2 BIG Developments today in the Silver State Helicopters matter. First, papers were filed in Federal Court in Tampa, Florida confirming that class counsel reached a proposed settlement with SLX whereby the loans of students enrolled at SSH when it ceased operations will be significantly reduced depending on the number of Federal Aviation certifications or ratings that student achieved at SSH before its bankruptcy and closure. The settlement benefits include debt forgiveness, lower interest rates, notification to credit reporting bureaus, and a refund for early repayment. Second, the attorney general task force that has been working on the SSH matter entered into a consent decree with Student Loan Xpress that will provide 112.7 million in debt relief to former students of SSH.
Here is the press release issued by the California State Attorney General:
Brown and 11 States Force Loan Provider to Forgive $112.7 million in Debts of Helicopter Flight School Students
“El Cajon-Attorney General Edmund G. Brown Jr. and 11 other state Attorneys General today forced Student Loan Xpress, Inc. to provide $112.7 million in debt relief to students facing a “mountain of debt” for helicopter flight instruction they never received.
Of the $112.7 million, approximately $25.5 million in debt relief will go to California residents who did not receive the training they paid for.
“These students did not obtain the helicopter instruction they were promised, yet Student Loan Xpress insisted that they pay off the full cost of their tuition,” Brown said. “Without this agreement, Silver State flight school students would face a mountain of debt for training they never received.”
Silver State Helicopters was founded near Las Vegas in 2002, and the company quickly grew. At its height, the school comprised 34 campuses in 17 states, and included 2,700 students who paid approximately $69,900 each. In California, Silver State Helicopters operated flight schools in Sacramento, Chino and El Cajon.
In August 2005, Student Loan Xpress became the preferred student loan provider for Silver State Helicopters, lending or servicing some $180 million in student loans.
Yet, even before it made its first loan, Student Loan Xpress had reason to believe that the school was in serious financial difficulty. Students complained of a shortage of instructors, flight simulators and helicopters. Only 10 percent of Silver State students graduated. Ultimately, the school filed for bankruptcy in February 2008.
Many students paid thousands of dollars of tuition, but did not receive the flight training they were promised in return. Regardless of the bankruptcy, Student Loan Express demanded that borrowers repay the full cost of the loans.
Consequently, several state Attorneys General launched an investigation, which determined that the two companies had a close business relationship, and that that Student Loan Xpress had failed to comply with the duty to provide required notices to borrowers. Under the settlement, Student Loan Xpress denied any wrongdoing.
After several months of negotiations, the attorneys general and Student Loan Xpress reached a settlement agreement. The settlement, in tandem with the resolution of a private class action, calls for Student Loan Xpress to restructure approximately $174 million of student debt, based on the number of Federal Aviation Administration (FAA) certifications each student obtained. The fewer certificates obtained, the larger the amount forgiven. The average debt relief for students under this settlement is $46,016.
The company also agreed to:
– Forgive an additional 2.5 percent of the student loan if the adjusted loan is repaid within five years;
– Refrain from providing negative information to credit reporting agencies with respect to any loan restructured; and
– Forgive interest between the dates Silver State Helicopters filed for bankruptcy and approximately the end of 2009.
Student Loan Xpress will also pay $125,000 in legal expenses to the states. The states joining California in today’s settlement are: Florida, Georgia, Idaho, Illinois, Missouri, Montana, Nevada, Oklahoma, Oregon, Utah, and Washington.
The $112.7 in debt forgiveness included in this settlement includes the total relief provided in both the states’ settlement with Student Loan Xpress, and the proposed settlement in a private, nationwide class-action called Holman et al v. Student Loan Xpress, Inc. That class action was filed in federal court in Florida.
Student Loan Xpress borrowers with questions about the settlement are asked to contact the settlement administrator in this matter by e-mail, at [email protected]” (Andrew August reports that the reference to the Gmail email address in the Attorney General’s press release and in other media accounts is is wrong: “It is not an email address for the settlement administrator. Rather it is our private, secure email account through which we will be able to answer questions. Of course it will not be operational until the court grants preliminary approval of the settlement.”)
To read the Assurance of Voluntary Compliance Agreement entered into by Student Loan Xpress and the Attorney Generals for 12 states, click on this link:
Here is more information from the press release issued by Andrew August [email protected] and Chris Casper [email protected] , two of the leading class counsel lawyers that will directly respond to questions from class members once the proposed settlement has received preliminary approval from the court:
“The parties have requested that the federal court overseeing the action preliminarily approve the settlement and authorize notice of the terms of the proposed settlement to be disseminated to class members. The notice will contain detailed information about the terms of the settlement, class members’ options, and ways to obtain additional information about the settlement. The court will then hold a hearing to decide whether to grant final approval of the settlement.
In additon to Class Counsel, numerous other attorneys who individually represented Silver State Students, including Daniel Reed from Utah (representing more than 300 students nationwide) and Michael Berger from California (representing more than one thousand students nationwide) have closely reviewed the settlement and uniformly and unconditionally support it. Moreover, Attorneys General from more than 10 states reviewed and enhanced the terms of the proposed settlement, while also reaching a separate agreement with SLX.”
I will post additional information about the proposed class action settlement agreement in the days to come. Clients of mine who want individual, personal advice about the pros and cons of this proposed settlement agreement for them are urged to wait until the court gives its preliminary approval to the proposed class action settlement, approves a manner and form of notice, and establishes a proposed schedule for final approval of class action settlement. All class members will receive a notice in the mail and will have at least 45 days to consider the proposed settlement agreement. I will then happily answer any and all questions from my clients by e-mail and by telephone. Clients of mine who choose to opt out of the proposed class action settlement agreement or who are not covered by the proposed class action settlement agreement will still be represented by me and I will continue to use my best efforts on their behalf.
The proposed class action settlement only covers former students of Silver State Helicopters who obtained loans from Student Loan Xpress to attend SSH and who were still enrolled at SSH at the time that it filed its bankruptcy petition. If you got your loan from KeyBank or paid cash and/or if you were not enrolled at SSH at the time that it filed bankruptcy, you are not covered by the pending proposed class action settlement.