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DOD News Briefing on Efforts to Enhance the Financial Health of the Force with Secretary Panetta, Assistant Director Petraeus, and Acting Deputy Assistant Secretary Milam from the Pentagon

Presenters: Secretary of Defense Leon E. Panetta, Assistant Director for the Office of Servicemember Affairs at the Consumer Financial Protection Bureau Holly Petraeus, and Acting DASD for Military Community and Family Policy Chuck Milam
October 18, 2012

            SECRETARY OF DEFENSE LEON E. PANETTA:  Good afternoon.  

            Let me start, before I turn this over to Holly Petraeus, if I could make a brief personnel announcement for Department of Defense. 

            Today I am very pleased to announce that President Obama will nominate General David Rodriguez to succeed General Carter Ham as commander of U.S. Africa Command. 

            General Rodriguez currently leads U.S. Army Forces Command, and as I think many of you know, he has served in a variety of key leadership roles on the battlefield. 

            While serving as commander of ISAF Joint Command, he oversaw the coalition and Afghan forces during the surge, and was a key architect of the successful campaign plan that we are now implementing. 

            He's a proven leader, extremely well prepared to serve as the next AFRICOM commander, if confirmed, and I believe he will be. 

            I'll have a lot more to say about General Carter Ham's service in the months ahead, but let me say this.  Under his leadership, AFRICOM has played a very central role in some very important missions, from the NATO campaign in Libya that led to the fall of Gadhafi; to successful counterterrorism efforts in Somalia, Yemen; to efforts that we are now involved in, in Nigeria, in Mali and elsewhere. 

            General Ham has really brought AFRICOM into a very pivotal role in that challenging region.  I and the nation are deeply grateful for his outstanding service. 

            As you all know, last week in Brussels I announced that President Obama will nominate General Joe Dunford to succeed General John Allen as the leader of the coalition forces in Afghanistan.  And General Allen will be nominated to be commander of U.S. European Command and NATO Supreme Allied Commander in Europe. 

            Today, I'd also like to announce that President Obama will nominate Lieutenant General John Paxton to succeed Joe as assistant commandant of the United States Marine Corps.  

            General Paxton has served in a number of key leadership roles in the Marine Corps and here at the Pentagon, where he recently served as director of operations for the Joint Staff.  He's an exceptionally capable leader, and again, if confirmed, he will be an outstanding assistant commandant of the Marine Corps. 

            General Rodriguez, General Paxton join a growing cadre of senior military leaders who have deployed to combat theaters numerous times throughout their careers.  And many have served, as we all know, in key leadership positions in Iraq and Afghanistan.  And they're now leading the most experienced and combat-tested military force that our nation has ever assembled.  

            Building on that perspective will be essential as we shape the force of the 21st century, that institutionalizes the lessons of war, and has the innovative capability to deal with the threats and challenges that we're going to face in the future. 

            Also this afternoon, I am very delighted to welcome to the Pentagon a true friend of the Department of Defense and a dedicated member of our military family.  

            Holly Petraeus leads the Consumer Financial Protection Bureau's Office of Servicemember Affairs.  That's a hell of a mouthful, but it really comes down to this:  She is leading efforts to ensure the financial health of servicemembers and their families. 

            Holly knows first-hand the challenges facing military families in this and other areas.  She's been an Army daughter, an Army spouse, and she remains an Army mother.  She is now applying her knowledge to help protect servicemembers and their families from unscrupulous financial practices and to connect them to the resources available to try to support them. 

            The Department of Defense strongly supports these efforts.  We're partnering with Holly and her team because the financial health of our force is absolutely critical to our overall military readiness.  

            Servicemembers and their families have unique challenges and opportunities when it comes to their personal finances.  They are often targeted by those who seek to profit from their unique circumstances. 

            In May of this year, the department and the bureau signed a joint statement of principles underscoring our partnership to protect the finances of servicemembers.  That statement is designed to help DOD and the bureau monitor unscrupulous practices directed at servicemembers and their families, coordinate consumer protection measures, and strengthen laws related to financial protections of military members and their families. 

