. Delaski should strive for that number.

Unfortunately, the student debt problem isn't likely to go away soon, Wood says. Tuition is increasing faster than starting salaries, leaving more and more veterinarians like Dr. Delaski stuck footing an overwhelming bill. But hope is not lost for these young professionals. "It's not like there's no light at the end of the tunnel," Wood says. "You just have to crunch the numbers and earn and spend smarter."

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