An In-Depth Look at the Student Loan Crisis with Larry Gilmore

Here at the MK blog, we wanted a better understanding of the growing student loan debt issues that are making the news. And we found the man with the answers.

This week is the first of a two-part interview with Larry L. Gilmore, president of the Student Loan Alliance (SLA). SLA is an online resource for borrowers challenged with excessive student loan debt, helping them to receive comprehensive holistic financial counseling, education and assistance.

Larry was also past cofounder, CEO, and president of the HOPE LoanPort, the mortgage industry portal designed to facilitate the submission of full modification applications to mortgage servicers. He’s held a variety of high-level positions in the mortgage industry, including VP of Emerging Markets for Option One, Associate Director of Industry Relations at the Mortgage Banking Association, and Manager of Market Opportunities for Norwest Mortgage (now Wells Fargo).

Tell us a little bit about the Student Loan Alliance, and the goals for your group.

The Student Loan Alliance is the sole national organization representing nonprofit credit counseling organizations active in providing borrowers student loan counseling. Core objectives include:

•Standardizing the delivery of counseling – traditionally, student loan counseling has been specific to entrance and exit education or primarily focused on the student loan debt itself.Existing measures don’t exist in standardizing the mediums in which counseling is provided and measuring the quality of that counseling

•Providing multiple mediums meeting borrowers where their most comfortable for assistance – SLA currently connects borrowers through our website StudentLoanHelp.org, in which counseling is provided via phone and face to face in some cases. Our goal is to expand this to include a toll free line and other communication mediums.

•Increasing borrower awareness of their best workout options – for federal loans, there are a number of repayment options available in which a small number of borrowers are currently taking advantage. SLA will develop major national campaigns to increase awareness, connect borrowers to counseling, and assist with application submission.

•Promoting affective private, public, nonprofit partnerships – Currently there are ongoing challenges student loan lenders, collection agencies, and regulators have making right party contact, ensuring borrowers are aware of their options, and ensuring applications are submitted in a timely fashion.

You have some experience with the housing industry and the housing crisis. How do the current student loan issues compare?

These to industries have numerous similarities and a few glaring differences that include:

Dual Markets – Like the prime and subprime mortgage industry, the student loan industry has federal and private lending.Like the subprime lending industry, private student lending provides less borrower protections, fewer work out options, risk based priced lending, and a higher concentration of underserved segments that use these loans.

These industries are not similar in that:

Your average at risk homeowner has few loans; borrowers are more likely to know who their lender/servicer is and the general status of their loan. Student loan borrowers have more than four loans and in many cases don’t know whether their loans are federal/private, subsidized/unsubsidized.

Though mortgage servicing practices have had their challenges and have slowly improved, there is less standardization in how student loans are serviced, what repayment options exist, and public transparency related to workout options particularly among private loans.

What does the future look like for student loans? Do you think education costs will continue to outpace the average American student’s ability to pay?

Yes. More federal workout options exist, online educational materials have been developed, and increase performance requirements on colleges to reduce cohort default rates are good steps forward. The current cost of higher education, though I foresee it increasing at a slower rate, will take some time before borrower’s ability to pay can catch up with today’s rates. I don’t see today’s rates decreasing substantially considering the ongoing high demand for higher education.

(Please join us next week for part two of this interview.)