Re: Looks like Arizona is now regulating flight schools
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It's illegal to rent airplanes now?
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Looks like California is now regulating flight schools
- Thread starter JOEFRIDAY2
- Start date
JOEFRIDAY2
Well-Known Member
Re: Looks like Arizona is now regulating flight schools
"get in the car--don't hit your head--you're going downtown"
"get in the car--don't hit your head--you're going downtown"
Re: Looks like Arizona is now regulating flight schools
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Not going to answer the question, huh?
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surreal1221
Well-Known Member
Re: Looks like Arizona is now regulating flight schools
The black and blue never answer questions.
The black and blue never answer questions.
Obama said there are 60 states.:rawk:
He had been to 57, planned on one more...and then two more after that.
57+1+2=60!
You fail at math. It should be 60+Y
But wait a minute here....
Every time I hear that interview I go:
:dunno:
:beer:
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Re: Looks like Arizona is now regulating flight schools
They're black and blue because they didn't answer this guy's questions....
That's not a chin under there. It's just a 3rd fist.
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They're black and blue because they didn't answer this guy's questions....
That's not a chin under there. It's just a 3rd fist.
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Obama said there are 60 states.:rawk:
He had been to 57, planned on one more...and then two more after that.
57+1+2=60!
You fail at math. It should be 60+Y
But wait a minute here....
Every time I hear that interview I go:
:dunno:
:beer:
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Ritalin anyone?
Patrick
Well-Known Member
This is a very valid point, and since day one of the massive flight training loans have wondered why the banks allow this lump sum up front policy. As you correctly point out, no bank is going to just give you #XXXk dollars up front to build a house- they used to, and they quickly learned why they shouldn't do that. It's no different here. Student is approved for $50k, bank releases $8k for his PPL. Student completes PPL, bank relases $10k for his IFR. Student completes IFR, bank releases $10k for his Multi. And on and on we go until he has exhausted his loan. If at any time the school defrauds him, goes belly up, or whatever, the most that could possibly be lost is $10k.
I'll go as far as to say that the banks are equally (if not possibly greater) to blame for so many students getting defrauded; as they allowed these scenarios to play out by freely giving these companies sizable, up front payments, often without doing much homework on behalf of the school that they were "approving."
I'm a big proponent of private industry solving its own problems, however, when that doesn't happen, at some point the regulatory system is obligated to do something to protect its citizens.
WacoFan
Bigly
Remember that scene in Full Metal Jacket. SGT Hartman finds that Pyle's foot locker is unlocked and rips into him stating that "if it weren't for dickheads like you leaving your locker unlocked there would be no crime". That's how I feel about the banks. You can't fix stupid. They probably wanted to book the loan fees, or perhaps package and sell them - perhaps that is the problem with securitization - the banks often weren't the end-owners of the note. Either way, the crooked schools simply gamed a system that the banks had the means to control (because they controlled the money).
I don't think politicians, particularly democrats who want to grow regulation, are always evil - just misguided. By the time a politician gets involved in something it is almost already too late and the resulting reaction is going to be largely misguided and wasteful (see Sarbanes-Oxley). I get more mad at the people in business though that allow things to get to that point. That is why I was advocating for beheadings in Wall Street in late 2008 early 2009. In the case of the flight schools I blame the bankers first (because they ultimately controlled how the transactions would work with their actions), I blame the students second (who the hell would pay a lump sum up-front for something they haven't received and has that many variables attached?), and lastly I blame the actual crooks - because they were simply taking advantage of the stupidity of the banks and students...you can't really blame them there, the money was served on a silver platter.
JOEFRIDAY2
Well-Known Member
The banks are absolutely a major part of the problem here.
I asked one of the banks why in the world they would release $70,000 to a flight school before the student has ever set foot in the school. I have never received an answer to this question.
In addition, why would a bank not even verify that a student was actually attending the flight school that received the $70,000 from bank?
The banks were in the business of offering student loans. Those banks had a duty to monitor the student's progress to make sure that the student was actually attending school and making adequate progress before releasing additional funds. The banks did not do this. The banks did not operate their student loan business in a reasonable and prudent manner.
There were some students that could not even get to solo because they just do not have the ability to fly an airplane safely. At that point the money should have stopped. Unfortunately it did not.
I'm from the old school that believes that NO STUDENT LOANS, for flight school students, should not be allowed until AFTER that student already has his/her private pilot certificate. This at least proves the student is "trainable" for this industry.
62% of the students that begin flight training NEVER receive their Private Pilot's License. That's a pretty high wash out rate. The schools knew about the high wash out rate.
Silver State management is on record indicating that they structured their program so that only 20% of the students would get through the program. Their goal was to wash the students out at the 90 day point just after Silver State had received the last of the $70,000 tuition from the bank.
This would leave 80% of the Silver State students with a $70,000 student loan that they could not possibly pay since they did not have their ratings.
So while the banks lack of oversight does not give the bad guys an excuse to run their flight school scam, it did enable those bad guys to actually run the scam.
