What is a school bond?
School bonds (also known as post-secondary school bonds, private school bonds, or proprietary school bonds) are legally binding agreements between three parties: schools, the government agencies responsible for regulating local schools, and a surety company.
The government agency is the Obligee and establishes the obligations that the school (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the school.
Why do you need a school bond?
School bonds are required in some states before proprietary, private or post-secondary schools can obtain a license to operate. Some states that require a surety bond include California and New York.
When the surety company issues the bond, they provide the government agency a guarantee that they will receive payment for financial losses resulting from a violation of the statutes and regulations established in the school license.
If the school fails to meet the obligations set out by the Obligee, the surety will pay out any damages up to the bond amount. The school is ultimately liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
How much does a school bond cost?
School surety bond costs vary depending on the total bond amount and the premium rate. The Obligee sets the required bond amount and the surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
Premium rates for school bonds typically cost between 1% and 5% of the total bond amount. School bonds may require credit checks but it is ultimately the surety company’s decision how to underwrite the bond.
During the application process, the surety company evaluates your financial strength and industry experience. For bonds requiring credit checks, applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a school bond. EZ Surety still offers competitive rates to individuals with low credit scores or other financial issues.