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Grappling with veteran debt can be challenging. Debt relief options like VA debt forgiveness, waivers, offers in compromise and debt consolidation can help.

Just like civilian consumers, active military members and veterans can face mounting credit card debt, mortgages, and VA overcompensation debts, making VA debt management strategies crucial.

Unpaid bills and rising debt can be overwhelming, especially if you've received a VA overpayment notice. In addition to common financial burdens, veterans may also incur debts related to their participation in VA compensation, education, or pension programs.

Understanding your options can help you take control of your finances and pay off what you owe. If you're wondering how to pay off your debt while still supporting your family, know that there are solutions and resources available to help.

What Is Veteran (or VA) Debt?

Veteran debt includes any debt owed by veterans to financial institutions, banks, or lenders. It can be credit card debt, medical debt, auto loans, personal loans, mortgages, or student loans.

In addition, veterans may owe money to the Department of Veterans Affairs (VA) due to benefit overpayments. These debts often arise from paperwork errors or delays in updating financial records.

For example, if your pension or compensation is based on your net worth and your financial situation changes without an update in VA records, it can lead to overpayments. When this happens, the VA may reduce or temporarily withhold your benefits until the debt is repaid.

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, repayment through collection by offset involves deductions from your current or future military benefits. This could reduce your VA pension or education benefits until the debt is settled.

To explore your options or request a lower offset for more manageable payments, contact the Debt Management Center (DMC).

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

Rolling multiple credit cards and loans into a single debt consolidation loan can simplify repayment and help you save thousands in interest charges. This option replaces high-interest (often variable rate) debt with a lower fixed interest rate.

If you have an active VA home loan, a Military Debt Consolidation Loan (MDCL) is another option. This is a cash-out refinance loan, allowing you to use your home’s equity to pay off unsecured loans and credit card debt. You’ll then make fixed monthly payments for a set loan term. However, since your home serves as collateral, failure to repay could result in foreclosure.

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.

Disabilities

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

Some 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 high-interest consumer debt or owe money to the VA, paying it off as soon as possible has several advantages:

  • Restores your full VA benefits – Once your debt is repaid, monthly offsets will stop.
  • Prevents credit damage – Paid debts won’t be reported to credit agencies and will eventually fall off your credit report (typically after seven years).
  • Saves money on interest – Paying off your debt reduces the total amount you pay over time.
  • Avoids collections and legal action – Prevents debt collection efforts, wage garnishment, or federal/state benefit offsets.
  • Improves your credit score – A lower debt balance positively impacts your credit.

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 relief solutions to choose from.

Beyond the options listed above, you may also benefit from VA debt management programs or credit counseling. A credit counselor can review your budget, assess your debts, and recommend a repayment strategy tailored to your financial situation.

At TurboDebt, we provide debt relief options through strategic planning, advising, and consulting services. Our experienced counselors can assist you with finding the right relief program and help you take control of your financial future.

With nearly 20,000+ 5-star TurboDebt reviews see why thousands of satisfied clients recommend our debt relief services.