            We're also working with the bureau to help enhance financial education for new recruits and to provide relief for military homeowners faced with moving because of military orders. 

            All of these efforts complement the department's personal financial readiness programs.  These programs provide military families a number of resources in order to make prudent financial decisions and facilitate access to appropriate services and support. 

            In partnership with the bureau, we're working to try to improve these programs and to integrate them into the department's broader efforts to enforce a ready force. 

            The problem here, I might mention -- and Holly, I'm sure, will refer to this -- is that the number one reason people in the service lose their security clearance is because of financial problems.  And that's something that we absolutely now have to address. 

            As an example, we've added a financial planning seminar to our redesigned Transition Assistance Program, the so-called TAP program, for those who are leaving the military, trying to incorporate financial guidance as part of that effort when they come back. 

            The seminar is an eye-opener for servicemembers who need help in developing a long-term financial plan.  It gives them the tools they need to resolve financial difficulties and try to achieve their post-military goals. 

            Today, Holly and her colleagues are releasing a report on the challenges that servicemembers face in repaying student loans. 

            Student loans are one important part of the total debt burden -- from mortgages to credit cards to other debt -- on those who are serving in the military today.  Indeed, in a recent survey of the force, 41 percent of servicemembers reported that they are paying off an education-related loan.  

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

            We must never forget that our men and women serving in uniform are willing to put their lives on the line in order to defend this nation.  Their service and their sacrifice should not be made harder for them when it comes to repaying their student loans.  Because of their sacrifice, it should be easier, not tougher for servicemembers to be able to pay off their college debt. 

            Together, we must do everything we can to focus attention on the benefits and special protections available for servicemembers with student loans.  That's why the department is continuing to work with the bureau, Department of Education, Department of Justice to make sure our military members know their rights and to ensure that companies protect, not take advantage of, these brave men and women under the law. 

            So now let me invite Holly to the podium to say a few words and to then take your questions. 

            She'll be joined by Chuck Milam, who's the acting deputy assistant secretary of defense for community -- for military community and family policy within the Office of the Secretary of Defense for Personnel and Readiness. 

            Let me thank her, take this moment to deeply thank Holly for her service, her dedication and her commitment to trying to help our men and women in uniform. 


            ASSISTANT DIRECTOR HOLLY PETRAEUS:  Thank you, Secretary Panetta, for those very kind remarks and for inviting me to the Pentagon today.  I appreciate your strong support and your understanding that financial readiness is essential to mission readiness. 

            When Congress created the Office of Servicemember Affairs at the Consumer Financial Protection Bureau it gave us three central missions.  First, to see that military personnel and their families receive the education they need to make better informed financial decisions.  Second, to monitor their complaints to the CFPB and the response to those complaints.  And third, to work with other federal and state agencies on consumer financial protection measures for military personnel and their families.

            Today's report, emphasized by our joint announcement with DOD, is a great example of how all three of our missions can come together to assist military families and ensure their financial readiness.

            And I should add that other federal agencies are represented here today as well, with senior staff from the Department of Justice and Department of Education in the room.  They have been working hard on military Servicemembers Civil Relief Act and education issues this year, and I have to thank them for their concern for our military and their families. 

            Since I began this job almost two years ago, I have visited over 40 different military installations and National Guard headquarters, talking to senior leaders, military service providers, and thousands of servicemembers and spouses.  I have had countless conversations about the financial issues that are currently impacting our troops. 

            One thing I have heard repeatedly is that servicemembers are entering the military with student loan debt, and as a result facing both financial challenges and paperwork challenges. 

            One particular conversation with a young sailor stands out.  He was just out of basic training and in the Navy's Advanced School at Naval Station Great Lakes.  He told me that he entered the Navy with over $100,000 in student loan debt and no degree. 

            He joined the Navy because it was the only way he believed he could make it, but most of his Navy paycheck was going towards paying off those loans.  And of course he was worried about what would happen if a financial emergency came along as he tried to chip away at his mountain of his debt.

