Virginia Private Postsecondary 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 Virginia private postsecondary school bond needs.
What Are Virginia Private Postsecondary School Bonds?
The purpose of a Virginia private postsecondary school bond is to provide financial protection for students and/or their parents or sponsors who pay tuition in exchange for certain educational services to be delivered. Those who are financially harmed by the unlawful or unethical business practices of a private postsecondary school owner are entitled to file a claim for damages.
Who Needs Them?
The State Council for Higher Education for Virginia certifies postsecondary schools to operate in Virginia. Certain types of schools are subject to a bonding requirement as part of the certification process. The Council (the “obligee” requiring the bond) informs school owners applying for certification as to whether the bonding requirement applies to them and, if it does, what the required bond amount is. The school owner purchasing a private postsecondary school bond is referred to as the bond’s “principal.”
Some types of private postsecondary schools are exempt from bonding and some that are required to furnish a surety bond may be able to get the requirement waived after five years in operation.
How Do They Work?
The third party to a private postsecondary school bond, along with the obligee and the principal, is the bond’s guarantor, known as the “surety.” The legal obligation to pay valid claims belongs to the principal alone, but the surety guarantees their payment by agreeing to extend credit to the principal to cover the claim amount.
How Are Claims Paid?
The first thing that happens upon receipt of a claim against a Virginia private postsecondary school bond is that the surety conducts an investigation to make sure the claim is legitimate and deserving of payment. Because the surety has guaranteed payment of valid claims, the usual practice is for the surety to pay a claim initially and then be reimbursed later by the principal. As an extension of credit to the principal, that payment creates a debt that the principal is legally obligated to repay. Failure to do so can result in the surety taking legal action to recover the funds owed by the principal.
How Much Do They Cost?
The principal will pay an annual premium for the bond that is calculated by multiplying two factors: the required bond amount and the premium rate, which the surety will establish through underwriting. The main underwriting concern is the possibility of the surety not being repaid for claims paid on the principal's behalf.
The premium rate reflects how risky the underwriters believe it is for the surety to pay claims with the expectation of being repaid by the principal. That risk level is established largely on the basis of the principal’s personal credit score. A high credit score is a sign of low risk and is rewarded with a low premium rate. A low credit score, on the other hand, is a red flag for higher risk, which warrants 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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Our surety bond professionals will get you the Virginia private postsecondary school bond you need at a competitive rate.