Mastering Your Debt Management in the Military

debt management, military

By Lacey Langford, AFC®

Debt and the military are like oil and water, they don’t mix. When you serve in the U.S. armed forces, your debt needs to be managed because a large amount of debt can have negative consequences on your security clearance and career.

Research shows that most people in the military are dealing with debt. According to the Military Family Advisory Network 2018 survey, over 92% of those polled had some form of debt. In the same group, 60% of the people do not have three months of their living expenses saved for emergencies. As a result, many use up savings or use credit to cover emergency expenses.

Good debt management starts with understanding your debt and the military benefits you’re entitled to, whether active duty or not. The next steps are to create and execute a debt management plan. Both will help keep your finances and military career on the right path. Here’s where to start.

Do a debt review

In the business of managing debt, knowing how much you owe, who you owe money to, and staying organized are the biggest components. Begin your review by making a list of each company or person you owe money to. Include the monthly payment amount and the balance you owe for any outstanding loans and credit card debt.

Compare your list with a copy of your credit report. Your credit report is a wonderful tool to double check you haven’t forgotten anything you owe. Additionally, you’ll be able to double check your credit report to ensure there are no mistakes. You’ll be killing two birds with one stone!

As a bonus, your debt review can double as a debt payment checklist. Use your debt review to check each debt off as you pay them. It will help ensure your payments are made on time every month.

Debt management benefits and resources

The Department of Defense (DoD) isn’t going to pay off your credit cards because you join the military. But there are some benefits and resources you can use to help reduce your interest rates and reduce student loan debt. Here a few.

Servicemember Civil Relief Act (SCRA)

The SCRA provides active-duty Servicemembers with different types of legal and financial protection. Under the SCRA, military personnel can have interest rates reduced to 6% on debt created before the start of their military service.

The interest rate deduction applies to debt such as car loans, student loans, mortgages and more. It's a great resource to reduce and manage your debt. If you incurred debt before your service, seek legal counsel to find out if your debt is eligible under the act.

Use of the protections of the SCRA depends on if you are materially affected by military service. Talking with your installation legal assistance office can help determine if you can use this benefit.

College Loan Repayment Program (CLRP)

Different branches of the military offer CLRP as an incentive to enlist. Under the program, the military will pay up to $65,000 (depending on your branch and career field) towards federal student loans. Private student loans, however, are not eligible.

This benefit can be used to help manage and reduce your student loan debt. Two major points you should know and consider before using the CLRP are:

  1. If you elect to take it, you’re not eligible to use the G.I. Bill for that enlistment.
  2. To use the CLRP benefit you must have it in your enlistment contract.
Contact a branch military recruiter to get specific CLRP incentives for their particular branch of service.

Public Service Loan Forgiveness Program (PSLFP)

The PSLFP allows members of the armed forces to have their federal student loans completely discharged. Private students loans do not qualify. To be eligible for this benefit you must make 120 on-time payments under a qualifying repayment plan and employer. People working for the U.S. government and non-profits organizations qualify. You can find a PSLFP help tool here.

Use a nonprofit debt management program

Another option that is available to Servicemembers, military families and the general public is to connect with a nonprofit organization that offers a debt management plan and counseling services with a certified credit counselor.

According to the National Foundation for Credit Counseling:

"A debt management plan sets up a payment schedule for you to repay your debts, with the goal of helping creditors receive the money owed to them and ultimately improving your financial and credit standing. By voluntary agreement, you deposit funds with your credit counseling agency each month, who sends those funds directly to your creditors. It usually takes 3-5 years to complete payments under a debt management program, after which you may be able to reestablish credit."

As opposed to for-profit companies, a nonprofit program ensures that all the money you send them goes directly to the repayment of your debts, either to the collector, the credit card company or the loan servicer.

Make a debt payment plan

Having debt is allowed in the military, but you don’t want it to be too much to handle or an amount that could put your security clearance in jeopardy.

Now that you know who you owe and the resources you can use, it’s time to plan how you’re going to reduce your debt or pay it off. Winging it isn’t a solid plan. Taking the time to plan the who, what, where, why and how much of your debt will make the payback efficient and effective.

A debt payment plan is how you go about getting out of debt as quick as possible. There are different ways to go about it but the most popular is to pay the minimum payments on all your debt except one. The one separate debt is the one you will focus on paying off first. The goal is to put every extra bit of cash you have towards that debt to pay it off ASAP.