            This young sailor's story was just one of many that I've heard.  Many servicemembers are entering the armed forces with and sometimes because of substantial student loan debt, and unfortunately they are not always getting the information they need about programs and policies that could help them reduce that debt significantly while they're on active duty. 

            Today's report and the coordinated efforts we're announcing with DOD can help.  This is an opportunity for us to fix an issue that is impacting the financial readiness of the force and causing harm to military consumers.  We need to be proactive in addressing problems in the servicing of student loans for members of our military. 

            I think we all saw what happened to military homeowners in the past few years when mortgage lenders consistently failed to give them the protections they'd earned under the Servicemembers Civil Relief Act. 

            According to the GAO, in recent years there were at least 15,000 instances of financial institutions failing to properly reduce servicemembers' mortgage interest rates to 6 percent under the SCRA and over 300 illegal foreclosures.  And it has taken class action suits and government intervention to fix these problems. 

            As the report released today notes, there are real concerns of a similar problem with student loan servicing and SCRA violations.  In fact, I think the problem may be greater with student loans than it was with  mortgages because I believe many more young servicemembers enter active duty with student loans than with a mortgage. 

            As an anecdotal example, just a couple of weeks ago I held a town hall with 214 airmen at an air base in Wyoming.  When I asked, more than a third  indicated they were carrying some form of student loan debt, significantly less than were homeowners. 

            Here's some of what I've heard through installation visits and consumer complaints to CFPB.  Servicemembers are having problems invoking consumer protection rights under the SCRA.  They don't know about their repayment alternatives and their servicers are providing them with inaccurate or incomplete information about their options.  And they are confused by eligibility requirements for benefits that are so complicated that they either can't figure out what they're entitled to or don't realize that taking one benefit might exclude them from being eligible for another, more helpful one. 

            This is not a matter of just a few dollars and cents.  That young sailor I talked about with $100,000 in student loan debt could pay nearly $25,000 extra if he doesn't receive his SCRA interest rate cap while he's on active duty.  And if he stays in the Navy for 10 years but doesn't know about or doesn't use the income-based repayment plan, the Public Service Loan Forgiveness Program and the SCRA rate cap, he could lose out on nearly $76,000 that he could have cut off his debt in those 10 years. 

            That's why I'm so pleased to be here today to help get the word out about military student loan protections and benefits.  We'll be teaming up with DOD to train JAGs, personal financial managers and education service officers so that they know about these benefits and consumer protections. 

            And we also plan to push out the message through a variety of media to all servicemembers.  We want them to know that even if they didn't know about or ask for their student loan repayment benefits when they entered the military, it's not too late to do it now. 

            I also want to take this moment to urge all in the student loan industry to be sure that their policies and procedures recognize the unique laws that protect our men and women in uniform. 

            No servicemember should be given the wrong information or forced to go round and round with their servicer to obtain the protections they have earned through their service to the nation. 

            And one final note.  If there are any servicemembers out there with student loan debt who are having trouble with their loan servicer, I want them to remember that they can go to consumerfinance.gov and file a complaint with the CFPB. 

            And now, I'll hand off the microphone to Chuck Milam, the acting deputy assistant secretary of defense for military community and family policy. 


            ACTING DEPUTY ASSISTANT SECRETARY CHUCK MILAM:  Well, good afternoon. 

            And first, I'd like to thank Secretary Panetta for his remarks today. 

            And, Mrs. Petraeus, it's always a pleasure to have you with us.  And I'm honored to be here with you today on this joint announcement. 

            I would like to echo Secretary Panetta's comments and express my sincere appreciation for the work that the Consumer Financial Protection Bureau and the Office of Servicemember Affairs do for all of our servicemembers and their families.  So, thank you very much. 

            The Department of Defense and the bureau both understand that financial fitness is part of the overall readiness of our force and financial hardship can affect that performance.  In Department of Defense surveys, servicemembers have related finances as one of their most significant stressors, rating even higher than deployments and personal relationships. 

