Massachusetts Private Occupational School Bond

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Massachusetts Private Occupational 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 Massachusetts Private Occupational School bond needs.

What Are Massachusetts Private Occupational School Bonds?

Massachusetts private occupational school bonds are designed to provide financial protection for those who have prepaid tuition and fees with the expectation of receiving specific educational services. The main concern is that some schools close their doors or lose accreditation without refunding prepaid tuition to students who have not received the services they are entitled to.

Who Needs Them?

In the Commonwealth of Virginia, private schools offering occupational education are regulated by the Division of Professional Licensure, Office of Private Occupational School Education (OPOSE).  The owners of these schools are required to furnish a surety bond in order to obtain a license to operate in Massachusetts. 

The state’s auditor determines the bond amount for each school based on the total amount of tuition prepaid by all students. The minimum bond amount is $5,000. Every private occupational school owner in Massachusetts must maintain an active bond at all times to avoid losing their license to operate.

How Do They Work?

A private occupational school bond forms a legally binding contract involving three parties:

  • The Commonwealth of Massachusetts is the “obligee” requiring the bond,
  • The private occupational school owner is the “principal” purchasing the bond, and
  • The company guaranteeing the payment of valid claims is the “surety.”

In purchasing a Massachusetts private occupational school bond, the principal agrees to abide by all applicable regulations as set forth in the Massachusetts General Code. Violations such as making misleading claims in advertising for new students can lead to claims being filed against the bond by those who have experienced financial harm. They may also file claims for monetary damages when a school ceases operations without living up to its end of the student contract or refunding prepaid tuition and fees.

How Are Claims Paid?

The terms of the surety bond agreement legally obligate the principal to pay all claims found by the surety to be valid. However, having guaranteed the payment of claims, the surety normally will pay a valid claim initially to expedite its resolution. In making that payment to the claimant, the surety is extending credit to the principal, creating a debt that the principal must pay back. Not repaying the surety for claims paid on the principal’s behalf may cause the surety to take the principal to court to recover the funds.

How Much Do They Cost?

The annual premium for a Massachusetts private occupational school bond is calculated by multiplying the required bond amount (set by the obligee) and the premium rate (assigned by the surety). Both are determined on a case-by-case basis.

The main underwriting concern is the possibility that the principal might not repay the surety for claims paid on behalf of the principal. That risk is assessed using the principal’s personal credit score, which is the best measure of financial responsibility and creditworthiness.

A high credit score is a sign of low risk, so the premium rate will be low. Conversely, a low credit score is a red flag for higher risk, which results in 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 Massachusetts private occupational school bond you need at a competitive rate.