Managing Your VA Benefits to Mitigate Debt

Transitioning from military service to civilian life is a significant adjustment on many levels, including financial stability.

Veterans may not have the same steady income they had in service or the free or extra income for housing. Navigating these new financial paths can be daunting, and often needs clarity.

In many cases, injured veterans rely on disability compensation from the Department of Veterans Affairs (VA) as their primary source of income or as a supplement to their income, depending on the severity of their service-connected injuries.

Responsible management of VA disability compensation and transparent communication with the VA are pivotal to mitigating debt and ensuring VA benefits provide a quality of life that honors the service and sacrifice of those who have served.

Wounded Warrior Project^® (WWP) offers warriors resources and tools to help them manage debt, create budgets, navigate their VA benefits, and better prepare for their financial futures. 

Financial Strain Among WWP Warriors

According to WWP’s™ most recent Warrior Survey, financial strain among WWP warriors is on the rise. In the 2022 survey:

• Over 64% of warriors indicated they did not have enough money to make ends meet at some point during the past 12 months, compared to just 42% in 2021. The top reasons were the increased cost of goods and services, working and not making enough money, and family obligations. Most WWP warriors (92%) have a VA disability rating, and most (78.1%) have a rating of 70% or higher.
• More than 9 in 10 have debt other than their mortgage, and more than half (56.8%) have at least $20,000 in total debt, excluding mortgages.

For many warriors, one missed or reduced compensation payment they weren't prepared for could create a financial crisis. WWP aims to help veterans reduce the risks of such incidents and better prepare for the future.

Tips for Mitigating Debt When It Comes to VA Benefits

Veterans don’t have to navigate their financial wellness journey alone. Veterans service organizations (VSOs), like WWP, can help veterans improve their financial knowledge.

There are also things veterans can do to help mitigate risks when it comes to debt and their VA compensation. WWP Benefits Training and Operations Specialist Michael Snook offers some tips to help empower veterans to help themselves.

• If possible, don’t depend on disability compensation: If you receive a steady paycheck from employment, try not to include your disability compensation as income. Leave it out of the monthly housing budget or as income when requesting a loan or credit card. Not having your VA disability compensation as part of your income can protect you in instances of a reduction or other changes to your VA disability benefits.

• Read all your paperwork: It may seem daunting, but it’s important to read any and all correspondence from the VA. Sure, it could be another appointment reminder, but it also could be a notification letting you know your compensation has changed. When you get the initial rating letter informing you that your injury is service-connected and you qualify for compensation, it’s wise to read through the entire document.

“Receiving a disability letter confirming your status as a service-connected disabled veteran is a significant step," Snook explained. "But don't just tuck it away and forget about it. This document contains crucial information that details your responsibilities now and possibly in the future."

• Notify VA immediately regarding changes in living situations: It's important to keep the VA informed of any changes in your marital or dependency status. For instance, let's say you get a divorce and remarry six months later. Even though the total number of dependents might remain the same, failing to report the change in marital status promptly could be costly. Your disability compensation rate may be adjusted based on your dependents, so delays in reporting a marriage could result in an overpayment that you'd be responsible for repaying to the VA.

“For example, if you get remarried, tell [VA] within a year of remarriage,” Snook said. “Then you will only owe the gap between the divorce and the new marriage. But if it goes beyond a year, all that time until you finally tell them (or the VA finds out), you owe them money for it. They will not retroactively pay you from the date you got remarried if you didn't tell them for more than a year after the nuptials.”

Dependent children can also affect your compensation. Although you may be entitled to dependent benefits after a child turns 18, informing VA of the change is still important.

“The forms to fill out for dependent benefits are different for dependents who are under 18 than those over, so if a child turns 18 and goes to college, you may still be eligible for benefits, but it may require a different form,” Snook said. “If you fail to notify VA, you could have your compensation reduced – and not be prepared for it – or even miss out on additional benefits.”

• Plan ahead and prepare for obstacles: It’s good to have some savings set aside to cover possible changes in compensation or other unforeseen circumstances.

Reductions in disability compensation can create snowball effects, especially if veterans are not aware of reductions or depend on disability compensation as income. It can cause bills to pile up, late fees to be incurred, and debt to increase. While sometimes difficult, setting aside some savings and preparing for life changes, like changes in dependent status, can go a long way toward reducing a possible financial crisis.

There may also be help available by communicating with VA when unexpected financial pitfalls occur, like the loss of employment. If you have a VA home loan, the VA may be able to help negotiate a loan modification, so you don’t get behind on your mortgage or, worse, lose your house.

“I think what’s important to get across is you can mitigate debt that may be caused by a reduction by being prepared,” Snook said.

• Create a checklist: Keeping a list of all the VA departments you need to inform of any changes in your situation is good. Refer to the list when you have a change and check it off after you’ve notified the appropriate VA department.

“It’s the responsibility of the veteran to inform the VA of life-changing events, like moving, divorce, or death in the family,” Snook said.

Find out how WWP’s Benefits Services Can Help.

Navigating Change Together

Changes in compensation can occur because a veteran fails to report life changes, improvement of service-connected injuries, or sometimes even mistakes on VA’s part. Regardless of the reason, changes in compensation can have a major impact on a veteran’s financial well-being.

“It’s too risky not to do anything. It’s up to the veteran to notice a discrepancy in their pay, as you may be required to return the overpayment,” Snook said.

VA is diligent about sending correspondence and notifications to veterans, but the amount of correspondence may make it easy to overlook or disregard, especially if you’re already dealing with injuries like post-traumatic stress disorder and traumatic brain injury. However, it’s vital that veterans maintain proper communication to ensure access to their deserved benefits and maintain their financial health.

“You need to try to make a diligent effort to stay in the know and stay on top of updates that come from VA, especially if you are drawing compensation benefits,” Snook said. “Anything that comes from the VA, make sure you read it and if you don't understand it, talk to your VSO. Wounded Warrior Project has a team of professional benefits advocates who are ready to ensure you receive the benefits you’ve earned in a manner that honors your service. But we’re also here to ensure you maintain those benefits and reduce the risk of incurring debts that could impact your entitlements.”

Contact: — Paris Moulden, Public Relations, pmoulden@woundedwarriorproject.org, 904.570.7910

About Wounded Warrior Project

Since 2003, Wounded Warrior Project^® (WWP) has been meeting the growing needs of warriors, their families, and caregivers — helping them achieve their highest ambition. Learn more.