            We appreciate the work of the bureau and the Office of Servicemember Affairs in engaging financial industry on behalf of servicemembers and their families and highlighting the issues of student loan debt in this report. 

            The Department of Defense considers debt from any source a concern and a potential threat to readiness, especially if not managed properly, as it could spiral out of control and cause undue hardship. 

            As Secretary Panetta mentioned, the Department of Defense provides a wide variety of financial education resources and counseling to help put servicemembers and their families on a path to financial freedom, and avoid common traps and pitfalls. 

            This report and the work of the bureau and the Office of Servicemember Affairs will better inform the education and counseling delivered to our servicemembers and their families to ensure they are equipped with the tools they need to make wise financial decisions in support of their financial goals. 

            The first line of defense for financial education counseling for military families are the personal financial managers at every military installation family support center.  These managers hold a nationally recognized financial counselor certification and provide on-site group financial counseling, workshop, classes, and one-on-one private financial counseling. 

            For those servicemembers and families who may not live near military installations, especially for the National Guard and Reserve, Military OneSource is a valuable online and telephonic resource, through which they can receive free and confidential financial counseling and planning consultation 24/7 via phone or face to face.  They also provide access to specialized financial and tax planning consultation via the phone. 

            In fiscal year 2012, Military OneSource conducted over 3,500 telephonic financial counseling sessions.  That was a 50 percent increase over the previous year. 

            The department can also deploy specialized military family life counselors called personal financial counselors across the DOD to support servicemembers and families, to provide financial briefings, one-on-one counseling, and education and training. 

            In fiscal year '12, nearly 2,000 personal financial counselors provided support at National Guard and Reserve events, and at installations across the country. 

            The installation and unit legal services office military JAG advocates are also valuable resources for servicemembers, especially when there is a question concerning how Servicemembers Civil Relief Act may impact certain debts before activated service, such as a college loan. 

            And when servicemember is ready to continue their formal education, installation education services officers provide the counseling they need to ensure they're making the best possible choices, both academically and financially, as they pursue their degree. 

            And finally, the servicemember's chain of command is always a valuable resource and eager to help them through the challenges and whatever they'll need.  

            Again, the work and the resources facilitated by the bureau and the servicemember affairs will help better inform the education and counseling delivered by all of these entities. 

            So in closing, I'd like to thank the bureau today for their report and reiterate the department's truly appreciative of Mrs. Petraeus and her team.  It's through our shared vision that we can help servicemembers and their families remain strong and resilient and face the challenges they may face. 

            Thank you for being here today. 

            STAFF:  Mrs. Petraeus and Mr. Milam are happy to take questions.  Are there any? 


            Q:  Ms. Petraeus, if I could ask you a question.  In the vignette that you mentioned, you talked about this being a servicemember who was walking in with debt.  Is that a failure, then, at the start for recruiters in not being able -- not having a clear grasp of the opportunities available to prospective recruits? 

            ASST. DIR. PETRAEUS:  You know, I think we put a lot on recruiters as it is.  I'm not sure -- they could probably be better informed and certainly that I think will be part of our education effort.  I think it's going to have to be multifaceted.  We need to be sure everybody's giving the right message. 

            And we are doing something.  We're going to do an education piece ourselves to go out to servicemembers who are in what we call delayed entry status, where they're committed to join the military but not yet gone to boot camp.  And we're going to put a piece in that as well about student loan debt.  So, hopefully that'll help, too. 

            But, yes, I think making sure recruiters have the right information can be helpful as well. 

            Q:  And how pervasive is the problem, as a whole? 

            ASST. DIR. PETRAEUS:  We have not got a lot of statistical data for you.  We do know, as you heard, that there is certainly a significant number of military that have student loan debt.  

            What we are -- we have seen is in our complaints and in the conversations I've had that there's some disturbing trends to us.  And a lot of this is, as we said, reminiscent of what we saw in the mortgage servicing issue.  

