"If I hear loud noises, I get, I'm real, real jumpy," Saunders told CBS News correspondent Kimberly Dozier. "I get paranoid."
"Distraught, lost, confused..." is how Saunders' father characterizes his behavior.
His parents say his breaking point was watching his best friend die while guarding a checkpoint.
"He kept saying, it should have been me, it should have been me," said his mother, Pam Wilson.
Texas medic Taylor Burke took Saunders' turn, and the car blew up.
"When he passed, it was like a part of me that's left me, and I haven't been the same since," Saunders said.
During home leave from Iraq, Shawn talked of suicide.
At Fort Hood, his home base, he asked for help. Instead of treatment, he says he got bureaucracy.
"I was basically just trying to find out what was wrong with me, because I was thinking about hurting myself, thinking about hurting other people," he said.
His dad took action, flying him to a New York veteran's hospital. Doctors there diagnosed Post-Traumatic Stress Disorder.
The Army disagreed. Military police arrested him at the hospital, jailed him and kicked him out.
Veterans advocates say it's a military-wide problem, where symptoms of PTSD - from substance-abuse to rage to suicidal depression - are misdiagnosed or blamed on the troops themselves.
These critics point to a 40 percent spike: 22,500 troops who've been expelled since 2003, for personality disorder. The military claims these are psychological problems the troops had before joining, that surfaced from combat.
Another 5,500 were expelled for "misconduct" like drug abuse - up to 20 percent. It's an expedient way to replace an ailing soldier quickly.
Discharging for a personality disorder takes days, and costs the military nothing. A PTSD discharge can take up to nine months, and treatment can last a lifetime - in severe cases, costing up to $2 million each.
The soldiers' record, obtained by CBS News, show the man was first diagnosed with PTSD. But his commander said he "did not see anything really bad," and ordered the diagnosis changed, to "personality disorder." The soldier was immediately discharged, with no medical benefits.
Shawn Saunders is now fighting to get his PTSD recognized.
Dozier asked him: "You've got a lot of stuff to go through to get back to normal life, huh?"
"I'm gonna try," Saunders said.