While in some cases, you could use a debt consolidation loan, here are some other methods for picking which debt to focus on paying off first:

  1. Highest balance method - This method focuses on paying the debt with the largest balance and thus paying off the bulk of your debt first.
  2. Lowest balance method - This method focuses on paying off a debt with the lowest balance to quickly get rid of a debt and give you momentum.
  3. Highest interest rate method - This method is where you to pay off the most expensive debt as quickly as possible, allowing you to reduce costs by saving money on interest.
  4. The Mental Health method - I like to call this one the mental health method because it means you focus on paying off whatever debt gives you the best mental health. There may be a debt that’s a bad reminder of past mistakes, or a student loan that depresses you every time you get the bill or just a loan that annoys you. Whatever the reason, if a certain debt is nagging you and brings down your mental health, pay that one off first. It will put you in a positive mindset to tackle the rest of your debt.

Find money to pay off debt

Resources and planning might not help if you don’t have the extra money to put towards paying off debt. In that case, you need to come up with extra cash to put towards your plan. Here are some ways to go about it.

Employment office

You can get a side hustle or a part-time job. Most installations have an office solely dedicated to helping you find a job. They will be under employment services in your base or post directory. Use this free resource! The employment office will have the inside track on local jobs to help you make money to pay off debt.

Other employment resources:

Reduce expenses

When you need extra money, a great place to find it is to audit what you’re spending money on and try to find the areas where you can reduce spending.

The first place to start is with your food spending. Eliminating extra eating out or using coupons can be a great way to lower your food costs. Also, look at cell phone usage or cable TV expenses to find better plans and reduce those expenses as well. Look at what you have and decide expenses you can live without or reduce to find extra money to put towards debt.

For more creative ways to save money as a Servicemember, check out my post on “7 Hidden Ways Military Members Can Save Money.”


Finding extra cash can be as easy as looking around the room. There may be some extras in your life that you don’t need or use that you can sell for the extra money. Here are some resources to help you sell items online:

How to repair your credit

Damage to your credit because of late or missed debt payments can hurt your military career. Let’s not forget, it can also cost you more money in interest and fees. There are ways to fix your credit, get back on track and manage your debt well.

Pay what you owe

Excessive debt is not a good thing when you’re a Servicemember. Debt in collections is a bad thing when you’re serving, especially if your career field requires a security clearance. If your credit isn’t in shape, you could easily be denied a security clearance, or denied a promotion.

If this is you, pay off the debt you owe quickly. Not only will it help improve your credit score, but it will also help keep your security clearance.

Pay your bills on time

We have a saying in the military, “If you’re on time then you’re late.” It means you show up 10 minutes before your required arrival time. That way you’ll always be on time even when things come up.

Apply the same principle to your debt payments. Don’t cut it close and think you’ll pay on the day it’s due. That’s too tempting for Murphy’s Law to throw a curveball and make you late. Pay your bills “on time.”

Get a credit builder loan

While a credit builder loan might not be able to repair bad credit, it does help add new payment history to your credit report. Payment history counts for about 35% of your credit score, and if it’s positive (meaning you make your payments on time and in full) building that payment history could help improve your credit.

It’s important to note, though, that credit builder loans are reverse loans – meaning you get the money at the end, not at the beginning. So if you’re looking for immediate funds, you might want to consider a personal loan instead.

You can find a credit builder loan at some local credit unions, or online or via the mobile app in all 50 states from Self.

How to manage your debt

After using resources and taking steps to improve your credit, it’s time to keep the management of your debt going smoothly. There are five ways to do that:

  1. Keep your debt review up-to-date by adding any new debt and removing paid off debt.
  2. Set-up automatic payments through your bank or allotments through DFAS to pay your bills on-time.
  3. Do a yearly credit report review to check for accuracy or mistakes.
  4. Avoid adding new debt by saving money for emergencies and other opportunities. See our related article about saving money in the military.
  5. Continue your debt payment plan to reduce and eliminate debt altogether.

Military debt management help

If the thought of figuring out how to manage your debt is daunting, don’t worry, there are resources you can turn to for help. Military OneSource offers free financial counselors in your local area to guide you.

Also, most military installations provide free financial counselors you can meet on base or post to coach you through the debt management process. Contact your installation’s financial assistance office to ask about financial counseling.

Bottom line

Debt and the military are not a good combination. Taking steps to get clear on the resources available to you and how to use them to maintain and improve your debt management can lead to financial success.

About the author

Lacey Langford is an Accredited Financial Counselor® and a candidate for CFP® certification with over ten years experience in financial counseling and coaching. She served four years in the U.S. Air Force and holds a B.S. in Business Administration with a concentration in finance as well as an Executive Certificate in Financial Planning from Duke University.

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Written on July 11, 2019
Self is a venture-backed startup that helps people build credit and savings. Comments? Questions? Send us a note at

Disclaimer: Self is not providing financial advice. The content presented does not reflect the view of the Issuing Banks and is presented for general education and informational purposes only. Please consult with a qualified professional for financial advice.

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