On November 5, 2008, Citibank began offering 100% loan forgiveness of Citibank SSH student loans in exchange for an assignment of the student's claims against SSH and against Citibank. We highly recommend that all of our clients with Citibank loans accept this offer. 100% Loan forgiveness has always been our highest goal for each and every one of our SSH clients. It is a complete victory for each and every one of our Citibank clients. It sets the bar high for KeyBank and Student Loan Xpress, the 2 other banks that wrote the majority of the SSH student loans.
The Citbank offer is being extended to all former SSH students with Citibank loans in every state except for California. I am working with counsel for Citibank to have this offer also extended to all my California Citibank clients who specifically request it. The Citibank offer is not yet generally available to California Citibank clients, apparently due to the pendency of a class action lawsuit.
Here is a complete copy of the November 5, 2008 Citibank letter that has already been received by several of our Citibank clients:
"Re: Master Student Loan Promissory Note between you and Citibank, N.A.
Our records reflect that Citibank, N.A. and the Student Loan Corporation (collectively "Citibank") made the above-referenced loan to you for flight training and education at Silver State Helicopter School ("the Student Loan"). As you may know, Silver State filed bankruptcy in Bankruptcy Court in Nevada and ceased operations earelier this year.
Cibank sent funds to Silver State for your flight training tuition. While you remain obligated to repay these amounts to Citibank under the promissory note you signed, Citibank will agree not to seek collection of those amounts from you on the terms set forth below.
Specifically, if you assign to Citibank any and all claims you may have with respect to your Silver State loan, whether against Silver State, Citibank, or there present and former officers, directors, and employees, Citibank will not seek to collect these amounts from you. This assignment will enable Citibank to pursue a claim in the bankruptcy court for return of the money it advanced on your behalf.
If you do not sign and return the letter to us, we will assume that you have not agreed to assign your claims to Citibank, and you may keep and pursue any claims against Silver State in the bankruptcy court and make arrangements with Citibank for a repayment plan.
If you agree to assign your claims to Citibank in exchange for Citibank's agreement not to pursue any amounts from you related to your Silver State loan, you and any cosigner should review carefully, sign below and return this letter to Citibank at the following address by November 21, 2008:
Citibank South Dakota
Attention Executive Communications
701 E. 60th Street N.
Sioux Falls, SD 57104
Please be advised that the statements herein apply only to the Student Loan and do not in any way modify, amend or otherwise relate to any other accounts you may have with Citibank or its affiliates. If you and any cosigner do not timely sign and return the enclosed assignment, then Citibank reserves all rights and remedies against you under the Student Loan.
If you have any questions or need additional information, please call Mary Bakker at 605-331-7219
Citibank, N. A. and The Student Loan Corporation
By signing below, the undersigned borrowers agree to assign to Citibank any and all claims we may have with respect to our Silver State loan, whether against Silver State, Citibank, or other present or former officers, directors, and employees. In exchange for this assignment, Citibank agrees not to pursue collection of the Student Loan from the undersigned borrowers.
Borrower Signature Date
Cosigner Signature Date
What This Offer Means
This offer means that former SSH students with student loans from Citibank can now walk away from 100% of their loans. They are being made whole. Students who owed $23,300.00, $46,600.00 and $69,900.00 + interest can now pay nothing to Citibank and move on with their lives. No principal, no interest, no attorneys' fees, no costs, nothing of any value whatsoever with the exception of the assignment of their claims against SSH and Citibank and its present and former officers, dirctors and employees. The most famous of these ex officers and directors is, of course, Jerry Airola. The assignment of these claims in exchange for 100% debt forgiveness seems 100% fair to me. Former SSH students are not entitled to a double recovery, and were never going to get one anyway. As discussed in my last post to this blog on November 4, 2008, unsecured creditors in the SSH bankruptcy are likely to recover much less than the full value of their claims. Trading these claims to Citibank for 100% debt forgiveness is a deal that I highly recommend -- it cannot be beat.
Why Is Citibank Doing This?
Why is Citibank making such a good offer? That is an interesting question on which there can be many different opinions. Is it a response to the pending lawsuits against Citibank and the additional threatened lawsuits? Is it due to political and public pressure? Is it the result of a cost benefit analysis in which giving in to the demands of its borrowers and their attorneys is seen as less costly than litigating and possibly losing and setting a precedent that would be bad for Citbank? Is it simply Citibank deciding to do the right thing?