Looking back, students of the Tab Express flight school could see the danger signs.
They remember the long waits to use airplanes and flight simulators, the difficulty of getting a tuition refund if a would-be pilot withdrew from the program, and the two weeks when the school, in DeLand, Fla., north of Orlando, shut down with no warning.
Most worrying was the airline that the school’s owners kept trying to set up. Every time a federal inspector came to observe one of Tab’s pilots in action, in one of the nascent airline’s planes, some piece of equipment would break, recalled Edward C. Roe, a former Tab student.
“They got down over the ocean and they couldn’t fly back because one of the pressure gauges didn’t work,” forcing an unscheduled landing, he said. “That didn’t seem normal to me…”
Mr. Roe and about 50 other students pooled their resources to hire a lawyer, then accused the bank of conspiring with the school to fleece them. Their story, however, is more than a saga of taking on a big bank. It is yet another cautionary tale about the dangers of easy credit. Like homebuyers who took advantage of mortgages with risky terms to buy real estate that turned out to be overpriced, some students borrowed more than they should have for the education they received…
The students’ experience also sheds light on the risks of borrowing large sums to pursue an education in one part of the trade school world: institutions that operate outside of federal loan programs. If a school — say, a small, privately operated beauty school, a computer training school or a flight school — is not in those programs and collapses, students who took out loans to pay tuition may be left with poor job prospects and big debts.
In Tab’s case, the collapse set off a small avalanche of lawsuits contending fraud, and criminal investigations by the state attorney general, the Federal Bureau of Investigation and possibly other agencies. These investigations have ended, and no criminal charges were filed. The owners of Tab sued KeyCorp, which is based in Cleveland and is the parent of KeyBank. KeyBank sued Tab, and the students sued both KeyBank and Tab…
The Tab students learned a lot about these private student loans, which have one thing in common with the federal variety: They are very difficult to get rid of, either through bankruptcy or through the kind of legal battle the students waged.
RTFA. The flight school cum airline sounds like a Ponzi scheme and Keybank sounds like a rinky-dink small town bank run by an ambitious shoe clerk – instead of the 12th largest bank in the country.
I’d give up on the whole notion of commerce if every business was run the way both of these operations functioned.