            So we want to be proactive and get out ahead of it and not wait necessarily for a large volume of people who've already had problems, but to go ahead and -- and take this opportunity to educate and hopefully nip some of this in the bud so servicemembers don't take an option that may be least advantageous, like deferring their loans, not realizing that those loans will still be accruing interest while they're on active duty. 

            We want them to make better choices, and that's going to a matter of education both for them and for servicers.

            Q:  Yeah, it seems to be that -- to me that you're saying the problem is getting worse.  Is there some reason for that?  I mean, student loans are hardly a new thing.  Servicemembers having student loans wouldn't be a new thing.  What's happened in the last couple of years, perhaps, that's made this come to a critical point? 

            ASST. DIR. PETRAEUS:  I think we've just seen that the amount of student loan debt out there is -- has gotten to a pretty frightening number, the estimates, and this is not just for military, but for everyone.  The estimate is that it's about a trillion dollars now of student loan debt out there.  And I think that number should be sufficiently alarming in and of itself that it needs us to take action. 

            Q:  Ma'am, what's -- reading the release that you had, it's confusing to me.  But, I mean, is that -- does that -- what changes this?  What -- what can turn the corner for you?  Is it training of personal financial managers?  I mean, how do you turn the corner in the education program for the -- for these kids? 

            ASST. DIR. PETRAEUS:  Some of it I think really is making sure they're aware of what questions to ask.  But I also think they're sometimes just getting flat wrong information from their loan servicers.  So we have to, you know, apply pressure to the industry as well to say, "You need to be giving the right answers." 

            And I'll give you an example.  Some servicemembers we've heard have been told, when they asked for their interest rate cap of 6 percent under the Servicemembers Civil Relief Act, they've been told by their servicer, "Oh, that only applies if you're going to a combat zone."  Completely wrong.  There is one provision for a Perkins loan that has a combat zone element to it, but has nothing to do with the Servicemembers Civil Relief Act. 

            So that's an example of a servicer giving out just completely wrong information.  So, we need to, you know, hold them accountable when they're doing that, get them to fix it, and also educate the servicemembers so they realize that they're not getting the right information.  And if they still have no luck, we want them to complain to us so we can then approach the servicer as well. 

            Q:  Thank you. 

            STAFF:  Viola? 

            Q:  Ms. Petraeus, the complaint line that you mentioned, how long has that been running?  And what's the average and the range of time it takes to resolve a complaint?  And what proportion of them are generally resolved in -- in favor of the complainant? 

            ASST. DIR. PETRAEUS:  We opened our doors for complaints in July of last year, but we didn't start taking student loan complaints until March.  

            You know, I can't really quote you statistics because I can't be sure that I would be right.  But we do, when we get a complaint, our, you know, our initial approach is to send a letter to that financial institution saying we've received a complaint and please respond within 15 days.  And then we take it from there. 

            And we try to keep the servicemember or the -- who's complained apprised all the way along of -- of, you know, what is happening so they don't feel like their complaint has gone into a black hole. 

            Q:  Ms. Petraeus, I was wondering, I know that you said that at this point there's not a lot of statistics that have been compiled.  What are the metrics or the outcome measures that your bureau is going to be looking at to consider whether things have improved? 

            I was wondering if you can comment on that. 

            ASST. DIR. PETRAEUS:  That's a tough one, metrics. 

            You know, we have a lot of economists and folks like that at the bureau, and I'm not one of them.  So I will just say, to me that the outcome I want to see is that no servicemember gets wrong information, or gets, you know, bad advice that leads them to lose money, and not take advantage of all the benefits that are there for them. 

            So we'll keep monitoring, you know, the complaints that come into us, and, hopefully, they will decrease if people stop having these problems. 

            Q:  Hi, Mrs. Petraeus. 

            Can you quantify how many personnel have lost their security clearance because of financial difficulties or student loans? 

            ASST. DIR. PETRAEUS:  That's something you'd have to ask the Department of Defense.  I do know that financial problems are the number one cause of security clearances being revoked.  I don't think they break it down into, you know, what specific financial problems. 

