Helicopter School Students Settle With Lender Student Loan Xpress
By JACK KATZANEK
The Press-Enterprise, October 27, 2009
Former students who attended the defunct flight school Silver State Helicopters won a court victory Tuesday when one of the major lenders agreed to a proposed settlement that would wipe away much of their outstanding tuition debt.
Student Loan Xpress Inc. will forgive more than $100 million in loans made to students who attended the failed vocational school. Silver State Helicopters had 33 schools across the country, including one at Chino Airport, when it abruptly filed for bankruptcy and closed in February 2008. About 2,500 students were enrolled at the time.
Papers were filed in federal court in Tampa, Fla., on Tuesday confirming the proposed settlement with Student Loan Xpress. Under the terms of the deal, which must be confirmed by a judge, the loans students received to pay the tuition at Silver State -- about $70,000 for 18 months of training -- will be significantly reduced depending on how much actual instruction they received.
According to court documents, students who did not receive any Federal Aviation Administration flight certification will see 75 percent of the loans forgiven. Others who achieved flight ratings will have their balances reduced on a sliding scale.
"It's as good a settlement as we'd hoped for, and it reflects the practical realities of the students' situation," said Andrew August, the San Francisco attorney who was one of two lawyers in this class-action suit. August said other attorneys who have taken on former Silver State students as clients, including Southern California lawyer Michael Berger, have reviewed the proposed settlement and support it.
The attorney generals of a dozen states, including California, conducted their own investigation of Silver State and its relationship with Student Loan Xpress and other lenders.
August said in a statement the state prosecutors were able to enhance the settlement while reaching a parallel deal with Student Loan Xpress.
The deal was welcome news for Daniel Ramos, a Corona resident who was 23 when he enrolled at Silver State. Ramos said he arrived for a Sunday lesson at Chino Airport on Feb. 4, 2008, only to find the flight school abandoned.
Ramos said he owed Student Loan Xpress $23,500. Because Silver State did not have enough helicopters to provide the training it promised, he only had about five hours of flight time, well short of the time needed for FAA certification.
One of his classmates, a retiree, paid the tuition in cash, Ramos said.
"I'm still going to have a bill but not nearly as severe as I had thought," Ramos said.
Student Loan Xpress was the preferred lender for Silver State from 2005 until the bankruptcy. In court papers, lawyers representing the students say the company should have known the Las Vegas-based flight school had a faulty business plan and was likely to fail but made loans anyway. The loans were not guaranteed by the government, so interest rates were higher than most student loans.
Student Loan Xpress is owned by CIT Group Inc., the New York City-based financial company that is currently trying to avoid bankruptcy by restructuring its debt. A CIT spokesman acknowledged the settlement in an email but did not comment further.
Another lender, Citibank, agreed to forgive all students' debts almost a year ago.
A third major lender, Cleveland-based KeyCorp., the owner of KeyBank National Association, Ohio's second-largest bank, has not made any overtures that might lead to a settlement. August said the deal to end the dispute with Student Loan Xpress will have no bearing on the KeyBank case.
KeyBank was Silver State's preferred lender in 2003 and 2004.