Alabama Private School Bond

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Alabama 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 Alabama schooling bonding needs.


What Are Alabama Private School Bonds?

Alabama private school performance bonds protect students attending vocational, technical, and other private schools against financial loss in the event that the school fails to deliver the education services for which they (or perhaps their parents) have already paid tuition and fees. Any breach of contract, whether it stems from a bonded private school’s insolvency, loss of accreditation, distribution of false or deliberately misleading information or something else, can result in students filing claims against the school’s performance bond.

Who Needs Them?

The Alabama Community College System (ACCS) requires all private postsecondary schools to purchase and maintain an Alabama private school performance bond for as long as they continue to operate in the state. The required bond amount for private schools offering degree programs is $50,000. For non-degree granting private schools, the required bond amount is $20,000.

How Do They Work?

There are three parties to an Alabama private school performance bond:

  • ACCS is the obligee requiring the bond,
  • The private school owner is the principal required to purchase the bond, and
  • The bond’s guarantor is the surety.

The terms of the surety bond agreement require the principal to operate in full compliance with Title 16, Chapter 46, Section 16-46-1 to 16-46-10 of the Alabama Legislative Code. That includes refunding prepaid tuition to students who demand a refund and have good reason for doing so—for example, because a school advertising guaranteed job placement for graduates merely directs them to a couple of online employment agencies. The school is in breach of its guarantee. If the students’ requests for tuition refunds are denied, they can file a claim against the private school’s performance bond; some might also lodge a complaint with ACCS.

The surety will initiate an investigation upon receipt of a claim for damages, and most likely will be in communication with ACCS, and it is possible that they will work out a settlement, especially if the school remains open and doesn’t want to lose its license. If there is no settlement, the claim must be paid.

How Are Claims Paid?

The surety has guaranteed the payment of claims, though the legal obligation to pay them belongs entirely to the principal. The surety is indemnified against any liability for claims. Therefore, while the surety will honor its guarantee and pay a valid claim initially, the principal then must reimburse the surety. Not repaying the surety can result in the surety taking legal action to recover the debt owed by the principal

How Much Do They Cost?

The annual premium for a private school performance bond is determined by multiplying the required bond amount ($50,000 or $20,000) by the premium rate the surety sets through underwriting. In addition to considering a number of factors related to the school’s financial strength and stability, the underwriters will consider the risk of the surety not being repaid for claims paid on the principal’s behalf. 

That risk is gauged by the principal’s personal credit score. A high credit score reflects financial responsibility and timely payment of debts, which means the risk to the surety is low and the premium rate will be low, as well. A less creditworthy principal has a higher risk profile and will be assigned a higher premium rate if the bond application even is approved.

The average well-qualified principal will pay a premium rate that’s in the neighborhood of one to three percent.

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Our surety bond professionals will get you the Alabama private school performance bond you need at a competitive rate.