Washington Degree-Granting Institutions 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 Washington degree-granting institutions bond needs.
What Are Washington Degree-Granting Institutions Bonds?
Washington degree-granting institutions bonds provide financial protection for students, parents, sponsors and others who have paid tuition with the full expectation of a student receiving certain educational services. If an institution fails to deliver those services for any reason and does not refund unearned tuition, those claiming a refund can file a complaint with the state.
Who Needs Them?
The Washington Student Achievement Council may require any degree-granting institution operating in the state of Washington to furnish the Council with an approved surety bond (or other security) in an amount to be determined by the Council.
How Do They Work?
The state of Washington is the “obligee” requiring the bond. The institution is the “principal” purchasing the bond. And the company guaranteeing the bond, specifically guaranteeing the payment of claims, is the “surety.” In guaranteeing the bond, the surety agrees to extend credit to the principal up to the required bond amount, to ensure that valid claims are paid.
When a complaint is filed with the Council against an institution—for example, if a school ceases operating before completing the current term for which tuition has been paid—the Council will try to notify all potential claimants.
How Are Claims Paid?
In some cases, the Council may negotiate a compromise settlement resulting in release and discharge of the school’s degree-granting institution’s surety bond. If necessary, the Council may file a claim on the bond on behalf of all claimants—a claim that the surety has guaranteed to pay on the principal’s behalf. Within ten days of the claim being paid, the principal must repay the surety and post a new bond.
How Much Do They Cost?
The annual premium for a Washington degree-granting institutions bond is the product of multiplying the required bond amount by the premium rate established by the surety on a case-by-case basis. The primary factor in setting the premium rate is the risk the surety is accepting in agreeing to guarantee the principal’s payment of claims.
The risk level is assessed by the underwriters based largely on the principal’s personal credit score. A high credit score is evidence that the principal has been fiscally responsible in the past and therefore is likely to repay the surety as required. That should result in a low premium rate. Conversely, a low credit score indicates a higher risk level which demands 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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