Military & Veteran Debt Relief Options

Veterans and active military struggle with mortgages, auto loans and credit card debt the same as civilian consumers. Bills can pile up while you’re deployed or if you’re a vet and just lost a job. Find out what debt relief options are available to you.

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Frequent relocation and inexperience managing money could cause stress for veterans and active military. Learn how much financial assistance is available through debt management, VA personal loans and credit consolidation that will help you stay ahead of debt.

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It’s not unusual for consumers, especially veterans and active military, to hit bumps in the financial road. Fortunately, there are benefits and programs available to smooth out the rough spots. Find out more about what the VA and private businesses are doing to assist you.

Home > Military & Veteran Debt Relief Options

Veterans and active-duty military personnel face their own unique challenges, but their service to the nation — whether past or ongoing — does not exclude them or their families from many of the same financial pressures and pitfalls that confront civilians.

Luckily, when it comes to debt management, debt relief, or financial assistance for veterans or active troops, there are programs available.

But first, a word of caution.

Debt and Security Clearance

Trouble with debt is the No. 1 reason active-duty personnel lose their security status.

If your job requires a security clearance, the Uniform Code of Military Justice Article 134 — a catchall often described as the “Devil’s Article” — sets rules for unbecoming behavior that can cost you. This means absolutely minding your budget, or at least demonstrating you’re taking steps to get your finances in order.

For solid reasons — you’re not seen as trustworthy; your judgment is suspect; you’re a candidate for bribery, or other illegal acts — too much debt can cost you a security clearance.

If you’re applying for a job that requires security clearance, the military can and will pull your credit report. To stay on track for promotions, more responsibility and higher pay, you must keep your finances well in hand.

Here’s how to do it.

Financial Assistance Programs

The federal government provides financial assistance programs that are directly aimed at active military and veteran debt relief, as well as preventing debt in the first place. The programs include a range of debt relief, including debt consolidation, immediate emergency assistance, housing help, student loan help and more. Military members and veterans drowning in debt can also take advantage of traditional debt relief, like debt consolidation and nonprofit credit counseling.

Military Debt Consolidation Loan (MDCL) — MDCL refinances an active VA mortgage loan, with a “cash out” element that can be used to pay off unsecured debts, such as credit cards, medical bills, payday loans and more. You make a single fixed monthly payment to the lender for a set amount of time, rather than multiple loan repayments to multiple creditors. Because it is a mortgage refinance, there are closing costs that are subtracted from the final amount.

Veterans of Foreign Wars Unmet Needs — program helps with unexpected financial difficulties veterans face as a result of deployment or other military-related activity or injury. Military families can get grants of up to $1,500 to help with basic life needs. The money goes directly to the creditor.

USA Cares Veteran and Family Support System — includes assistance for emergencies, housing, career training, and more for veterans facing challenges ranging from unemployment to foreclosure to PTSD.

Operation Family Fund — is a nonprofit organization run by volunteers and funded through donations that gives grants to military families in need.

Operation First Response — provides financial assistance for disabled veterans and their families, paying for things like utilities, mortgage, rent, groceries and vehicles.

Personal loans — are another way military members and veterans can find debt relief. There are lenders that specifically offer loans to active-military and veterans to pay bills and for emergencies. Personal debt consolidation loans are usually unsecured – which means no property is used as collateral – and may be a traditional bank loan, a payday loan, a peer-to-peer (P2P) loan or even borrowing from family and friends. Personal loans from a lending institution usually require good credit, and high-interest payday loans can often cause further financial issues, so lenders, and what they offer, should be researched carefully.

Debt settlement — is a debt-relief option the allows you to pay less than what you owe on debt, but it can be a long process that will damage your credit report and cost you money in fees.  A for-profit debt settlement company negotiates with your creditors for a lump-sum settlement. You make monthly payments to the company until you reach the negotiated amount. Once an agreement with creditors is reached, the amount raised by your payments is used to pay the creditors. It stays on your credit report for seven years, and the forgiven balance is considered income by the IRS and will be taxed.

Debt Consolidation — Debt consolidation means lumping several credit card debts together, taking out a big loan from a bank or credit union to pay them all off, then repaying the lender with one monthly payment. Aside from the loans already covered here, debt consolidation can include debt management plans, in which a nonprofit credit counselor works with your creditors to lower interest rates and reach an affordable monthly payment to retire your debt in 3-5 years. Debt management will improve your credit score once your balances start shrinking and payments are being made on-time. It is not a loan and, unlike debt settlement, you pay the entire balances owed.

Student loan consolidation — is similar to a debt consolidation loan in that it combines all your student loans into one loan at a reduced interest rate. The federal Direct Consolidation Loan is a way to consolidate federally backed student loans. It offers low interest and extends the length of the loans, making the monthly payment smaller. Some companies also offer consolidation for private student loans. The VA also offers student loan debt relief options including the VA Education Debt Reduction Program, which repays a portion, or all, of student loans for workers who take a job at a VA center or hospital.

