When you’re in the military, managing your money is a different beast. From staying on top of finances while deployed overseas to figuring out how to make the most of military compensation and benefits, it can feel like complications are around every corner.
Just ask Peter Nguyen, a U.S. Army captain who’s stationed in South Korea. When he was a newly commissioned officer just out of college, Nguyen faced $68,000 in debt that he and his wife had racked up in school.
Despite the challenges that came with repaying debt as an active-duty Army officer, Nguyen quickly paid off student loans and was free of this debt in just three years. Here’s his journey.
Racking up $68,000 in debt before being commissioned
As a member of the Army Reserve Officers’ Training Corp (ROTC) throughout college, Nguyen got some help to pay for costs: a military scholarship that covered two and a half years’ worth of tuition and books, plus a $500 monthly stipend. His wife also was a student and had a scholarship that paid her full tuition costs.
Despite this, the Nguyens graduated with about $30,000 in student debt. “I was living outside my means,” he said. “In order to live our lifestyle, I used both [our] Stafford Loans for God only knows what.”
In addition, Nguyen bought a new car with a $35,000 loan. Between the auto loan, student debt, and some credit card balances, the family debt totaled $68,000.
“Every year when I would take out those student loans, there was always a small part of me that said, ‘You don’t need this,’ but the play-all-day-and-all-night side of me shouted down that lame side of me pretty easily,” Nguyen said.
Borrowing this money was easily justified, after all. “My attitude was that we didn’t need to worry about the debt because after school was done, I’d be able to wipe out the debt,” he said.
Facing student debt reality
While Nguyen was nonchalant about his debt during college, the reality of his situation hit him after graduating in 2010. As part of being commissioned in the Army, Nguyen took a personal finance class. “That’s when I realized I was in trouble,” he said.
“When I had to start repaying it — it kept me up at night,” Nguyen said. “I just couldn’t relax or feel good about receiving a paycheck because I knew I wouldn’t be able to keep the money.”
With most of his earnings eaten up by loan payments, Nguyen could barely enjoy his time abroad at his first duty station in Germany. “The loans were taking so much of my income, I realized that had I taken on less debt, I would have been able to travel much more,” he said.
5 strategies Nguyen used to repay student debt in the army
“My poor decisions were stopping me from doing what I really wanted,” Nguyen said. “I made a commitment to get myself out of the hole I dug and to stay out of it.”
Here are the major steps Nguyen took to become debt-free that could help you as well.
1. Refinance student loans
Nguyen used USAA bank’s Career Starter Loan to reduce the balances on some of his student loans. He borrowed $25,000 at a 2.90% interest rate to pay off his student debt, which had a rate of 6.80%. Over 10 years of repayment, this rate reduction alone would have saved him $5,694 in interest.
See if you could get a lower interest rate by refinancing student loans, refinancing an auto loan, or consolidating credit card debt. Military members should look for similar financial products designed specifically for them, which often offer some of the best deals.
2. Set and follow a budget
“If you’re in the military and you’re in debt, the first thing you have to do is set a budget,” Nguyen advised.
For the first time, he and his wife started following a budget together. With this effort in place, they knew where their money was going and could more effectively control it.
3. Put as much money toward debt as possible
For military members, “all of your basic necessities are provided,” Nguyen said. From housing to health care and even some food costs, there are few expenses you have to pay out of pocket.
“That means most of your income is free to go toward paying your debt,” he said. The Nguyens capitalized on this aspect to put as much of their income as possible toward their debt.
4. Make the most of deployment pay
Nguyen also made the most of the extra pay he earned while he was deployed to a combat zone. The deployments are difficult, but as Nguyen acknowledged, “There were financial rewards, and we used them responsibly to pay off our debts.”
For example, being in a combat zone “allowed me to roll my significant housing allowance into my debt,” he said. Additional hardship duty pay helped, as well as the tax-free earnings from serving in a combat zone.
5. Apply your mission mindset to financial goals
It can be helpful to apply the mindset you’d have on a mission to your financial goals as well, Nguyen suggested.
“Use what you’re taught in the military regarding being mission-oriented and setting goals, and being relentless towards achieving those goals and completing your mission,” he said. “If you apply that ethic toward getting rid of debt, you’ll succeed.”
Nguyen adopted these strategies, and succeed he did. “I paid off all of the debt by the end of the year 2013,” he said, wiping out $68,000 in just three years. Today, the Nguyens are focused on their next financial mission: paying down the mortgage on their home.
In addition to using these tactics to repay your own debt, you should explore military student loan forgiveness and repayment assistance. Your military service could entitle you to some well-deserved help with your student debt. Managing money and paying off debt while serving in the military can be a struggle, but it’s possible, as Nguyen said, if you have the determination and discipline to do it.
All opinions stated by Peter Nguyen are his own and do not reflect the views or opinions of the U.S. Army.
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