            But, you know, there's a logic to that.  If somebody has serious financial problems they may be open to doing something they would not ordinarily consider.  So that is -- that's the rationale, certainly. 

            And I think it just really strongly reminds us that financial readiness is tied to mission readiness.  And if they lose that clearance they can't do their job.  Everybody loses. 

            Q:  Mrs. Petraeus, is the G.I. Bill involved in this at all?  And what happens to that servicer and that lender who provides wrong information to the -- to the troops?  What -- what is done there?  What is -- does the servicemember have any recourse?  What -- what happens there? 

            ASST. DIR. PETRAEUS:  First of all, I'd say this particular issue is not really a G.I. Bill issue.  This is more concerning student loan debt that servicemembers have accrued. 

            And it depends, what happens to the servicer, it may depend on what the violation is.  If they've actually violated the Servicemembers Civil Relief Act then that is a law that is enforced by the Department of Justice Civil Rights Division, and they can certainly take action on that. 

            If it's other servicing issues, again, we do encourage people to file a complaint with us at consumerfinance.gov.  And, you know, we may be able to assist.  And if we see a real pattern then we can possibly, you know, take further action. 

            Q:  Are lenders making these mistakes, is it your impression, primarily because of, you know, lack of knowledge, or is this willful, unscrupulous business practices? 

            ASST. DIR. PETRAEUS:  That's a good question, and I think we -- I think we asked that question when we saw all the problems with mortgage servicing. 

            And, you know, I think that there's a variety of factors there.  Some of it may just be poor training of customer service personnel who don't get the proper information.  Sometimes it may just be -- you know, it may be more deliberate than that.  There's really no way to tell what they're thinking.  

            What we deal with is the other end, which is that they've given out bad information. 

            STAFF:  Luis, and then this woman here. 

            Q:  Question for the secretary, actually.  A question about -- you spoke about Military One [sic; Military OneSource], the program, and other programs.  How does sequestration potentially impact these programs?  Because I believe that personnel services are something that -- (inaudible) -- trying to protect from sequestration.  Is that something that you're looking at or was there a potential impact? 

            ACTING DEP. ASST. SEC. MILAM:  Without a doubt we're all concerned about sequestration.  And -- but as Secretary Panetta has said, you know, this would be disastrous if passed. 

            And, you know, that said, we're going keep the faith with the military and their families.  At this time there are no reductions in those programs with -- with OneSource and the counselors as well. 

            Q:  (inaudible) -- mainly on contractors or is it a DOD -- 

            ACTING DEP. ASST. SEC. MILAM:  Yes, Military OneSource is a contracted operation. 

            Q:  Certainly, as you said, you know, there are servicemembers who come into the military with student debt, but among those who, you know, incur this -- this crippling debt after they're in uniform, can you address, sort of, how that happens given the availability of G.I. Bill, tuition assistance, I mean, and is your education effort here going to try and get after that and prevent debt from happening? 

            ASST. DIR. PETRAEUS:  Well, we've certainly been vocal on this topic in the past year.  G.I. Bill and tuition assistance are very generous benefits, but there are schools that definitely cost more than that, and some servicemembers choose to go to those. 

            And if they do, first -- certainly we want to encourage them as their first loan source to look at federal student loans and as a last resort to look at private student loans where you have a lot less in the way of protections. 

            And I also would encourage them to think about, is this the school that really offers something so valuable that they're going to pay above and beyond their benefits to go there?  Because there are a lot of schools where you don't have to do that.           

            So it's another education issue for sure, and one that we've definitely been talking about. 

            ACTING DEP. ASST. SEC. MILAM:  If I could add, prior to a servicemember signing up for tuition assistance, they go through a pretty rigorous counseling session, either in person or online.  And part of the Principles of Excellence, the president's executive order, we've enhanced actually the measures that are taking place for schools to be more up front about their expenses and their costs; for schools to also counsel our servicemembers on the available -- loans that are available, to include the lower interest rate federal loans that are available as well. 

            So we feel pretty good about the programs that we have in place for our servicemembers who utilize the Tuition Assistance Program.

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