Oregon Private School Bond
Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your Oregon private school bond needs.
What Are Oregon Private School Bonds?
Oregon private school bonds provide financial protection for those who have paid tuition with the expectation of receiving specific educational services outlined in the student contract. The main concern addressed by Oregon private school bonds is the possibility of a school ceasing operations without issuing refunds to students who have prepaid tuition. When students have not received the services their tuition payments entitle them to, their tuition is referred to as “unearned.” Private school bonds provide a way for students to recover unearned tuition.
Who Needs Them?
In Oregon, different types of private postsecondary schools are regulated by different organizations and have different bonding requirements. The Higher Education Coordinating Commission requires private postsecondary schools offering degree programs to furnish a private school bond as a condition of licensing. Many types of non degree-granting private postsecondary schools are regulated by the State Board of Career Colleges and Schools and may be subject to different licensing and bonding requirements.
The owner of a private postsecondary school (referred to as the bond’s “principal”) subject to a bonding requirement must purchase a bond in their own name. The entity requiring the bond (known as the bond’s “obligee) establishes the required bond amount, which typically is based on the school’s tuition revenues.
When a private school bond is required, it must be maintained continuously to avoid license suspension or revocation.
How Do They Work?
An Oregon private school bond is a legally binding contract involving three parties: the obligee, the principle, and a third party known as the “surety.” This is the party guaranteeing the payment of claims.
Any party who incurs a financial loss as a result of the bankruptcy or closure of a bonded private school without receiving a refund of unearned tuition from the school can file a claim against the bond. The surety conducts an investigation to confirm the validity of the claim.
How Are Claims Paid?
The legal obligation to pay valid claims belongs exclusively to the principle. However, having guaranteed the payment of claims, the surety wants to resolve the matter quickly and therefore issues payment directly to the claimant. That initial payment is, in effect, a loan to the principal, who must then repay the surety. The surety is indemnified against any legal responsibility for claims.
How Much Do They Cost?
In Oregon, private school bonds are sold for an annual premium that is calculated as the product of two factors: the required bond amount established by the obligee and the premium rate set by the surety. Both of these factors vary by school and by the type of private school bond.
The premium rate is established through an underwriting process that considers the risk to the surety. The primary risk is not being repaid for claims paid on the principal’s behalf. The generally accepted measure of that risk is the principal’s personal credit score.
A high credit score is correlated with low risk because it means that the individual has demonstrated fiscal responsibility and managed credit well in the past and should continue to do so. A low credit score, on the other hand, suggests that the risk to the surety is higher. A high credit score should result in a low premium rate, and a low credit score in a higher premium rate.
The average well-qualified principal will pay a premium rate that’s in the range of one to three percent.
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