Oklahoma 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 Oklahoma private school bond needs.
What Are Oklahoma Private School Bonds?
Oklahoma private school bonds help ensure that schools subject to the bonding requirement operate in compliance with the regulations of the Oklahoma board of private vocational schools. They also provide a way to compensate parties who experience a monetary loss due to the unlawful or unethical actions of the owners.
One of the biggest concerns with private vocational schools is the possibility of a school closing down permanently without delivering the services students’ prepaid tuition entitles them to and without issuing refunds or teaching out the last class of students.
Who Needs Them?
Every private postsecondary vocational school applying for licensure in Oklahoma is required to furnish a private school bond in an amount that is based on 10% of the previous fiscal year’s revenue from tuition. The maximum bond amount is $50,000 for schools that meet the state’s financial stability standards. For schools that don’t meet Oklahoma’s financial stability standards, the maximum bond amount is $250,000. The required bond amount for new schools with no prior history of tuition revenue is $5,000.
How Do They Work?
An Oklahoma private school bond is a 3-way contract between 1) the Oklahoma Board of Private Schools, which is the obligee requiring the bond, 2) the school’s owner, known as the principal, and 3) the bond’s guarantor, referred to as the surety.
When a student (or sponsor) financially harmed by the school’s violation of the student contract or the Board’s regulations files a claim against the principal’s private school bond, the surety determines whether it is legitimate and should be paid.
How Are Claims Paid?
The bonds principal bears the full legal obligation for paying all valid claims, but the surety has guaranteed their payment. Therefore, the usual practice is for the surety to pay a valid claim initially, to expedite resolution of the matter. But the surety is indemnified by the terms of the surety bond agreement, so the principal’s legal obligation then becomes an obligation to repay the surety.
Failing to repay the debt created by the surety’s initial payment of a claim can result in the surety suing the principal to recover the funds.
How Much Do They Cost?
The annual premium for an Oklahoma private school bond is the result of multiplying the required bond amount by the premium rate. A surety determines the appropriate premium rate for each bond based on an underwriting assessment of the risk level for the surety. The greatest risk, of course, is that the principal might not repay the surety for claims paid on the principal’s behalf.
That risk is measured largely on the basis of the principal’s personal credit score, which is a good indicator of fiscal responsibility.
A principal with a high credit score poses a low risk to the surety, and one with a low credit score is a higher risk. Low risk leads to a low premium rate, just as high risk suggests the need for 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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