How to Pay Off Vet School Loans

TLDW (too long, didn’t watch): Roo Student Loan Webinar

Roo recently hosted a free webinar for our users on managing student loans, which can be found here. We sat down with the perfect person to take on this topic: Dr. Meredith Jones, DVM — emergency veterinarian turned Certified Student Loan Planner (CSLP®) at Student Loan Planner and co-founder of the Veterinary Financial Summit — to discuss how veterinarians can best pay off their vet school loans. 

Watch Now

This is just one of a multitude of free informational webinars and CE events Roo offers to its users as we continue to foster community in our little corner of the vet med universe. To make these informational series more accessible, we’ll now be hosting them on our blog for all Roo users to access at their convenience, and we’ll be providing a written summary for those who prefer to read at their own pace.

How long does it take to pay off vet school loans? 

The short answer — it depends. Bet you saw that coming. There are two predominant strategies for paying off vet school loans: 

1. Aggressive + Fast (10 years) - pay off your loans as quickly as possible.
2. Long Term + Forgiveness (20 - 25 years) - get on an Income Driven Repayment Plan (IDR) and pay only the monthly minimums, then pursue loan forgiveness.

Whichever route you choose, it’s important to pick one and stick with it for the greatest benefits as flip-flopping back and forth can be inefficient or wasteful.  

The Aggressive method tends to be preferred for vets whose annual income is greater than their student loan balance. 

If your student loan balance outpaces your yearly income, it’s usually most beneficial to go for the long term option, which tends to be the most affordable over time. As an added bonus, income driven repayment plans free up cash flow for other financial goals you may have such as buying a home or opening a practice.

However, don’t forget about the emotional weight of student debt. If it’s going to take a mental toll on you to be paying off student loans for 20+ years, the faster, more aggressive route might be a better fit for you. 

Income Driven Repayment Plans

The standard vet school loan takes about 10 years to pay off with payments around $2000 to $4000 per month. That’s a lot of zeros. An Income Driven Repayment Plan allows vets to pay off their federal loans over a longer period of time, making lower monthly payments based on their income that can get down into the hundreds. 

Any job qualifies for these plans, you could even be a full-time relief vet!

PAYE vs. REPAYE / SAVE

There are a few options here, but the best two we’re going to focus on tend to be:

1. PAYE (Pay as you earn) - Pay 10% of your discretionary monthly income for about 20 years. Must have taken out your loan after 2014 to qualify. These will be going away on July 1, 2024. 
2. SAVE (Saving on a Valuable Education - formerly REPAYE) - Pay about 10% of your monthly discretionary income for around 25 years. If you were on a REPAYE plan before, you’ll automatically be switched over to Save. 

After either plan expires, the remainder of your loan can be forgiven - woo hoo!

Choosing the best plan for you is going to depend on your unique situation. Student Loan Planner offers a Free Student Loan Calculator that can help you make the best decision for you. However, there’s no substitute for meeting with an expert to make sure you’re fully taking advantage of every opportunity available to you. 

KEY TAKEAWAY: If you’re going the long term route, never pay more than the minimum required payment. Any remaining balance on your loan will be forgiven at the end of your repayment period so there’s no benefit to paying extra!

Student Loan Forgiveness

Once you’ve made 240 to 300 qualifying payments (20 to 25 years worth), your loans will be forgiven. Poof - gone! However, this does have some consequences. There’s going to be a tax bomb, which is quite an alarming word pairing, we know. 

Basically, the amount of money left on your loan that gets forgiven is counted as income on your annual taxes that year, which may be a lot. It’s best to prepare for this added expense by saving up some money in advance. A Student Loan expert can help you estimate how much you’ll need to set aside. 

The good news is some vets will be able to dodge the tax bomb entirely with Public Service Loan Forgiveness. If you worked at least 10 years for the government or a non-for-profit, your vet school student loans can be forgiven tax-free! 

Switching Plans

You can switch from one Income Driven Repayment Plan to another until you’ve made 60 payments, so the first five years. When you do, all the years you paid into a previous plan still count toward your forgiveness timeline! So it’s okay to switch between plans early on, you just don’t want to switch off of IDRs entirely once you’ve started.

Upcoming IDR Changes to be aware of

Loan consolidation coming in 2024!

Do you have an undergraduate student loan that hasn’t been paid off yet? A new change coming in 2024 allows you to combine your vet school and undergraduate loans, meaning any loan payments you made between undergrad and vet school can be applied to your IDR loans. It’s like getting extra credit toward your loan and could help you pay off your loans up to three years sooner!

If you have even $1 left on your undergraduate loan and made payments towards that loan between undergrad and vet school, now’s the time to act. We recommend applying to consolidate your loans by 12/31/23 to ensure you meet the deadline! 

Tips for Restarting Loan Payments

This one’s huge: DON’T recertify your income until you have to. 

You don’t need to recertify your income until six months after loan payments restart, which is early 2025 for most vets. Most veterinarians saw their income go up during COVID, but as long as the government doesn’t know that, your IDR payments will be based on your former, lower income from your 2018 tax filing (in 2019). Nice!

The exception here is if your income has gone down for whatever reason, you will want to recertify to see those benefits. 

SAVE Plan Changes

The way your discretionary income is calculated has been updated using a higher poverty line deduction of 225%. This should result in lower income-based payments.  

Additionally, the interest subsidy has jumped from 50% to 100%. This means the government will take care of any unpaid interest on your loan. So on a SAVE Plan, you won’t see your balance increase over time, which is typical for some other plans. 

Are you married? You can now file your taxes separately, which may benefit you with lower loan payments. This is because you can now exclude your spouse’s income by filing separately, a strategy you may want to consider before you do your 2023 taxes in April.

Landmines to Avoid

Here are some common landmines avoid when it comes to student loans:

1. DO NOT refinance

You’re probably suspicious of that mailer you got telling you to refinance your loan, and you’re right! Refinancing federal loans through a private bank makes you ineligible for income driven repayment plans AND loan forgiveness. It also excludes you from any federal loan repayment pauses like the one we just had during COVID. Not to mention interest rates are exceptionally high right now. 

In this case, some of the best advice we can give is: Keep it federal. Keep it safe. 

2. Not having a plan

The next thing to avoid is — avoidance! The best way to set yourself up for success is to address your student loans proactively and have a plan. Student loan payments have been paused for three and half years so it’s easy to stop thinking about them, but now is the time to make a plan and get ahead of it! The worst plan is having no plan at all.  

3. Stick to the plan

Whether you choose the aggressive route or the long term route to paying off your vet school loans, you need to commit to your decision. If you’re working toward loan forgiveness, there’s no benefit to putting extra money toward your loan. And definitely don’t pay off interest, that’s going to be forgiven!

So what if you’re on an IDR plan and find yourself with extra money you don’t know what to do with? Plan ahead and save it for the tax bomb, or put the money in a brokerage account to generate even more money!  

4. Don’t miss out on loopholes

The rules change all the time, always make sure you’re up to date on the most current information. The best way to ensure you don’t miss out on any loopholes at all? You guessed it, meet with an expert. Just one hour of your time could go a long way and save you a lot of money. 

With the pause on loan payments being lifted, we know this issue is at the forefront of a lot of vets’ minds right now; so we hope we’ve armed you with some helpful information to go tackle this common challenge. As always, Roo has your back! 

Have a topic you’d like us to cover? Send it our way at Ask@roo.vet.