The Pentagon is suspending plans to collect bonuses that were given to California National Guard veterans in error.
The decision, which was announced by Secretary of Defense Ash Carter during a visit to Brussels, comes after a congressional outcry.
The bonuses were offered as incentive to fill the shortage of troops during the wars in Iraq and Afghanistan.
Nearly 10,000 soldiers were expected to repay at least $15,000 (£12,270) each.
Some soldiers received bonuses in exchange for enlisting, and others received university tuition assistance.
Since the federal investigation concluded in 2010, about $22m (£18m) has been recovered, the Los Angeles Times reported.
"This process has dragged on too long, for too many service members. Too many cases have languished without action. That's unfair to service members and to taxpayers," Secretary Carter said in a statement, adding that about 2,000 soldiers were given erroneous payments.
Robert D'Andrea, a retired Army major and Iraq veteran, was told in 2008 that he must repay $20,000 (£16,350) because auditors could not locate a copy of the enlistment contract that he says he signed.
"Some benefit of the doubt has to be given to the soldier," Mr D'Andrea told the Los Angeles Times.
The reimbursement suspension will continue until Mr Carter "is satisfied that the process is working effectively".
"While some soldiers knew or should have known they were ineligible for benefits they were claiming, many others did not," Mr Carter said, adding that he has appointed an official to review the process.
The Pentagon will set up "a streamlined, centralised process" to help soldiers determine a reimbursement plan, Mr Carter announced.
On Monday the Congressional Committee on Oversight and Government Reform called for the Pentagon to absolve the soldiers' debts.