Deployments help some soldiers reduce debt

Posted by Tom Tolman :: November 12, 2007 @ 11:32 am

As we celebrate Veterans Day this weekend our thoughts here at Lending Club turn to service members and their finances. Well over a million U.S. troops have deployed in support of Operation Enduring Freedom and Operation Iraqi Freedom since September 11th, 2001. Many of these soldiers and their families face unique financial challenges during operational deployments. The challenges can be especially disruptive to Reserve and National Guard troops who may leave a better paying civilian job behind.

From a financial perspective, however, there are several potential benefits soldiers can receive while deployed to Iraq or Afghanistan (and most other countries in the region supporting those operations). In fact, one Air Force officer was recently featured in the New York Times after he volunteered to deploy in an effort to help him get out of debt. He has kept a blog about his journey to Financial Freedom in Iraq.

Here are a few of the financial benefits available to deployed soldiers:

Soldiers' and Sailors' Civil Relief Act - Wartime deployments can make it very difficult to fulfill financial obligations and exercise legal rights. To help mitigate these challenges, Congress has enacted the SSCRA. The two most used provisions under the SSCRA are:

• Service members with deployment orders may terminate leases early without penalty

• Service members may cap the interest rates on any outstanding debts at 6%. This applies to any debts incurred prior to the service member coming on active duty

Savings Deposit Program - Service members deployed in combat zones, qualified hazardous duty areas, or certain contingency operations may deposit up to $10,000 into the SDP where interest will accrue at 10% during the deployment.

Tax-free income - Income earned in combat zones is excluded from federal and state income tax based on the Combat Zone Tax Exclusion. Enlisted soldiers who choose to extend their contract while in a combat zone also receive their re-enlistment bonus (sometimes as high as $30,000) tax-free.

Hazardous Duty Pay - $100/month (This extra pay is listed as SAVE pay on Leave and Earnings Statements.)

Per Diem - This is only $3.50/day for locations like Iraq and Afghanistan, but for a year-long deployment it will add up to more than a thousand dollars.

Increased potential savings - Many soldiers, especially single soldiers, can greatly reduce their expenses while deployed. Rent, food, utilities and other expenses can be minimized or eliminated. There are also limited opportunities to spend money. This gives many soldiers the opportunity to pay off debts or jump start their savings.

Hostile Fire/Imminent Danger Pay (HFP/IDP) - $225/month

Family Separation Allowance - $250/month for married soldiers

Assignment Incentive Pay – Recently, the Army announced most tours will be extended from 12 to 15 months. Those that are involuntarily deployed for more than 12 months receive $1,000 for each additional month or portion of a month served.

There are many organizations that support the military. One of these, the Non Commissioned Officers Association (NCOA), was established in 1960 to enhance and maintain the quality of life for non-commissioned officers in all branches of the Armed Forces, National Guard and Reserves.

Lending Club recently partnered with NCOA to provide additional services and benefits to service members and their families. Through this partnership, NCOA members can borrow and lend to each other directly and get better rates than those offered by banks or credit card companies.