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Helicopter School's Crash Leaves Students Grounded
If you want to know the dangers of taking out private student loans, just ask the 2,500 students who were, until early this year, enrolled at flight academies across the country owned by Silver State Helicopters.
As recounted by The San Diego Union-Tribune, these students were "left in the lurch" when the Nevada-based company, without warning, shut its doors on Super Bowl Sunday and filed for bankruptcy liquidation. Because the schools did not have the proper accreditation to qualify to participate in the federal student aid programs, the company directed students to take out high-cost private student loans to cover the $70,000 tuition that they were required to pay up front. Unfortunately, these students may be stuck repaying these loans for training they did not ultimately receive.
At Higher Ed Watch, we have often warned of the hazards of private loans, particularly for students attending questionable for-profit trade schools. Private loans almost always have worse terms than federal loans, and lack important safeguards. Unlike federal loans, for example, private loans are not automatically discharged if a borrower attends a school that unexpectedly shuts down before a student completes his or her studies.
To make matters worse, the federal government has made it extremely difficult for borrowers in financial distress to discharge private loans in bankruptcy. While the law does allow discharge for borrowers who can prove that repaying the loans would cause "undue financial hardship," courts have applied the undue hardship standard unevenly, leaving many desperate private loan borrowers with no way out.
All of which is to say that while the unscrupulous owners of Silver State Helicopters can liquidate their company and escape their debts through bankruptcy, flight-academy students like Hector Leon, a divorced father of two who first enrolled in the school in 2006, have no such recourse.
Like many such students, Leon was taken in by the dreams the school was selling. "When I heard their ads, which said you could make upwards of $150,000 to $180,000 a year, I thought it was the way to get a better income and provide a better life for my two kids," Leon told the Union-Tribune.
Sadly, Leon's story, and that of his classmates, is all too familiar.
In the late 1980's and the early 1990's, the U.S. Education Department and Congress were forced to take emergency actions to crack down on an explosion of fly-by-night trade schools set up solely for the purpose of reaping profits from the federal student aid programs. As a result of the crack down, hundreds, and even thousands, of disreputable proprietary institutions were forced to close or were shut down.
Since that time, advocates for trade schools have lobbied aggressively to get federal policy makers to relax these rules, arguing that the problems of the past are entirely behind them. But over the last several years, some of the largest publicly-traded for-profit higher education companies -- such as the University of Phoenix, Career Education Corporation, and Corinthian Colleges -- have come under intense scrutiny from federal and state regulators and have faced numerous lawsuits over allegations that they have engaged in aggressive and misleading recruiting and admissions tactics to inflate their enrollment numbers, while providing academic offerings of dubious value.
And in recent years, there has been a proliferation of unlicensed and unaccredited (or at least not accredited by groups recognized by the U.S. Education Secretary) trade schools, like the Silver State Helicopters Flight Academy, that do not participate in the federal student aid programs and therefore go largely unregulated. The growth of these schools appears to have been fueled by student loan companies that have willingly and irresponsibly "partnered" with the institutions to provide high-cost private loans to the at-risk students these schools tend to attract.
If Congress doesn't overreach in lubricating student loan liquidity, one of the credit crunch's potential silver linings is that it may discourage lenders from participating in deals with the likes of $70,000 a year, unaccredited helicopter training schools. That would benefit both students and the public.
This is a topic near and
This is a topic near and dear to my heart, as I've begun representing culinary students in Oregon who have incurred profound debts to obtain certifications that qualify them for low paying kitchen jobs. Most of these students are upside down on their student loans from the moment they sign their promissory notes. In the case of the well-publicized culinary school scam stories in Oregon and California, it's clear that students are getting very little training for high dollar programs. I can't help but think that many of the trade-school-for-profit programs are simply numbers games fueled by lax regulation and Wall Street numbers. I wonder how long before the student loan predatory lending problems get the kind of attention given to predatory mortgage lending. Of course, if it does, I imagine that Career Ed Corp., Sallie Mae and other players will get bailed out, and--like the mortgage crisis--consumers will get crumbs.
