Veteran Debt Relief Options (What Veterans And Their Spouses Should Know)

By Minh Tong Reviewed by Nima Vahdat Updated Apr 09, 2024
Veteran Debt Relief Options (What Veterans And Their Spouses Should Know)

Various forms of military debt relief exist to assist those who’ve served our nation, helping them to effectively manage their debt.

Veterans face similar financial challenges as civilians. Like anyone else, they may encounter setbacks such as the loss of a spouse, unexpected medical expenses, divorce, business failure, or unemployment.

A Debt and Delinquency After Military Service report by the CFBP highlighted a significant proportion of young enlisted service members experiencing delinquency on debt or acquiring severe derogatory marks on their credit record as they transition out of active duty.

Taking on additional employment and reducing expenses may not suffice to eliminate debt entirely, especially in times of financial crisis.


  • Veterans face unique financial challenges, and managing debt can be particularly difficult.
  • Several programs and resources exist to help veterans overcome debt, including the Servicemembers Civil Relief Act and VA Housing Assistance.
  • It’s essential for veterans to explore their debt relief options thoroughly and choose the solution that best suits their needs.

Risks Of Excessive Debt For Veterans

Excessive debt poses significant risks for veterans due to the unique challenges they face upon transitioning from military service to civilian life. 

Frequent relocations, deployments, and the unpredictable nature of military life can exacerbate financial pressures, making it challenging for veterans to manage their debts effectively. 

The following are comprehensive explanations of the risks associated with excessive debt among veterans…

Financial Instability: Transitioning from military to civilian life often involves significant changes in income and employment opportunities. Excessive debt can amplify financial instability, making it difficult for veterans to cover basic living expenses, save for emergencies, or plan for the future.

Stress and Anxiety: Coping with significant debt while adjusting to civilian life can lead to heightened stress and anxiety among veterans. Concerns about meeting financial obligations, maintaining a good credit standing, or providing for themselves and their families can impact overall well-being and hinder successful reintegration into civilian society.

Employment Challenges: Veterans with significant debt may encounter difficulties securing employment or advancing in their careers. Employers may view financial distress as a red flag, raising concerns about the veteran’s reliability, responsibility, and ability to manage job-related responsibilities effectively.

Housing Insecurity: Excessive debt can impede veterans’ ability to secure stable housing upon leaving the military. Rental applications and mortgage approvals may be denied due to poor credit history or high debt-to-income ratios, leading to housing instability and homelessness among vulnerable veterans.

Social Stigma and Isolation: Veterans facing financial difficulties may experience social stigma and isolation, compounding the challenges of transitioning to civilian life. Shame and embarrassment associated with debt can prevent veterans from seeking help or accessing support services, exacerbating feelings of loneliness and alienation.

Mental Health Implications: Financial stressors can exacerbate existing mental health conditions among veterans, including post-traumatic stress disorder (PTSD), depression, and anxiety. The burden of debt may contribute to feelings of hopelessness, despair, and suicidal ideation, underscoring the critical need for comprehensive mental health support for veterans in financial distress.

Debt Relief Programs For Veterans

The Servicemembers Civil Relief Act (SCRA)

The SCRA is a federal law that provides a wide range of protections to active-duty service members, including those in the National Guard and Reserve. 

Enacted in 1940 under the name Soldiers’ and Sailors’ Civil Relief Act, this law prohibits creditors from initiating foreclosures, evictions, garnishments, repossessions, and similar actions until 60 days after a service member’s departure from active duty.

The SCRA provides various protections, including:

  • Limiting eviction by landlords unless rent exceeds $4,089.62 per month; this amount adjusts annually to reflect market value.
  • Halting foreclosures and vehicle repossessions without a court order.
  • Pausing civil proceedings, such as divorce and child support cases.
  • Preventing storage facility owners from selling stored goods without a court order for unpaid rent.
  • Allowing termination of: cell phone contracts if relocating to an uncovered area for at least 90 days, vehicle leases signed before active duty if mobilized for at least 180 days, and housing leases without penalty if deployed for 90 days or more.
  • Capping interest rates on pre-active duty loans at 6 percent, upon providing written notice to the lender with orders or a letter from a commanding officer.

Military Debt Consolidation Loan (MDCL)

The MDCL is a specialized loan program available to eligible veterans aimed at consolidating high-interest debts (such as medical bills, credit cards, and payday loans) into a single, more manageable loan with a lower interest rate. 

This option helps veterans simplify their debt repayment process and potentially save money on interest charges.

MDCLs function as “cash out” loans, enabling you to refinance your existing loan for an amount exceeding the owed sum and receiving the difference in cash. Upon disbursement, closing costs are deducted from the final amount.

For instance, if your home loan balance stands at $90,000, you might qualify for a $120,000 MDCL, leaving you with $30,000 (minus closing costs) to address other financial obligations like credit card debts or medical expenses.

