Joins Former Students In Fight For Tuition Refunds
The saga continues in
the story of the closure of flight school chain Silver State
Helicopters and its subsequent abandonment of its 2,500+ students,
leaving them with tens of thousands of debt with no relief or
refund. The situation has attracted attention in Washington
as students seek any possible help to recover money they were
bilked out of for training that was never completed.
US Senator Bill Nelson of Florida is now involved and is
pressuring the Federal Trade Commission to investigate the
bankruptcy, and subsequent February 3 closing of the 33 location
school as reported by ANN. The
closure left about 200 students in his state with loans up to
$70,000 with nothing to show for it and accruing enormous amounts
interest.
Silver State Helicopters was the largest private helicopter
flight academy in the US in September 2006. It even attracted
the attention of Inc. Magazine which ranked the company in the
number 12 spot of its annual list of the nation's fastest-growing
private companies, the Inc. 500, that year.
"What Silver State was doing was taking the $70,000 up front and
then it was using it immediately," Nelson said to First Coast News.
"They were going out and recruiting more students at $70,000 per
student and paying expenses as they went along with what they were
collecting from the students."
"Now if that's what this investigation ends up being, then it's
a Ponzi scheme."
A Ponzi scheme is a fraudulent business scheme which pays
attractive returns to early investors with income from later
investors, concealing operating losses and, often, disproportionate
payments to company executives. When the growth of new investors
slows, the scheme collapses. In a case of "robbing Peter to pay
Paul" the school used money from new students to pay old debts
instead of the direct costs of training as they expected.
Because Silver State Helicopters was unaccredited by any
educational body, the financing options given to students were in
the form of private bank loans and not interest-regulated federal
educational loan programs. As a result, students paid exorbitant
interest rates on the loans that ballooned the original $70,000
loan into $300,000 worth of debt in some cases. Many students have
said those rates were not disclosed when they originally signed
up.
Class action lawsuits were filed by former students earlier this
month against lender KeyBank under the claim that the bank enabled
the Ponzi to take place.
Nelson said last week he is considering asking the US Justice
Department to investigate the withholding of particular information
when students signed loans, along with the possibility of the Ponzi
scheme. The FTC has been historically slow to act on requests for
similar types of investigations, he said.
"If they don't respond, I'll continue to beat down the door,"
said Nelson (shown above, right).
Nelson, along with former Silver State students, hope for some
type of refund of their loan money.