What is a private school bond?
A private school bond is a surety bond the Department of Education requires private schools in many states to post to become licensed. This license and permit bond is a financial and legal contract that ensures schools operate ethically, honestly, and transparently. Private schools are businesses that require private funding and school tuition for students to attend. Since parents often pay for their student’s education before classes begin, surety bonds are required to ensure schools use these funds accordingly. They protect parents and students if something unexpected occurs, like a sudden shutdown, that leads to financial losses. A parent can file a claim to get some of the tuition money back if a school closes due to financial mismanagement, misconduct, or another covered reason.
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Quick Takeaways
- A private school bond is a financial and legal contract that ensures schools operate ethically, honestly, and transparently.
- Private schools may include colleges and universities, trade and vocational schools, elementary schools, middle schools, high schools, online educational institutions, and driving schools.
- If a school breaks its bond contract and causes another party financial harm, the injured party may file a claim against the bond for compensation.
How does a private school bond work?
A private school bond is a three-party contract between a surety, a principal, and an obligee.
- Surety: The financial institution that underwrites and issues the bond
- Principal: The private educational institution that must purchase and post the bond
- Obligee: The state governing agency that requires the school to post the bond
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If a principal breaks its bond contract and causes another party financial harm, the injured party may file a claim against the bond for compensation. The surety guarantees that the principal will pay. If it doesn’t, the surety will cover for them. However, the principal must repay the surety in full.
Who benefits from private school surety bonds?
Private schools benefit because they can become licensed to operate by obtaining a surety bond. It can increase their reputation as well. Surety bonds also benefit the public by protecting those that may be impacted financially if a school shuts down unexpectedly or mismanages tuition payers’ money.
How much does a private school bond cost?
Private school bonds cost a small percentage of the total bond amount required. Bond requirements may vary by state. The rate you pay will depend on several factors, including your financial stability and credit rating. For example, if your state requires a $20,000 bond and you pay 2%, your bond will cost $2,000. To avoid claims against your bond, abide by the terms of your surety contract.
Which states require bonds for private schools?
Many states require this type of bond, including Colorado, Florida, Michigan, North Carolina, and many others. Contact your state Department of Education to determine if you need a private school bond for your institution.
How to Get Your Private School Surety Bond
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply today online or call us at 888.435.4191 to speak with an agent directly.
About ZipBonds.com
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.