Deal will erase debt tied to defunct Silver State Helicopters

By Mary Manning

Published Thursday, Oct. 15, 2009 | 10:33 a.m.

Updated Thursday, Oct. 15, 2009 | 11:53 a.m.

A year after Silver State Helicopters declared bankruptcy -- leaving its students with sky-high debt -- a group of attorneys general are negotiating an agreement to partially erase their debt.

Under the agreement with 12 states, including Nevada, Student Loan Express is expected to forgive a total of $112.7 million in debt for students who had private education loans to attend the defunct flight school, Attorney General Catherine Cortez Masto said today.

The Nevada Attorney General's Office served on an executive committee that helped negotiate the agreement, which will be reached under a national private class action settlement expected soon. Nevada will then file its version of the agreement in Clark County District Court.

"We can finally see some relief for Silver State Helicopters students who were left in the lurch by the bankruptcy of the company," Masto said.

Silver State Helicopters began operating in 2002 as a small helicopter pilot training school out of North Las Vegas Airport and Boulder City under former Clark County Sheriff's candidate Jerry Airola.

At its peak, the school operated 34 flight schools nationwide with a total of 2,700 students enrolled. Student Loan Express served as the preferred student lender for students attending Silver State Helicopters, offering $174 million to more than 2,300 students nationwide. When the school closed in February 2008, most students were left owing Student Loan Express substantial debts for training and certification they never received.

The states' settlement includes a provision that Student Loan Express forgive debt for students who are eligible for relief and participate in a private, nationwide class action settlement, Holman et al v. Student Loan Express, expected to be filed in federal court in Florida.

More than half of the students who enrolled in the flight school never earned a certificate. Under the agreement, Student Loan Express will forgive 75 percent of the total amount borrowed by those students. Students who earned one or more certificates will also receive some relief. Students will be required to make payments on the remaining loan balance.

The states' agreement also stops Student Loan Express from reporting negative information to credit reporting agencies about students who failed to make payments on their loans before the settlement. The company must provide written disclosures to each prospective student borrower whenever it acts as the exclusive private loan provider for students of a private, post-secondary, trade or vocational institution not certified or accredited by state or federal authorities, if the agreement is accepted by the court. Those disclosures must state that the loans do not endorse the school, its principals or the quality of training offered.

Although the states' attorneys general negotiated to improve forgiveness terms for the students, it is up to the class action administrator who will handle the loan forgiveness process. Students who are eligible for the settlement will receive documents from the class counsel once the court accepts the settlement, Masto said.

In addition to Nevada and Florida, states participating in the settlement are California, Georgia, Idaho, Illinois, Missouri, Montana, Oklahoma, Oregon, Utah and Washington.