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AER helps Soldiers with interest-free loans, grants -- rates among top charities for efficiency

By C. Todd Lopez

WASHINGTON (Feb. 24, 2009) -- Army Emergency Relief, which begins its annual campaign next week, provided more than $252 million in assistance to more than a quarter million Soldiers and family members between 2003 and 2007.

The AER bills itself as "the Army's own emergency financial assistance organization." It assists Soldiers with interest-free loans, grants and tuition money for family members. Money for the program comes from voluntary donations by Soldiers and civilians, and from investments made by AER.

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In fact, each year, AER provides more aid to Soldiers than what was collected through donations -- the remainder of the money comes from the dividends paid on investments made by AER.

"When people ask me what amount of the dollar they donate to AER is actually spent on Soldiers, I can tell them that in 2007, we spent about $1.84 of that dollar on program costs," said Andrew H. Cohen, deputy director for finance and treasurer, Army Emergency Relief.

AER maintains sufficient resources to invest -- ensures there is always enough money to pay to Soldiers in need. At one point, the total value of AER investments peaked at about $297 million. Today AER's investments are worth about $190 million. That money, Cohen said, is an insurance policy to ensure that AER always has the money it needs to help Soldiers were a major unforeseen crisis occur, such as a large mobilization.

"The investment capital represents the body of funds that has grown over the years from when AER ran surpluses," Cohen said. "That money is not just sitting there. It is earning a revenue stream allowing us to operate over and above what we get from donations. It represents seed money and investments. And that money can be used for anything, such as a mass casualty event where a lot of people need a lot of money. During the Gulf War, for instance, we went from $25 to $45 million of assistance in a matter of months."

Cohen pointed out that while the investment capital is earning additional funds for AER, it is still available to help Soldiers when needed.

"It's not held in reserve -- it's available for use," he said." Every Soldier that has a valid need has gotten assistance, so the needs of our Soldiers are being met."

In fact, the AER's ability to manage its funds in a way that provides the most assistance to Soldiers has earned AER its third consecutive "4-star rating" from Charity Navigator, for "its ability to efficiently manage and grow its finances."

Charity Navigator further stated: "Only 10 percent of the charities we've rated have received at least three consecutive 4-star evaluations, indicating that 'Army Emergency Relief consistently executes its mission in a fiscally responsible way and outperforms most other charities in America.'"

The AER is not about giving money away, but rather meeting the emergency needs of Soldiers and their families. It accomplishes this mission by providing interest free loans and grants as appropriate. Cohen said assistance is provided as loans when a Soldier has the ability to repay and grants when repayment would cause a future hardship. Unlike most charitable non profit organizations AER clientele, Soldiers, have an income and the ability to repay their no interest loans, which is in turn is made available to other Soldiers. And they don't want a handout -- they are simply in need of funds for unexpected emergencies.

"The bulk of financial assistance is traditionally for rent, mortgages, housing, personally owned vehicle repair, or travel under emergency leave conditions," Cohen said. "For instance, a recruiter and his family might get stationed in Los Angeles. And while he gets a basic allowance for housing, he might not have the money he needs for expensive rental deposits or start-up costs to move into a home there. That is where AER could help."

Another example, Cohen said, is a family renting a home where the landlord fails to make mortgage payments. That family could find the home is being foreclosed on by the bank.

"They might find they've got a week to get out of the house and find a new place to live," Cohen said. "That's another case where AER could help out with emergency moving funds, in the form of an interest-free loan."

Last year, AER provided $83 million to 72,000 Soldiers and Families. About 24 percent of that amount was in the form of tax-free grants and 76 percent was for interest-free loans.

Between Jan. 1, 2003 and Dec. 31, 2007, AER paid out a total of over $252 million. The majority of that was in the form of interest-free loans. About $63 million -- as reported in a recent story by the Associated Press -- was given away in the form of grants for such things as tuition for qualifying family members, emergency travel for Soldiers who are in hardship situations for when their loved ones die, and for aid to the widows and orphans of fallen Soldiers.

"Widows and orphans automatically get grants," Cohen said.

But the bulk of money provided by AER is in the form of interest-free loans, Cohen said. And of the loans given out, some 95 percent of Soldiers pay the money back.

"This is about Soldiers helping Soldiers," Cohen said. "If Soldiers know you need help to get through a financial bind, they're going to help - and again, they willingly repay these no interest loan so that the money can help the next Soldier."

The AER works very closely with the Army and with a Soldier's chain of command to ensure that much needed funds get where they need to go.

"Unit leadership needs to be aware of when Soldiers are experiencing problems"

Cohen said. Both AER and the Army believe there is a moral imperative to take care of the Soldier -- and knowing when a Soldier needs assistance and helping them to get that assistance is part of that. When a Soldier needs financial assistance, they may also need other kinds of help -- If leaders are unaware of a problem they cannot be part of the solution and provide the required help."

While Soldiers must pay back the interest-free loans they are offered by AER, they have actually come out ahead by talking first with their chain of command to seek relief through AER," Cohen said. Were Soldiers to go to other lenders, a "payday loan" lender for instance, they may pay an annual percentage rate of up to 36 percent. For a $1,000 loan over the course of two weeks, that amounts to a mere $13 in interest.

But the 36-percent APR cap was instituted by federal law as part of the Fiscal Year 2007 Military Authorization Act. Prior to that, payday lenders were charging as much as an 800-percent APR on loans. Prior to 2007, the same $1,000 loan over the course of two weeks could have cost a Soldier more than $300 in interest.

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