Joe
I asked one of the banks why in the world they would release $70,000 to a flight school before the student has ever set foot in the school. I have never received an answer to this question.
In addition, why would a bank not even verify that a student was actually attending the flight school that received the $70,000 from bank?
The banks were in the business of offering student loans. Those banks had a duty to monitor the student's progress to make sure that the student was actually attending school and making adequate progress before releasing additional funds. The banks did not do this. The banks did not operate their student loan business in a reasonable and prudent manner.
There were some students that could not even get to solo because they just do not have the ability to fly an airplane safely. At that point the money should have stopped. Unfortunately it did not.
I'm from the old school that believes that NO STUDENT LOANS, for flight school students, should not be allowed until AFTER that student already has his/her private pilot certificate. This at least proves the student is "trainable" for this industry.
62% of the students that begin flight training NEVER receive their Private Pilot's License. That's a pretty high wash out rate. The schools knew about the high wash out rate.
Silver State management is on record indicating that they structured their program so that only 20% of the students would get through the program. Their goal was to wash the students out at the 90 day point just after Silver State had received the last of the $70,000 tuition from the bank.
This would leave 80% of the Silver State students with a $70,000 student loan that they could not possibly pay since they did not have their ratings.
So while the banks lack of oversight does not give the bad guys an excuse to run their flight school scam, it did enable those bad guys to actually run the scam.
Joe
drunkenbeagle
Gang Member
We are talking about banks here, not parents. Why on earth would they care how you are doing? None of their business. They are in the business of loaning money. For what is essentially a loan secured against future income, the banks only care about getting repaid.
WacoFan
Bigly
Because ultimately the bank is the one that the student defaults to. It isn't about being a parent, it is about protecting your equity and depositors money. Ultimately the bank made the loan, with little or no oversight or even understanding of the transaction they were funding (wash out rates, cost variability (fuel), etc). The bank making silly and stupid loans like this created the problem...the "bubble" if you will. Too many lenders being paid to put loans on the books and build interest income for retention or securitization for future sale. Nobody looking at the long-term viability of the underlying transaction (the banks responsibility). Would you lend someone $70 grand up-front to give to a flight school...knowing what you know about flight schools, washout rates, etc? Were these loans made before the prospective student even got a medical? What if they fund the loan and the student flunks the medical? All of these things are the banks responsibilities to know before making lots of large loans into a sector.
Ahem... Gunnery Sergeant Hartman.
JOEFRIDAY2
Well-Known Member
You are spot on. It is amazing that the banks would put themselves in this position.
But there is a reason for it........
Most of these private student loans were guaranteed by TERI. TERI (The Educational Resource Institute) was a non profit organization that guaranteed student loans. The bank was not on the hook for the money. TERI was on the hook for the money if the student defaulted. As long as the loan was guaranteed by TERI the loan was not dischargable in a bankruptcy action by the student.
But in April 2008.........
TERI filed bankruptcy because they were having so many loan defaults because so many students had been scammed and had no way to make the payments on their loans without having the education and subsequent jobs they had signed up for.
TERI walked away from all of the loan guarantees in the bankruptcy action.
That left the banks on the hook for the entire loan. On top of that the loans were now eligible to be discharged in bankruptcy by the students since they were no longer guaranteed by a non profit organization or by the government.
And that is why the student loans dried up and were no longer available.
The whole program had been grossly mis-managed and there were not any checks and balances.
The bad guys had taken the money. The bad guys scam had sunk TERI, the banks and the students. The bad guys had taken customers (students) from legitimate flight schools.
And the bad guys got away with hundreds of millions of dollars without prosecution and without restitution.
Joe
drunkenbeagle
Gang Member
So as a glider CFI, I guess I will never be doing instruction in California. A good glider CFI can make about $2,000 a year. A commercial glider rating goes for about $3,000. As I understand it now, a glider commercial rating would be subject to this. Seems like a lot of cash to me (the compliance costs would higher than the total revenues for most glider operations). Not that many are left in California anyway, but still.
If you call yourself a "flying club" instead of a "flight school," I would imagine this would not apply?
JOEFRIDAY2
Well-Known Member
Well there is an exemption that you could try if you think you can qualify. Here is how it is worked from Article 4 section 94874 (b):
(b) An institution offering educational programs sponsored by a bona
fi
de trade, business, professional, or fraternal organization, solely for that
organization’s membership.
So you could start the San Diego Flying club, issue a voting share to each member, comply with the IRS 501 c(3) or 501 c(6) requirements and make it work. Of course you would be governed by a board of directors and have a lot of paperwork to do.
I'm looking at flight school regulations in several states and the California regulations are the tamest of all.
The way Arizona is written right now, you need a surety bond and the tuition recovery fund in addition to a whole lot of paperwork. They will also do an FBI background check. Or you can become a 141 flight school and be exempt from the state regulations. The problem is that 141 flight school certificates are difficult (and expensive) to obtain and qualify for.
Joe