Military & Veteran Debt Relief Options

Veterans and active-duty military personnel face 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. In fact, many studies show that military families are more likely to have financial challenges than their non-military counterparts.

Luckily, when it comes to military and veteran debt assistance and financial assistance for those facing hardship, 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.

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

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 and private lenders and organizations provide financial assistance programs that are directly aimed at active military and veteran debt relief, as well as preventing debt in the first place. Programs include debt consolidation, immediate emergency assistance, housing help, student loan help, debt consolidation and nonprofit credit counseling.

VA Debt Consolidation Loan

The Department of Veterans Affairs (VA) doesn’t loan money but does back mortgage loans for veterans. Its Cash-Out Refinancing Loan allows borrowers to get cash for their home’s equity when they refinance that can be used to pay off unsecured debts, such as credit cards, medical bills and payday loans. It can be used to refinance a VA mortgage or to replace a traditional mortgage with a VA loan. You make a fixed monthly payment for a set amount of time, instead of multiple loan repayments to multiple creditors.

Veterans of Foreign Wars Unmet Needs

The Veterans of Foreign Wars Unmet Needs program helps active-duty service members who have unexpected financial difficulties 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 can be considered a veteran debt relief grant since the VFW program directly pays creditors and the veteran does not have to pay it back.

USA Cares Veteran and Family Support Program

The USA Cares Veteran and Family Support System provides post-9/11 veterans and active-duty service members, as well as their families, with financial assistance and post-service skills training that aims to create a foundation for long-term stability. Programs include assistance for emergencies, housing, career training, resources and financial help for veterans facing challenges ranging from unemployment to foreclosure to PTSD.

Operation Family Fund

Operation Family Fund is a private nonprofit organization run by volunteers and funded through donations. It provides grants to veterans and civilian personnel who were disabled as part of Operation Enduring and Iraqi Freedom, and their families. Assistance is aimed at financial self-sufficiency and solutions to short-term and long-term needs such as food, rent or utilities; emergency transportation or vehicle needs; legal, medical and funeral expenses; home purchase or repairs; trauma and caregiver training and support, offering a form of veteran debt forgiveness.

Operation First Response

Operation First Response provides financial assistance for disabled veterans and their families. Financial assistance is tailored to individual needs, and covers things like rent, utilities, vehicle payments, groceries, clothing, and travel costs. Support may begin from the initial onset of injuries or illnesses, and extends through recovery and the transition to civilian life.

Personal Loans

A personal loan is another debt relief option for military members and veterans. Some lenders have loans specifically for active-military and veterans to pay bills and for emergencies. Personal loans are usually unsecured – which means no property is used as collateral. They may be a traditional bank loan, a payday loan, a peer-to-peer (P2P) loan or borrowing from family and friends. Lending institutions usually require good credit. High-interest payday loans can often cause further financial issues, so research lenders and what they offer carefully.

Debt Settlement

Debt settlement allows you to pay less than what you owe on debt, but has expensive drawbacks. A for-profit debt settlement company negotiates with your creditors for a lump-sum settlement while you make monthly payments to the company. When payments equal the negotiated amount, it’s used to pay the creditors. Debt settlement stays on your credit report for seven years, it comes with high fees, and the forgiven balance is considered income and taxed by the IRS. Credit counseling agencies are now offering a more forgiving program called nonprofit debt settlement.

Debt Consolidation

Debt consolidation lumps credit card debts together, so you make one monthly payment for a specific amount of time. Loans from banks, credit unions or online lenders are one form. Another debt consolidation strategy is a debt management plan. A nonprofit credit counselor works with creditors to lower interest rates. You make a monthly payment based on your budget, retiring debt in 3-5 years. DMPs improve your credit score as balances shrink and payments are made on time. It is not a loan and, unlike debt settlement, you pay the entire balance owed.

Student Loan Consolidation

Student loan consolidation combines all your student loans into one at a reduced interest rate. The federal Direct Consolidation Loan is a way to consolidate federally backed student loans, offering low interest and extending loan length, meaning a lower monthly payment. Some lenders 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, student loans for workers who take a job at a VA center or hospital.

Relief for VA Debt

If you have debt related to VA disability compensation, non-service-connected pension, or education benefits, the VA has programs that can help you pay and provide information. Assistance can include offsets, repayment plans, compromise offers and even a waiver that allows veteran debt forgiveness.

VA Program: Home Loans for Veterans

Taking advantage of VA mortgage rates is one of the top benefits of being in the military and can also be a source of debt relief for veterans. 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.

The Interest Rate Reduction Refinance Loan (IRRRL) allows borrowers who have a VA mortgage to refinance for a lower interest rate, lowering monthly payments, which can free up money to pay other bills.

The Native American Direct Loan is offered to veterans who are Native Americans to buy, build or improve a home on federal trust land, or refinance for a lower interest rate.

Lower interest and fewer fees for a mortgage frees up money that can help pay down debt and pay bills.

Personal Loan Options for Veterans

While the VA doesn’t offer personal loans, several lenders offer loans specifically for veterans and active members of the military, and their families, even those with bad credit. Some of the biggest ones are USAA Bank, PenFed Credit Union and Navy Federal Credit Union. Amounts available, and interest rates vary based on the lender, depending on your credit history. 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. As with most loans, approved credit score, direct deposit checking account, and other qualifications, depending on the lender, 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 their 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 debt.

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 to terminate your cellphone 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. The cap is high — 36% — but it beats what civilians sometimes pay.

If consolidating your debt into a single payment (with an ironclad vow to avoid 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, PenFed Credit Union 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, the 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.

Military Money provides free information and resources about debt and personal finance for military families. Their articles range from information about debt relief programs and housing assistance to details about education and retirement benefits.

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.

The Basic Needs Allowance (BNA) is a major benefit to military families. It offers monthly payments to military families experiencing financial hardship. It’s also under-used – 54% of active-duty family respondents in the 2023 Military Lifestyle survey by Blue Star Families did not know what the BNA is, and only 3% indicated that they had applied

Active-duty service members and their families face challenges, both financial and otherwise. The most common contributors to financial stress for active-duty family respondents are housing costs, food insecurity, spouse unemployment, and out-of-pocket relocation costs.

• 73% 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.
• 1-in-6 active-duty family respondents and 1-in-4 enlisted family respondents reported experiencing food insecurity and 14% of active-duty family respondents reported food banks or charities as a major food source,
• 22% of active-duty spouse respondents are unemployed, five to six times the rate of their counterparts without a military connection; 63% report some level of underemployment.
• 31% of active-duty families report they are “just getting by” or are “finding it difficult to get by.
• 35% cannot find child care that works for their employment needs.

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.

The Importance of Seeking Financial Help

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

If you’re experiencing financial hardship, reach out for help. 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.

Help for veterans and active-duty military with debt and facing financial hardship include:

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: During a credit counseling session, counselors will review your finances, help you create a budget, and will offer an action plan with recommended debt solutions and alternatives available to you.