Please welcome Michelle Smith, DVM. She is a small animal veterinarian who resides in Los Angeles with her husband and 1 child. Read how she managed to pay off over $200k in student loans over 5.5 years!
1. Please introduce yourself! Give us a little of your background and how you got started in veterinary medicine.
I am one of those people who never wanted to be anything else, except for a brief interest in architecture, and had a sole focus on becoming a veterinarian from the age of about ten years old. I started working in a veterinary office when I was 20 years old and worked there until I got into vet school.
2. How much debt did you have upon graduating from veterinary school (if any)?
My veterinary education cost me $211,194. This was the total amount owed upon graduation including interest up until that point. I went to a state school for undergrad which myself and my parents paid for, and had no car or credit card debt. My husband and I owned a house on which we owed approximately $190,000.
3. What was your level of financial literacy prior to veterinary school? Were you price sensitive when pursuing veterinary medicine?
Before vet school, I had a basic education in finance thanks to my dad who teaches real estate and finance courses at the graduate level. I knew not to use credit cards for things I didn’t actually have the money for, and I knew the value of a dollar since I had to contribute to my undergrad education, as well as buy things I wanted or needed myself.
I was price sensitive, but not enough to change my applications based on tuition. I applied to schools that I thought I had a good chance of getting into. I ended up going to Ohio State, which has one of the highest out of state tuitions, but allows you to claim residency after the first year to get in-state tuition, so that is what I did (Editor’s note: Smart move!). I did forego working during the summers so I wouldn’t compromise my residency status(I traveled out of state during the summers).
4. Did your veterinary school provide personal finance education? If so, what did you think of the quality?
We had a few classes on loan repayment strategies, in which the instructor mainly seemed to push us toward the income based repayment. I vaguely remember something about budgeting in our professional development seminar, which also had sections about negotiating salary. The quality was relatively poor in both cases, since many scenarios used hypothetical numbers and/or old data. No one gave us actual examples of costs of living and expected monthly take home salary. (Editor’s note: Giving a simple example of what a budget will look like post graduation would do wonders for those that have never worked a salaried position before.)
5. Describe your debt payback strategy and how you decided to use that strategy (if applicable).
I wanted to pay off my loans as fast as possible. I did not want a massive loan hanging over my head for 25-30 years, and I did not necessarily trust that the balance would be forgiven at the end. Nor did I want to pay thousands toward the life of the loan only to watch the balance continually rise and then have to pay astronomical taxes at the end. So I chose the standard 10 year repayment plan and I began aggressively paying off my loans as soon as the grace period ended.
6. How long did it take for you to pay off your debt (if any)?
I paid off my student loan in full in 5.5 years.
7. If you have a significant other/spouse, what role did they play while paying off debt?
My husband played a large part in paying off my loan. He is very financially inclined and manages all of our finances, investments and bills, and he was also highly motivated to get it paid off as soon as possible. The first three years after I graduated we were child-free, and my husband’s salary was enough to live on plus save for retirement, so we were able to put almost my entire salary toward my student loan. I had just bought my first horse when I became pregnant, and we bought a second house (the first was in another state being used as a rental property), so my payments dropped at that point to the minimum payment or just over. Then, a few years later we ended up selling our first house and using the profit to pay the remaining balance of about 75k.
8. Did you have any challenges while paying back your debt?
Our first house was in an underwater mortgage for several years. We bought it just at the peak of the market in 2008, and then its value dropped basically 100k overnight. We moved, and had no choice but to rent it out where we basically broke even or only lost a few hundred dollars on it per year in repair fees etc. Since we couldn’t sell our first house without taking a huge loss before we bought our second, we had two mortgages for awhile. We also used a huge chunk of savings and investments to make the downpayment on the second house, but we were able to recoup those once we sold the first house.
9. What are some financial mistakes that you’ve made?
The biggest mistake I made was not paying the accrued interest during school semesters. I received bills every quarter that listed my accrued interest for that quarter and gave the option of paying them off before they were added to the principal and capitalized. I never paid them, even though I had left over loan money that I could have put toward those balances. If I had done that, it would have saved me thousands of dollars on my loan balance at the end. I didn’t understand the capitalization effect at the time (I still don’t really know how to calculate how much money that added to my total loan amount) even though I understood it would be added to the principal.
(Editor’s note: It’s ridiculously easy to receive these loans. It’s so much harder to understand the best way to manage them, especially while you’re in school and you have other things to worry about.)
10. What is your financial advice for other veterinarians?
My advice is to have goals and write them down, and look at them often. You are much more likely to realize them if they have a tangible presence somewhere. Also, pay off your loans as fast as you can. It has been very freeing to not have a huge debt burden. Then, start saving for retirement.
Closing thoughts: Despite the large loan amount and an underwater mortgage, it was clear that Dr. Smith was intent on paying off these loans sooner rather than later. Having this same mindset with her husband was key in order for the loans to be paid off so quickly. They also employed a great strategy by living off of one income and using her income to accelerate the payments. Congrats on getting rid of your debt, Dr. Smith, and thanks for sharing your story!
Are you interested in submitting your own Vet Success Story? I’m currently accepting submissions for student loan debt payoff, FIRE, and Entrepreneurs. Contact me at email@example.com.