	The Army Has Referred Debts of Nearly 1,300 Battle- Injured Soldiers for Collection, and the Number May Be Greater

Our analysis of Army and DFAS data through the end of fiscal year 2005  identified nearly 1,300 separated battle-injured soldiers and soldiers who  were killed in combat who had military debts totaling $1.5 million that  were reported to DFAS for debt collection action. Of the nearly 1,300  soldiers, almost 900 separated battle-injured soldiers had debts totaling  about $1.2 million and about 400 soldiers who died in combat had debts  totaling over $300,000. As a policy, DFAS does not pursue collection of debts of fallen soldiers. Debt-related experiences of 19 separated battle- injured soldiers who contacted us included the following. Sixteen soldiers had their military debts reported to credit bureaus, 9  soldiers had debts turned over to private collection agencies, and 8  soldiers had their income tax refunds withheld under TOP. Sixteen could not pay their basic household expenses. Four soldiers were unable to obtain loans to purchase a home, meet other  needs, or obtain VA educational benefits due to service-related debt on  their credit reports. Table 4 illustrates examples of the effects of debt collection actions on  selected separated Army battle-injured soldiers and their families based on  our case studies. Opportunities Exist for Congress to Legislate a More Soldier-Friendly Process for Collecting GWOT Debts

As a result of concern regarding the indebtedness of soldiers resulting  from pay-related problems during deployments, Congress on occasion has  provided authority to the Secretary of Defense to cancel such debts. In addition, unlike waivers,  soldiers who paid debts are not eligible for refunds under the remission  statute. Because of a restriction  in the current law, injured Army GWOT soldiers who separated from the  service at different times have been treated differently, which raises  questions of equity. Because the current debt relief authority expires on December 31,  2007, injured soldiers and their families who have GWOT-incurred military  debts could face the prospect of bad credit reports, visits by collection  agencies, and offsets of their tax refunds if the authority is not available  throughout the OIF/OEF deployment and a reasonable period after the  deployment ends. Appendix II: Objectives, Scope, and Methodology

The purpose of our audit was to determine the (1) extent to which Army  soldiers serving in the Global War on Terrorism (GWOT) who were injured  or killed by hostile fire and were released from active duty are having  debts referred to credit bureaus and collection agencies and (2) the impact  of Department of Defense (DOD) debt collection action on these soldiers  and their families. You also asked us to discuss ways that Congress could  make the process for collecting out-of-service debts more soldier friendly. We were contacted by 19 separated battle-injured Army GWOT  soldiers.
Why GAO Did This Study

As part of the Committee on Government Reform's continuing focus on pay and financial issues affecting Army soldiers deployed in the Global War on Terrorism (GWOT), the requesters were concerned that battle-injured soldiers were not only battling the broken military pay system, but faced blemishes on their credit reports and pursuit by collection agencies from referrals of their Army debts. GAO was asked to determine (1) the extent of debt of separated battle-injured soldiers and deceased Army soldiers who served in the GWOT, (2) the impact of DOD debt collection action on separated battle-injured and deceased soldiers and their families, and (3) ways that Congress could make the process for collecting these debts more soldier friendly.

What GAO Found

Pay problems rooted in the complex, cumbersome processes used to pay Army soldiers from their initial mobilization through active duty deployment to demobilization have generated military debts. As of September 30, 2005, nearly 1,300 separated Army GWOT soldiers who were injured or killed during combat in Iraq and Afghanistan had incurred over $1.5 million in military debt, including almost 900 battle-injured soldiers with debts of $1.2 million and about 400 soldiers who died in combat with debts of $300,000. As a policy, DOD does not pursue collection of debts of soldiers who were killed in combat. However, hundreds of battle-injured soldiers experienced collection action on their debts. The extent of these debts may be greater due to incomplete reporting. GAO's case studies of 19 battle-injured soldiers showed that collection action on military debts resulted in significant hardships to these soldiers and their families. For example, 16 of the 19 soldiers were unable to pay their basic household expenses; 4 soldiers were unable to obtain loans to purchase a car or house or meet other needs; and 8 soldiers' debts were offset against their income tax refunds. In addition, 16 of the 19 case study soldiers had their debts reported to credit bureaus and 9 soldiers were contacted by private collection agencies. Due to concerns about soldier indebtedness resulting from pay-related problems during deployments, Congress recently gave the Service Secretaries authority to cancel some GWOT soldier debts. Because of restrictions in the law, debts of injured soldiers who separated at different times can be treated differently. For example, soldiers who separated more than 1 year ago are not eligible for debt relief and soldiers who paid their debts are not eligible for refunds. Further, because this authority expires in December 2007, injured soldiers and their families could face bad credit reports, visits from collection agents, and tax refund offsets in the future.