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Will Falling Behind on My Student Loan Payments Doom My Efforts to Obtain a Security Clearance?


Student loan debt is a significant burden carried by many people in this country. Unlike other types of consumer debts, it can be difficult, if not impossible, to discharge unpaid student loans in bankruptcy. As a result, it is not uncommon for people to default on their student loans or otherwise fall behind on their payments. In turn, this can impact the borrower’s ability to find work that requires a government security clearance.

The Department of Defense will consider a person’s “[f]ailure to live within one’s means” and “satisfy debts” when judging an application for a security clearance. This does not automatically mean that an unpaid student loan will result in the denial or revocation of a clearance. But the applicant may need to explain their situation in greater detail in order to mitigate the government’s concerns.

A recent decision from the Defense Office of Hearings and Appeals (DOHA) provides a helpful example. This case involved a 26-year-old woman (the applicant) who works for a defense contractor. She required a clearance to move into a better-paying job with her employer.

The applicant partially financed her college education with student loans. She eventually defaulted on $38,600 of unpaid student loans. Additionally, the applicant carried smaller amounts of debt from a private loan and unpaid medical bills. While applying for her security clearance, however, the applicant neglected to mention these debts, saying she was unaware of the medical bill and “did not think she had to list her student loans.”

The DOD initially denied the applicant’s request for a clearance, citing “financial considerations.” A DOHA administrative law judge (ALJ) reversed, however, finding the applicant had mitigated any security concerns. The ALJ noted the applicant’s debts were not “the result of frivolous or extravagant spending.” More to the point, the applicant presented a “plan to resolve her financial problems.” She worked with a private company to negotiate a repayment plan for the student loans.

Although the applicant did not initially disclose her debts, the ALJ did not find this was a case of someone intentionally providing “false information.” The judge said the applicant was “honest, but unsophisticated about her finances,” which led her to making certain mistakes. Based on the “whole-person concept” applicable in security clearance cases, the ALJ concluded the applicant’s financial issues posed no threat to national security.

Speak with a Maryland Security Clearance Lawyer Today

It is always important to be honest and upfront about any financial issue, especially outstanding debts, that may impact on your application for a security clearance. Never assume that a particular debt is insignificant or irrelevant. If you are unsure about whether or how to disclose something, it is best to consult with an experienced Maryland security clearance attorney who can help guide you through the process. At Henault & Sysko, Chartered, we help many individuals who work for government agencies and contractors obtain and maintain their security clearances. Call us today at 410-768-9300 to schedule a consultation.


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