I left all my law enforcement dreams for this...
I am a ex SSH student I joined one day after I went to one of the misleading seminars. I was promised a school that was open to education and teaching there students how to fly . I was promised a career that would make me better myself and become my childhood dream. When I joined SSH I was in backgrounds for the Sheriff dept. I left that to pursue a dream that lead me to a dead end with no way out! Jerry A. I just want to let you know you I am a 21 year old that worked hard through high school and college, you misled me to my dream and now my life is ruined.
Are they still
Question - are they still making you repay the loans you took out up to the date the school closed? If you are - fight it. There is an application online from the DoE stating that you are due a full discharge because the school closed. But the evildoers at Sallie Mae won't advertise this to you, they won't adivse you of this course of action, they will hope that you will blindly pay and move on. Don't give up. If we all fight them we can simply bury them under a mass of paperwork a mile-high, and hopefully stop them from ruining the lives of future hopefuls.
That doesn't work
That only works if you have federal student loans... its tough luck for private student loan borrowers, which make up the bulk of the loans that end up paying for trade and tech schools... i tried fighting mine and all i got was, "You'll have to take it up the your lender." Needless to say there was no compassion in fact i was re-directed and then hung up on.
Fly-By-Night Schools
Ok - long story, bear with me. When I was 16 years old (1986) I got suckered into one of those "Trade Schools". ABC Technical & Trade schools in Tucson, Arizona. They enrolled me for 9 sessions at $3,000 per session promising me an Associates degree in Electronics Repair. Half-way through the second session we spent three weeks without an instructor and I dropped out. Fast-forward to 1996. President Clinton signs into law the new bankruptcy reform bill that makes it almost impossible to bankrupt off student-loan debt. Not even a week later I get a call from United Student Aid Funds demanding upwards of $11,000 for my "defaulted" student loan. (The student loan companies / collection agencies aren't even allowed to report this on my credit because the loan is so old) The government always has, and always will, protect business over individuals. I have appealed this this debt over and over again and now they (sallie-mae) don't even respond to my applications for discharge even though the grounds for the discharge are solid (based on the school's false certification of my ability to benefit from the program - IE I couldn't get a degree because I was a high-school drop-out at the time) and all of my correspondence now goes completely unanswered. The student-loan system as it is is broken. It preys on the hopes of the under-class to benefit the rich.
I was screwed
I was screwed by that same ABC in San Diego, 3 months after silver state closed. I had been in for 3 years already, and now it is for naught. Both schools have left me high and dry. Now I am unemployed, over educated, without career, and in more debt than folks twice my age. This crap has hit me hard and I want something to be done about it! I am at my limit! What can a guy do? Just move on and spend the next 20 yrs paying for it... Very infuriating. -Mike
Agree
I agree completely! Colleges are so much business now that they stopped being about education about two decades ago. It doesn't suprise me, given that we've given up teaching children to think in favor of teaching them to blindly memorize unverified facts, it only goes to follow that colleges (and especially the student-loan industry as a whole) would stop putting education at the top of their list of goals in favor of the allmighty dollar. I remember when in-state tuition at a state college was around $1,100 a semester for a full course-load. Now in researching schools for my wife who wants to return to school, I'm finding in-state tuition do be in the $8k - $10k range. Have we gone completely insane? No - we've been duped. The rich don't want the poor and middle-class to become educated, because if the masses are educated properly they would see through the lies that are spread in lieu of truth. As a high-school drop-out who, through self-education, is now making more than most members of congress, I stand here as proof that you don't need to go hundreds of thousands of dollars in debt to a broken system just to get a broken degree, just so you can take an entry-level job that you truthfully could have gotten without the degree if you just show a little aptitude and enthusiasm for what you want to do. Think about it - if you skip college, you start-off ahead of the game. When you figure in the payments on 8+ years of student loans, Doctors working through their residencies make about minimum wage. The people who get rich are Sallie Mae, the colleges, and the states who collect the taxes from the out-of-state students, and all the other profit-centric lenders.
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