If you’re dealing with a lot of debt as a veteran, explore options like VA debt forgiveness, offer in compromise, and debt consolidation.

Just like civilian consumers, active military members and veterans can have mounting credit card debt, mortgages, and VA overcompensation debts, making VA debt management strategies crucial. Find out what options are available to you to pay off your debts.

Having a pile of unpaid bills and mounting debt can be distressing for anyone. If you have received a letter of overpayment from the VA, you may be rightfully concerned. Other than the usual causes of debt, such as credit card use, auto loans, and mortgages, veterans often incur debts because of their participation in VA compensation, education, and pension programs.

Only 50% of respondents in a poll of U.S. military service members reported that they had enough emergency savings to cover their expenses for three months. 52% of the enlisted personnel in the poll had no savings at all.

If you have a lot of veteran debt, you may have questions about how to pay off the debts while still supporting your family. Fortunately, there are many solutions and resources available.

What Is Veteran (or VA) Debt?

Veteran debt is any debt that veterans owe to financial institutions, banks, or lenders. It can be credit card debt, medical debt, auto loans, personal loans, mortgages, or student loans. 

Veterans may also owe a debt to the Department of Veterans Affairs (VA) for overpayments in benefits. Paperwork errors or overpayments can trigger debts to the VA when these errors are discovered.

If you’re receiving a pension or compensation based on your net worth, and it changes, but the records have not been updated by the VA, it can result in overpayments. When you owe VA debt, your benefits can be reduced or even temporarily withheld until you pay back the overpayment amount.

6 Veteran Debt Relief Options

There are many VA debt relief programs available to choose from, depending on the amount you owe and your financial situation.

1. Benefit Offset

If you owe a debt to the VA, you can offset debt payments against your current or future military benefits.  If you’re receiving VA pension benefits or education benefits, you can elect for collection by offset of your benefits until your debt is resolved. 

You can get in touch with the Debt Management Center (DMC) to discuss your options and request a reduced offset amount to make it more manageable.

2. Payment Plan

Another option for resolving VA debt is to set up a payment plan. If you’re unable to pay the entire debt at once, the DMC can work with you and set up a repayment plan. You’ll then have a fixed amount to pay each month until your debt is paid off in full. 

3. Offer a Compromise

If you owe a significant amount of VA debt and are unable to pay the full amount, you may send in a compromise offer to settle your debt for less than what you owe.

If the proposal and repayment terms are accepted, you can pay a lump sum amount within 30 days to the DMC.

4. Debt Settlement

If you have more than $10k in unsecured debt, debt settlement can allow you to pay less than what you currently owe. A debt settlement company can negotiate with your debt providers to accept a lump sum settlement amount.

You can set up a separate bank account where you can make monthly payments to save towards the settlement amount. This money will then be used to pay your lenders to settle your accounts.

5. Debt Consolidation

If you have multiple credit cards and loans, you can roll them together into a single loan through debt consolidation. This option will also allow you to save thousands of dollars in interest charges because it replaces your high-interest (often variable rate) debt with lower fixed interest rates.

If you have an active VA home loan, a Military Debt Consolidation Loan (MDCL) is another option. 

You can cash out to pay off any unsecured loans and credit card debt you have, then pay a fixed monthly payment for a set loan term. However, this is a home equity loan, and your home serves as collateral, so failure to pay can result in foreclosure, i.e. the loss of your home.

6. VA Debt Forgiveness

If you have received a notice from the DMC for overpayment, submit a waiver request as soon as possible. A waiver is a request for cancellation of any overpayment debt so that your benefits won’t be withheld.

The waiver needs to be sent within 30 days of receiving the notice to avoid your benefits from being withheld. 

Along with the written request for debt forgiveness, you will also need to provide reasons why your debt should be forgiven. You’ll have to send in a financial status report to demonstrate that you rely on your benefits to pay for your basic living expenses.

How Does a Veteran Get VA Debt?

Veteran debt is a challenge for many people who have faithfully served the country because of their unique financial challenges. Here are a few main reasons why veterans accumulate debt of various kinds.

Overpayment of VA benefits

This is one of the main reasons why so many veterans have a lot of debt. VA overpayment is when, through error or omission in processing or record-keeping, you receive more benefits than you are entitled to. These extra benefits must then be paid back to the VA.  

Employment Gap

Veterans often have no job in place when their active duty ends. Adjusting to civilian life is hard enough, and trying to find a job where their skills are applicable is more challenging. 

This often results in employment gaps, and you may be left without a consistent income for a long time. This can make it very challenging to pay the bills.  

Relocation Costs

Even though relocation benefits are offered to many members of the armed forces as part of their change in duty station, they can quickly add up. If you do not have any cash available to deal with these expenses, you may have taken out a loan to pay the bills when your active duty ends and/or you move to a new duty location.


Many veterans are dealing with disabilities, and this can affect their ability to work. This can have a serious impact on their ability to earn a living. It may also result in a lot of medical debt.

Unemployed Spouse

Frequent relocation for military families also means that it may be challenging for a military member’s spouse to hold a job consistently. Unemployment among military spouses is quite high, and many of them are forced to live on a single income for long stretches of time.

Gambling and Other Addictions

Many veterans may also spend a significant amount of their savings on addictions such as gambling. Having no safety net to deal with emergencies can add to their overall debt.

Benefits of Paying Your VA Debt

Whether you’ve accumulated a lot of high-interest consumer debt or owe money to the VA, there are several advantages of paying it off at the earliest:

  • Your VA benefits will no longer be offset each month, once you repay your debt.
  • If you pay off your debts, they will not be reported to credit reporting agencies, and will fall off your credit reports entirely, after approximately seven (7) years.
  • Paying off your debt is also cheaper because it allows you to save money on interest charges that you would otherwise have to pay.
  • Your accounts will not go into debt collection.
  • It allows you to avoid wage garnishment or offsetting of state or federal benefits payments.  
  • Paying off your debt positively impacts your credit score.

Evaluate Your Veteran Debt Relief Options

Whether you are dealing with VA debt, credit card debt, health care bills, or any other type of debt, there are many debt solutions to choose from.

Other than the options listed above, you can also consider VA debt management and credit counseling. Credit counselors can review your budget and debts and suggest a debt repayment option suitable for you.

TurboDebt can provide you with debt relief through strategic planning, advising, and consulting services. Our knowledgeable counselors can help you find the right debt relief options and help you resolve the financial challenges you are currently facing. Connect with us for a free consultation today.

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