US military sounds alarm over mounting student loan debt

WASHINGTON Thu Oct 18, 2012 4:36pm EDT

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WASHINGTON (Reuters) - The military voiced concern on Thursday over mounting student loan debt owed by American troops, saying loan companies appeared to be taking advantage of U.S. forces - guiding them away from special protections they earned through service.

Some 41 percent of America's armed forces are holding student debt, according to one recent survey, and Pentagon officials say financial troubles are among the top sources of anxiety among troops -- sometimes even topping war itself.

Defense Secretary Leon Panetta told reporters that the No. 1 reason troops lose security clearances was financial troubles, which include things like overwhelming debt for mortgages, credit cards and student loans.

"And that's something that we absolutely now have to address," Panetta said at a Pentagon press conference detailing a new report on student loan debt.

"Because of their sacrifice, it should be easier, not tougher for service members to be able to pay off their college debt," he said.

The growing student loan burden in the military appears to partly reflect a trend in America generally. Two-thirds of U.S. college seniors who graduated in 2011 had student loan debt, with an average of $26,600 per borrower, according to a study released on Thursday by the California-based Institute for College Access and Success.

The Pentagon report cited a figure from 2008 showing that the amount of student debt for active-duty service members graduating from college in 2008 was $25,566.

But troops, unlike the general population, should benefit from laws meant to help them manage their student debt, including the Servicemembers Civil Relief Act (SCRA), which cuts interest rates to 6 percent during active duty service on debt incurred prior to service.

Instead, the report warned that troops confused by the complexities of their benefits through acts like SCRA were being guided into unfavorable debt repayment plans or refused their legal benefits.

"I'm concerned that the report that is being issued today warns of student loan companies that not only may confuse service members, but even violate the law in the approach that they take," Panetta said.

Holly Petraeus, a top official with the U.S. Consumer Financial Protection Bureau who advocates for troops, noted documented cases of abusive mortgage lending practices against troops, resulting in more than 300 improper foreclosures.

"I think the problem may be greater with student loans than it was with mortgages," Petraeus, wife of CIA Director David Petraeus, said, explaining that "many more young servicemembers enter active duty with student loans than with a mortgage."

(Reporting by Phil Stewart; Editing by David Gregorio)

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Comments (2)
Gordon2352 wrote:
The changes Congress has made to student loan laws in order to favor bankers and finance companies are literally destroying this nation by saddling a massive number of people with debt that can NEVER be discharged through bankruptcy.

It is the ONLY type of debt that is completely non-dischargeable in a bankruptcy.

As the article points out, it is leading to many loan abuses. And most often to those who are least prepared to deal with the issues involved.

They NEED protection from creditors who have managed to secure an egregious “loan shark” advantage and attitude towards debt collection.

I fail to understand what Congress was thinking when they enacted this new student loan legislation because this is wrong no matter how you look at it, and it MUST be stopped.

Oct 20, 2012 3:51pm EDT  --  Report as abuse
Overcast451 wrote:
Yes indeed, they garnished my wages for 1.5 years for more than my mortgage – and the lender did it intentionally. It’s paid now, so I have no axe to grind.

But they crock-blocked the paperwork and wouldn’t send it to me, once I had gotten the loan out of default and was going to transfer it back to the Student Loan Servicing (this is the collection agency, West Asset Management – and yes, I’ll name them as this is not fiction) – but since I never got the paperwork they ‘claimed’ they sent. But maybe I just missed it 3 times.. it’s possible…

So, it went BACK to collections – mind you, the money part was paid **current** by this time I was not behind one cent on the new payment plan, thus the paperwork for the ‘release’ was needed – which was never sent.

I grew so TIRED of dealing with this company, and after too many years of already having been in debt – well, my debt now is about 15% of incoming – so I told them to just garnish it. It was more than my house payment, but the jerks have their precious money now – and I’m almost totally out of debt.

Thank God I never qualified for a credit card when I was young and stupid, student loans were bad enough!! If I had a credit card too then, I’d never get out of debt.

Lesson learned – **suffer to pay these early,** otherwise; you suffer more later. They WILL TAKE IT, one way or the other. There’s no getting around this educational scam, unless you want to do general labor – you gotta ‘pay the man’ and then hope you can get a job. I think Academia is worse than corporate America now in terms of greed.

Best idea now is to go to school slowly and work while you are in there to keep it paid down.

Oct 22, 2012 10:06am EDT  --  Report as abuse
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