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.

FMI: www.billnelson.senate.gov, www.ftc.gov