Define Overseas Cost of Living Allowance (COLA).

• A. An adjustment to offset higher costs of living overseas (location-based).
• B. A relocation stipend for moving to foreign bases.
• C. A tax deduction for overseas education.
• D. A standard housing allowance in the United States.

Answer: (A)

Overseas Cost of Living Allowance is a recurring adjustment that offsets the higher costs of daily living at foreign duty stations. It’s location-based because different overseas places have different price levels for housing, groceries, utilities, transportation, and other essentials, so the allowance varies by location to keep purchasing power more consistent with home or a standard baseline. This isn’t a one-time relocation payment, it isn’t a tax deduction, and it isn’t a domestic housing allowance in the United States. The idea is to balance out the local costs so the service member or employee doesn’t experience a reduced standard of living simply because they’re stationed abroad.