Minnesota 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 Minnesota private school bond needs.
What Are Minnesota Private School Bonds?
Minnesota private school bonds help ensure that private schools live up to the promises made to students (and parents or sponsors) who have paid tuition and fees in exchange for certain educational services, as per the student contract. That includes ensuring that prepaid tuition is returned to them if their school closes down without issuing refunds.
Who Needs Them?
Anyone opening a new private postsecondary non-degree granting school in Minnesota must obtain a license from the state’s Office of Higher Education, which requires the owner to purchase a private school bond. The required bond amount is 10% of the previous year’s gross revenue from tuition and fees, with a minimum bond amount of $10,000.
Schools with multiple locations in Minnesota can purchase a single bond covering all sites. The minimum bond amount in such cases is 10% of the school’s aggregate income from all sites.
The bond must be renewed annually for as long as the school remains in operation. Failure to maintain an active bond can result in the loss of the school’s license.
How Do They Work?
A Minnesota private school bond is legally binding on all three parties to the surety bond agreement: the obligee, the principal, and the surety. The state of Minnesota (Office of Higher Education) is the obligee requiring the bond. The principal is the school owner purchasing the bond. And the surety is the bond’s guarantor.
Students who do not receive the educational services their prepaid tuition and fees entitle them to and whose tuition and fees are not refunded by the school can file a claim for damages against the institution’s Minnesota private school bond. The principal is legally obligated to pay all claims that the surety finds to be valid.
How Are Claims Paid?
Although the legal obligation to pay valid claims rests entirely with the principal, the surety has guaranteed they will be paid. Therefore, the common practice is for the surety to send payment to the claimant to ensure that the claim gets paid promptly.
That initial payment is made on behalf of the principal, not by the principal. The principal’s obligation then shifts to repaying the surety, who is indemnified against any legal responsibility for claims.
The surety can take legal action against the principal if not repaid for a claim already paid on the principal’s behalf.
How Much Do They Cost?
The annual premium for a Minnesota private school bond is a small percentage of the required bond amount. That percentage is the premium rate, which the surety assigns to each bond applicant through an underwriting process that focuses on the risk to the surety—specifically the risk of not being repaid for claims paid on the principal’s behalf.
The assumption is that a principal with a high personal credit score is a low risk and will repay the surety according to the terms of the surety bond agreement. Therefore, the premium rate can be as low as 1%. A lower credit score is taken as a sign of a higher risk level and warrants a higher premium rate.
The average well-qualified principal will pay a premium rate that’s in the range of 1% to 3%.
Get a Quote
Our surety bond professionals will get you the Minnesota private school bond you need at a competitive rate.