While the VA guarantees the loan, its value cannot surpass your home’s appraised value. Additionally, there are limitations on the frequency of VA loan utilization, especially if repayment becomes challenging.

This loan offers terms that can span from 10 to 30 years, providing flexibility in repayment durations.

The Military Lending Act (MLA)

The Military Lending Act (MLA) sets a crucial limit on interest rates and fees for military service members seeking desperation loans, which often burden borrowers with exorbitant rates. 

Despite the intent of imposing a cap, the permitted limit remains notably high at 36 percent, a rate prone to escalating debt rapidly. While this rate may be lower than what non-service members encounter, it still poses significant risks.

The MLA safeguards against:

  • Payday loans
  • Vehicle title loans
  • Tax-refund anticipation loans

In essence, it encompasses all loan types that service members are advised to steer clear of due to their potential to lead to financial distress.

VA Housing Assistance

The Department of Veterans Affairs (VA) offers various housing assistance programs to help veterans achieve homeownership and maintain stable housing. 

These programs include VA loans, which offer favorable terms and often require no down payment, as well as grants for home modifications to accommodate service-related disabilities.

Student Loan Discharge

Veterans with a service-connected disability may be eligible for student loan discharge, which relieves them of the obligation to repay federal student loans. 

This discharge option recognizes the sacrifices made by veterans in service to their country and provides financial relief to those facing challenges due to their disability.

Homeowners Assistance Program (HAP)

HAP provides financial assistance to eligible service members and veterans who have incurred losses on the sale of their primary residence due to certain circumstances, such as base closure or deployment. 

This program helps mitigate the financial impact of housing-related challenges faced by military personnel and their families.

Debt Relief Options For Veterans

Pay Down the Debt Yourself

Taking control of your finances starts with creating a budget that outlines your income and expenses. 

By prioritizing essential expenses and cutting back on discretionary spending, you can free up extra funds to allocate towards debt repayment. 

Implementing a debt snowball or avalanche method can help you systematically pay down your debts, starting with either the smallest balance or highest interest rate.

Balance Transfer

If you have high-interest credit card debt, consider transferring balances to a new credit card with a lower interest rate. 

Balance transfer offers typically come with an introductory period of low or 0% APR, allowing you to save on interest charges and pay down your debt more quickly. 

Be mindful of balance transfer fees and ensure you can pay off the transferred balance within the introductory period to maximize savings.


Bankruptcy should be considered as a last resort for individuals facing overwhelming debt that cannot be managed through other means. 

Chapter 7 bankruptcy involves liquidating assets to discharge unsecured debts, while Chapter 13 bankruptcy involves creating a repayment plan to pay off debts over a specified period. 

Bankruptcy can provide immediate relief from creditor actions such as lawsuits and wage garnishment but may have long-term consequences on credit and financial stability.

Consolidation Loan

Debt consolidation involves combining multiple debts, such as credit card balances and personal loans, into a single loan with a lower interest rate. 

This simplifies the repayment process by consolidating multiple payments into one, potentially lowering your monthly payment and reducing overall interest costs. 

Consolidation loans are available from banks, credit unions, and online lenders, and eligibility criteria may vary.

Debt Settlement

Debt settlement involves negotiating with creditors to settle debts for less than the full amount owed. 

This option is typically pursued by individuals who are facing financial hardship and are unable to repay their debts in full within a reasonable amount of time. 

Debt settlement companies negotiate on behalf of the debtor to reach a lump-sum settlement, providing relief from overwhelming debt. 

However, debt settlement can negatively impact credit scores, although it has been shown that they can rebound while progressing through a debt resolution program.

Some Final Thoughts About Veteran Debt Relief 

Veterans facing financial challenges due to debt have several options available to them. 

Whether through specialized programs for veterans or general debt relief strategies, it’s essential for veterans to explore their options and seek assistance when needed.

At Americor, we understand the importance of managing your finances wisely. 

As America’s trusted source for debt relief solutions, we aim to empower you with financial knowledge that can lead to informed decisions, whether it’s about savings, investments, or managing debt.

If your debt has become unmanageable and you have difficulty making your debt payments each month, then you should consider a free consultation call with one of our certified Debt Consultants, who can provide personalized advice tailored to your specific needs.

By taking proactive steps today, you can put an end to your financial stress and work towards a brighter financial future. 

Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.

For more information on Americor’s debt relief services, contact us today to see how we can help you eliminate your debts, and get on the fast-track to becoming completely debt-free!


Minh Tong

Minh leverages decades of experience in marketing, sales management and technology to provide high-level advice and lead new initiatives. Minh has a Bachelor of Science in Business/Managerial Economics from University of California at Irvine. He brings over 20 years of sales and executive management experience to the company and his responsibilities include customer service improvement, professional development, and carrying out communications and marketing. Originally from the east coast, Minh resides in southern California and enjoys spending time with his family, going to the beach, and playing a variety of sports.