A Response to Military Families Carrying More Debt

Financial Planning Investment Money Income

By Meghan Northcutt, AFC® Candidate, FINRA Military Spouse Fellow

The National Foundation for Credit Counseling, or NFCC, released the results from a recent survey showing that military families carry more debt and have fewer tangible assets when compared to civilian counterparts. Results show military families have 16% fewer tangible assets, 7% higher balances in unsecured debt, and 15% higher monthly expenses related to debt. The presented information breaks down what causes such a difference between military and civilian families; reasons cited include frequent moves otherwise known as PCS moves, difficulties in military spouse employment, deploying or becoming activated, and transitioning out of the military. These are considered major life events that military families experience repeatedly during their terms of service. Upon reviewing the results and the causes of such differences, the prognosis is not a surprise; however, there are many programs offering hope in response to the problems that have arisen.

Problem: According to the General Accounting Office (GAO) in 2001, the average E5 to E9 spends $1,000 of moving-related expenses during each move which are not considered reimbursable by the Department of Defense (DoD). Pair that with a Permanent Change of Station (PCS) move every 2 years on average, and that expense adds up quickly for military members. The amount of time between PCSes differs by rank and branch with lower ranking servicemembers moving more frequently and Marines moving most frequently while Airmen move least frequently. In addition to costs directly related to moving expenses, military families report loss of spouse’s employment, extended wait times for permanent housing at the new duty station, and change in cost of living which can have an impact on military family finances during each PCS.

Response: In recent years, many of the branches have increased time on station before PCSing again. Referencing the GAO information from 2001, this change should have a positive impact on military families by decreasing the total out-of-pocket moving related expenses over their entire service term.

Problem: Stars & Stripes reports 90% of military spouses are underemployed with an average total of almost $16,000 less in annual income when compared to civilian counterparts. 85% of respondents indicated that it is difficult to find employment as a military spouse, and 30% of military spouses between ages 18 and 24 years old are unemployed in comparison to approximately 10% unemployment rate of civilians in the same age group.

Response: The Military Spouse Employment Partnership (MSEP) was created in 2011 under DoD’s Spouse Education and Career Opportunities (SECO) initiative to help reduce the negative aspects of these staggering statistics. The non-profit organization for military spouses, In Gear Career, helps those seeking employment and working spouses conduct career networking. Also under the SECO initiative, the Military Spouse Career Advancement Accounts (MyCAA) was created in 2010 to offer financial assistance covering eligible education expenses for spouses of lower ranking military members. The non-profit organization, Military Spouses of Strength (MSoS), created the Military Spouse Education Initiative (MSEI) as a resource to assist military families in finding scholarship and education opportunities. FINRA Foundation partnered with the National Military Family Association (NMFA) to offer the FINRA Military Spouse Fellowship to 50 military spouses annually; the fellowship covers the cost of becoming an Accredited Financial Counselor. There are many other opportunities and groups to assist military spouses with employment and educational advancements. Although there is still much work to be done to decrease the rate of unemployment and underemployment of military spouses, these initiatives are helping to bridge the gap on a daily basis. Continuation of such programs is vital to changing the way employers view military spouses in the workforce.

Problem: Debt payments during deployment can be difficult, especially when considering National Guard, Air National Guard, and Reservists whose pay is greater in their civilian jobs.

Response: The Servicemember Civil Relief Act (SCRA) allows pre-service debt to be capped at 6%. Pre-service debt is that which has been incurred prior to Basic Training for Active Duty. The same is true for Guard and Reserve, but they are able to use the cap again upon activation. The SCRA debt cap should reduce financial strain on military families during deployment as the monthly payment has the potential to be significantly lower; some companies agree to reduce the interest even lower than required by law. In addition, military families can seek assistance from a Financial Counselor at their installation’s Family Readiness Center. Financial education classes as well as one-on-one appointments are usually available to help create an action plan for financial success.

Problem: Transitioning veterans have difficulty in personal finance. This is partly due to a 13% unemployment rate of Post-9/11 Veterans, according to a study from the Bureau of Labor and Statistics.

Response: An overhaul of the Transition Assistance Program (TAP) is underway. The overhaul aims to better prepare veterans to translate military experience to civilian employers and establish realistic expectations for exiting the service. The Department of Labor Veterans’ Employment and Training Service (DOL VETS) has assisted with the TAP overhaul but also includes one-on-one help for transitioning veterans seeking employment at American Job Centers. The Consumer Financial Protection Bureau offers free one-on-one Financial Coaching within American Job Centers at 60 locations throughout the United States under their Financial Coaching Initiative. The goal is to increase transition and financial success through the client-driven financial coaching services for veterans.

Though today’s military families have hurdles when it comes to financial capacity, there are many government programs, non-profit organizations, and laws offering hope. It’s important for military families facing struggles that can lead to increased debt to seek the assistance available to them. With assistance, military families can decrease their debt and reach their financial goals.


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