VA Program: Home Loans for Veterans

Taking advantage of VA mortgage rates is one of the top benefits of being in the military. VA home loan rates are typically lower than those for conventional loans. The Department of Veterans Affairs guarantees up to 25% of the payment on VA home loans, which means no private mortgage insurance or down payment is needed. Learn more about the guidelines and requirements for this extraordinary military benefit.

VA Personal Loan Options for Veterans

There are several lenders offering personal loans for veterans and active members of the military, even those with bad credit. Unsecured loans up to $40,000 are available and interest rates range from as low as 4.99% to 36%, depending on your credit history. Military spouses and dependents also are eligible for financial assistance. Personal loans can be used for any purpose, whether it’s paying off credit cards, buying a new car or a home improvement project. In most cases, you can apply online and expect an answer in less than 24 hours. Some lenders have special rates for military, but restrictive conditions – approved credit score, direct deposit checking account, and more – must be met to qualify.

Debt Protection Programs for Veterans

Whether you’re a veteran or on active duty, look for businesses that cater to service personnel. Give these programs a chance. You’re not taking unfair advantage of your service; you’re giving the provider — who knows your dollars are tight — an opportunity to express his/her gratitude.

Otherwise, do not allow yourself to be locked into a state of financial anxiety. Instead, avail yourself of the protections in place to help stretch your scarce dollars. These programs are designed specifically to help keep military personnel and veterans out of debit.

The federal government has safeguards in place to help protect veterans, including:

Servicemembers Civil Relief Act (SCRA): Active-duty service personnel, reservists, and members of the National Guard — while on active duty — are protected by SCRA, which has provisions that include:

  • Preventing your landlord from evicting you without a court order as long as the rent is under a certain amount (it increases every year).
  • Stops foreclosures without a court order
  • Stops vehicle repossessions without a court order if you made a deposit, or at least one payment before you joined the military
  • You can’t be taken to court for civil proceedings; this includes divorce and child-support hearings
  • Keeps the owner of a self-storage facility from selling your belongings for overdue rent without a court order
  • Allows you terminate your cell phone contract if you relocate for at least 90 days to a place that doesn’t have coverage under your current provider
  • Lets you end a vehicle lease you signed before joining the military if you are mobilized, PCS OCONUS, or deploy OCONUS for at least 180 days
  • Lets you end a housing lease without penalty if you deploy for 90 days or more
  • Limits interest on all loans taken out before joining the military to 6%. This includes auto loans, mortgages, student loans, credit cards, etc.
  • If you delay payments under the SCRA, it won’t reflect on your credit report.

Joint Federal Travel Regulations: Designed to protect military personnel facing foreclosures or evictions, this regulation provides cash allowances to assist with travels and transfers associated with landlord actions.

Military Lending Act: The MLA puts a cap on interest and fees imposed on military service personnel who indulge in what amounts to desperation debt: payday loans, tax-refund anticipation loans, and vehicle title loans. It’s not much of a cap, really — 36% — but it beats what civilians sometimes pay.

If consolidating your debt into a single payment (with an ironclad vow to avoid at all costs running up those paid-off credit cards again) with a lower interest rate seems desirable, investigate your options. The better your credit score, the better the terms you can expect to receive. Keep in mind those lenders that cater to veterans and active-duty personnel: USAA and Navy Federal Credit Union.

Other Sources of Military Debt Relief

Working your way through the VA bureaucracy can take its toll. Still, taking advantage of federal VA benefits programs can be useful. Among other things, the VA offers financial advice and legal counseling.

Meanwhile, if you’re a veteran battling to make ends meet after leaving service, there are other sources. Here are a few other options:

The American Legion can step in with cash grants for families needing help with the cost of shelter, food, utilities, and health expenses.

MilitaryOneSource, a Department of Defense organization, provides free financial counseling, resources on navigating military life, education, housing and more to current and retired military members and their families

Organizations that provide financial assistance to veterans include Operation First Response and The Coalition to Salute American Heroes. Each intervenes on behalf of veterans who are facing emergencies such as utility shutoffs, foreclosure or eviction, vehicle payments, groceries, and food.

Disabled American Veterans supports veterans who became disabled as a result of their service. With more than 1,300 chapters and 1 million members across the country, DAV helps provide the resources disabled veterans and their families need to pursue life to its fullest. Services include transportation, assistance with applications for services, education, and home-loan guarantees.

The American Red Cross Financial Assistance for Military Families offers money for emergency travel, burial of a family member, emergency food and shelter and more for active duty service members, activated National Guard or Reserve, immediate family, military retirees and spouses widows or widowers. Help is available 24/7, 365 days a year, and those who need it can apply either by phone or online.

