From Today’s Herald -Zeitung Newspaper in New Braunfels, Texas
Settlement offered to Silver State students
By Chris Cobb
Published December 29, 2009
Some measure of relief could soon be landing in the mailboxes of former students of Silver State Helicopters.
The nationwide flight school had plans to relocate its headquarters to New Braunfels before abruptly going bankrupt in February 2008 — cutting short flight training for thousands of students across the county who had already paid as much as $70,000 up-front through student loans.
After more than a year of bankruptcy proceedings in various states, a settlement offer to Silver State students from their largest lender is being mailed out this week, an attorney representing a number of the former trainees said Monday.
An agreement between 12 states was struck in October with Student Loan Xpress, which lent money to some 2,300 Silver State students nationwide, and is expected to have the company erase nearly $113 million in student debt.
The deal would forgive up to 75 percent of the loan amount for Silver State students who borrowed money from Student Loan Xpress.
Now that it is court approved, students can expect detailed notices explaining the settlement to arrive in early January, according to Michael Berger, a California-based bankruptcy attorney.
“I feel bad for people to have to pay anything, and I know that can be a great hardship,” Berger said. “But I think if they don’t take this deal, there’s a really good chance they could be stuck with 100 percent of the debt.”
Student Loan Xpress was the largest of three lenders used by Silver State’s more than 3,000 trainees — including nearly 50 in New Braunfels.
CitiBank had already forgiven 100 percent of the outstanding Silver State loans, although Citibank only represented around 100 students, Berger said.
A settlement is not expected any time soon with Key Bank, the third lender, according to Berger.
Although Texas was not one of the states that helped broker the settlement with Student Loan Xpress, it will still apply to Texas students.
“The settlement is written so that it applies to students in all states,” Berger said.
The settlement is only for students who were enrolled in Silver State when it went bankrupt.
The amount forgiven is based on a sliding scale, depending on whether a student received certification. If they did not receive any, 75 percent of their debt would be forgiven.
“I think it’s the best that can be done under the circumstances,” Berger said.
Silver State operated 34 campuses in 17 states.
It ran the air traffic control tower in New Braunfels, as well as a flight school.
Its bankruptcy in February 2008 cost the City of New Braunfels hundreds of thousands of dollars in unpaid fuel sales the company had been buying on credit, and left dozens of students and former employees wondering what to do next.
The large-scale legal battle over its bankruptcy has been going on ever since, with students waiting to hear if they might get some relief after paying thousands for training they would never receive.
“Everybody has just kind of been in limbo,” said Derrick Smith, president of Veracity Aviation, a helicopter flight school he started in New Braunfels after the bankruptcy. “No one has really known what’s going on.”
For the majority of students who borrowed from Student Loan Xpress, they might be getting some of their money back.
“It’s a drag to pay anything because they never got to be helicopter pilots,” Berger said. “But we think this is the best deal they’re going to get.”