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For veterans, bad financial choices while on active duty can spiral into decades of debt

Financial Readiness
Spc. Michael Bradle
U.S. Army
Soldiers of the 25th Infantry Division take part in an October 2020 financial readiness class at Schofield Barracks in Honolulu. The class, available at every Army installation, is designed to teach soldiers how to save, invest, and eliminate debt.

Veterans are more likely to struggle with debt or other financial problems. Often, their issues with money start when they're still in the military.

A study from the Pew Research Center found that more than 30 percent of military veterans struggle to pay their bills. That’s a good bit higher than the number of non-veterans with similar money issues.

For many veterans, the problem starts when they are still in the armed services. Former soldier Darius Stubbs, who is now a plumber in Maryland, traces his financial struggles to a car loan he took out while he was in the Army.

"It put me in a great amount of debt to where I spent my military career paying my car off, but even after the military because I was so behind on paying my bills off,” Stubbs said. "It just put me in a deep hole mainly because I didn’t have any knowledge." 

His challenges compounded and made it difficult for him to qualify to rent some apartments.

"It just overloaded my expenses," he said. "I was able to have a roof over my head. The issue was being able to live comfortably and not feel like I’m under water."

Stubbs is far from alone. According to a 2020 report from the Consumer Financial Protection Bureau, recent vets are ten times more likely to have delinquencies or credit defaults than they were before they left the service.

In 2017, The Financial Industry Regulatory Authority - the private agency that oversees stockbrokers - found that veterans were nine percent more likely to have poor credit habits. In a follow up study in 2019, the number rose to 11 percent.

"One of things that I’ve noticed is that being in the military for almost four years and then being out for almost seven or eight is that veteran debt starts at the very beginning," said Jake Hare, the CEO of a South Carolina small business incubator that works with veterans.

A veteran himself, Hare said military salaries start out "exceptionally low." That can make it especially hard for service members who have families to support.

"Doing that on a salary of 30 to 35,000 a year really does lend itself - or at least leans towards - getting into large amounts of debt."

Another challenge: bureaucratic red tape that delays veterans benefits for some former service members.

“We are seeing that veterans are having their pay delayed by months and months and sometimes years," said Keith Taylor, the president and founder of Modest Needs, a New York City crowdfunding group that works with veterans.

“In the end, people lose the titles to their cars and get a $200 cash advance hoping they can pay it back in another week or so, but they can’t, because of delay after delay after delay," Taylor said.

Modest Needs launched a fund called the Homecoming Heroes Grant. It helps veterans meet their basic needs without having to take out potentially predatory loans. But the program's footprint is small.

Stubbs, the Army veteran in Maryland, said the military should beef up its financial education program for troops. Most service members have access to financial counselors, and all are required to go through transition training in their final months before they leave the military. It's where they're supposed to learn about landing a civilian job, going back to school, and how to manage money.

But the quality and length of the training varies throughout the services, and Stubbs said it's often inadequate.

"I just feel like there should be a lot more time and energy dedicated to that. versus just going through just two weeks of transition training. I feel like it should be a few months," Stubbs said. "We don’t know what we don't know."

This story was produced by the American Homefront Project, a public media collaboration that reports on American military life and veterans.Funding comes from the Corporation for Public Broadcasting.

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