Civilians’ Debt Problems: An Overview

Civilian debt problem
High level. Overdue debt on loans

People who protect face more problems

What is a “civilian,” and how does it differ from other types of employees?

The term “civilian” refers to nonmilitary personnel employed by federal agencies outside of uniformed military forces. Civilians work both inside and outside of government buildings, offices, schools, hospitals, etc. Still, most civilians spend more than 50% of their time performing public safety, national security, law enforcement, firefighting, emergency medical response, disaster relief, search and rescue operations, environmental protection, transportation, energy production/distribution, etc.

What is the reason for a civilian employee to fall into debt?

• Cost-of-Living Adjustment; this increase is based on increases in the Consumer Price Index from January 1st through December 30th each year;

• Student Loan Repayments Program Benefits Paid Directly By The Department Of Defense; These benefits cover monthly repayment plans for federal Stafford Loans taken out before separation from military service;

• Federal Pell Grants; these grants are awarded by the U.S. Dept. of Education and are intended to assist eligible students who meet specific criteria;

• Dependent Care Assistance; covers costs associated with caring for dependents at home while individual works outside of their regular schedule.

How can I get help with my military-related financial issues?

Military members and their families are often struggling to pay off debts incurred during service. The Department of Defense offers several programs that may be available for your situation, including:

• Military Spouse Relief Program – This program provides relief from certain student loan payments while the servicemember is deployed overseas or on active duty training. You must complete an application for Assistance. It includes questions about your income, assets, liabilities, expenses, family size, number of dependents, type of loan, the amount owed, interest rate, monthly payment, total payments, credit history, and reasons for requesting Assistance. AFR forms are available at local
branches of the Servicemen & Women’s Group Insurance Program, Financial Counseling Offices, and Credit Union Service Center locations.

• Debt Consolidation Assistance Programs – These programs provide a streamlined process for consolidating multiple consumer debts into one manageable monthly installment plan. There are two DCAP options: Direct Loan Consolidation and V.A. Consolidation. To qualify for either option, you must meet eligibility requirements based on your current household composition. You should apply as soon as possible because some applications take several weeks before approval.

Civilian debt problem
Couple managing the debt

Why do I owe money to DFAS?

If you are a civilian, the Department of Defense has agreed with your employer to pay for certain services. These payments include:

• Your basic allowance for housing and subsistence, which is a monthly payment made by DoD on behalf of its employees who live in military family housing or receive Basic Allowance for Housing as part of their compensation;

• The cost-of-living adjustment; this increase is based on changes in the Consumer Price Index from January 1st through December 31st each year;

• Tuition assistance program benefits paid directly by the Army National Guard Bureau; these benefits cover tuition at state colleges and universities where an eligible member attends school full time while serving in the National Guard.

How do I dispute a debt with DFAS?

If you think there was something wrong with what happened to you, contact them immediately to investigate your case. Once they receive your complaint, they’ll send you a letter explaining why they have denied your claim. This letter explains:

1) What information is used to determine whether your claim was approved or rejected.

2) How you can appeal this decision.

3) The deadline date for appealing this decision.

What is DoD’s policy on paying off debts incurred while in active duty, including student loan payments and credit card balances?

DoD does not have specific policies regarding how much financial responsibility it should assume when members incur debts during service. However, we believe that all servicemember families deserve access to affordable health care, education, child support, and other critical needs. We also recognize that some individuals may need additional help managing their finances while they serve. Therefore, we provide resources such as counseling programs available through Military OneSource and Financial Readiness Centers located throughout our installations. For example, can you get out of paying back your loans if you are on disability or in jail?
The answer is no. If you were terminated due to misconduct or unsatisfactory performance, you would owe back taxes and penalties. If you had a garnishment placed against your wages, you would still owe tax and penalty obligations. You could file bankruptcy to discharge your debt.

What happens after I am discharged from Active Duty? Can I keep working until I’ve paid off my debts?

Yes, you can continue employment even though you’re being separated from the Armed Forces.

Do all civilian employees have access to the same benefits as active-duty personnel?

No. In general, only those civilian positions covered under Title 5 and 10 U.S. Code § 9101 et seq., Veterans Employment Opportunities Act, Uniform Services Employment and Reemployment Rights Act, Office of Personnel Management regulations, Executive Order 13489, and applicable collective bargaining agreements are considered to be equivalent to active duty status.


Civilians cannot borrow as much as they used to. They also face higher interest rates than ever before. This has led to a rise in consumer bankruptcy filings. More than 1 million consumers filed for bankruptcy last year, according to the American Bankruptcy Institute. Civilians with debt problems often find themselves in a difficult position. They may owe more than they can afford, but they don’t want to default on their loans. They might try to negotiate with creditors, but they’re not sure if they’ll
be successful. And they don’t want to file bankruptcy because that will hurt them financially and emotionally. More Assistance from the government and care expenses will help them to get out of it.


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