The Military Family Advisory Network provides resources for military families and veterans on financial help for housing, food insecurity, education and more.

Armed Forces Legal Assistance offers free legal help for active-duty military for any legal matter, ranging from understanding a lease, to estate planning, to adopting a child.

Debt Help for Military Spouses

Spouses of active members of the military can get help paying their bills and other debt relief under the SCRA. As mentioned above, the law caps credit card and mortgage interest rates while on active duty and provides protections against eviction and foreclosure. In addition, there are health and life insurance benefits, housing benefits and tax deductions for students who are military spouses.

As found in a 2020 Military Lifestyle survey by Blue Star Families and the Institute for Veterans and Military Families, families of veterans and active-duty service members face challenges, both financial and otherwise. The most common contributors to financial stress for active-duty family respondents who indicated some financial stress are unemployment and underemployment; student loans; and out-of-pocket relocation costs.

  • 77% of active-duty family respondents who have out-of-pocket housing costs spend more than $200 a month more than their Basic Allowance for Housing allotment.
  • 20% of active-duty spouses are unemployed and actively seeking employment. 67% of employed active-duty spouses report they are underemployed.
  • 67% of active-duty spouses earned less than $20,000 in 2019; 40% earned no income at all in 2019.
  • 28% of active-duty family respondents report that "military pay" is one of their top five issues.
  • 14% of enlisted active-duty family respondents reported low or very low food security.

Importance of Budgeting

Of course, financial assistance for veterans and active-duty military begins where it does for all Americans, with a budget. While it may not be fun, it’s as essential to your financial health and avoiding debt as mastering a 20-mile hike in full combat gear is to your survival in hostile territory.

No financial assistance program ever created can deal with your money needs if you’re unwilling to do the tough work of figuring out where your income goes, developing a plan to manage it, and sticking to it.

Budgeting can be as simple of keeping track of monthly income and bills on a legal pad or a doc on your computer. It doesn’t have to be fancy or complicated. There are also online templates and apps that can help strategize your goals. Find whatever works best for you to ensure that you’ll be consistent and keep track.

The most important aspect of budgeting is to keep track of money coming in, what bills have to be paid and when. Setting up automatic payments and keeping track of when they are due can be a huge step in making sure bills are paid on time. Review your budget frequently and make adjustments where needed. Once you’re in the habit, it won’t be a chore, but a great debt relief tool that has cost you nothing and you’re in control of.

Education Opportunities

The GI Bill, Montgomery GI Bill, Reserve Educational Assistance and the National Call to Service are just some of the programs the government offers to active military, reserves, veterans and their families to help cover the cost of college or job training. The programs help pay for an education that may otherwise be out of reach. In addition, more education can lead to more earning potential and fewer problems with debt.

Seek Help

Options for veteran debt relief, as well as for debt relief for active-duty military members, are wide-ranging and easily available. Remember, too, help paying bills doesn’t only mean loans and grants, but also financial education and resources that help you manage money.

Those who are facing financial hardship should immediately reach out for help, whether to a specific program that will help with a financial challenge, or for more general help, like nonprofit credit counseling.

The military knows that it’s in everyone’s best interest for active-duty service members and veterans drowning in debt to get help and stay on solid financial footing.

Military members, their families or veterans who are in danger of losing their home or facing other serious issues should not be ashamed or embarrassed, but should know there is help available, including:

Homeowners Assistance Program: The HAP is available to active-duty personnel and veterans, as well as surviving spouses and civilian employees of the Department of Defense. It provides financial support for qualified candidates who have to sell their homes at a loss, or those who aren’t able to sell their home.

Nonprofit Credit Counseling: Military personnel and veterans should know better than most the value of consulting expert specialists in complicated matters. Nonprofit credit counselors understand which levers to press to create the best possible circumstances to manage, and ultimately eliminate, debt.

Nonprofit credit counselors are required by law to act in a client’s best interest. The credit counseling session is free, and they will review your finances, help you form a budget, and discuss options for debt relief.

About The Author

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].

Sources:

  1. N.A (ND) Debt Management for Military and Veterans. Retrieved from https://www.nfcc.org/resources/personal-finance-resources-and-programs-for-military-and-veterans/debt-management-for-military-and-veterans/
  2. N.A. (2020, November 13) Pay Off Your Student Debt Quickly with this VA Program. Retrieved from https://blogs.va.gov/VAntage/80815/pay-off-school-debt-quickly-va-program/
  3. N.A. (2021, November 3) Security Clearances and COVID-19 – Adjustments, Caution and Advice. Retrieved from https://www.militaryonesource.mil/family-relationships/family-life/covid-19-resources/security-clearances-and-covid-19/
  4. N.A. (2022, April 5) Military Programs and Benefits. Retrieved from https://www.usa.gov/military-assistance