New Mexico Private Postsecondary School Bond

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New Mexico 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 New Mexico private postsecondary school bond needs.

What Are New Mexico Private Postsecondary School Bonds?

New Mexico private postsecondary school bonds are intended to ensure that such schools operate in accordance with the regulations set forth by the New Mexico Higher Education Department. Regulatory compliance helps ensure the financial protection of those who have paid tuition in exchange for specific services to be delivered by a private postsecondary school. 

In the event a bonded school ceases to operate before enrolled students have completed the course of study for which they have paid, without providing student refunds or “teaching out” those students, a private postsecondary school bond provides a way for them to recover monetary damages.

Who Needs Them?

Every private postsecondary educational institution seeking to operate in the state of New Mexico is required to furnish a surety bond. That requirement is mandated by the New Mexico Department of Higher Education, referred to as the bond’s obligee.

Schools that are based in New Mexico must provide a bond for 20% of the school’s estimated gross tuition revenue for the current year, with a minimum of $5,000. Out-of-state schools are subject to the same bonding requirement, but with a minimum bond amount of $10,000 and a maximum of $25,000. 

The bond must be purchased in the name of the school’s owner, known as the bond’s principal. There must be an active bond in force at all times for the school to continue operating legally.

How Do They Work?

A party who incurs a financial loss because of the principal’s violation of the regulations governing private postsecondary schools can file a claim against the institution’s private postsecondary school bond. When a school closes its doors without offering a teach out option or issuing refunds of prepaid tuition, it’s likely that multiple claims will result, as entire classes of students may be affected.

The bond’s guarantor, called the surety, is responsible for determining whether a particular claim is legitimate and needs to be paid.

How Are Claims Paid?

A New Mexico private postsecondary school bond is a legally binding contract among the obligee, the principal, and the surety. The terms of the surety bond agreement place the legal obligation to pay valid claims squarely on the principal’s shoulders and indemnify the surety. However, the surety has guaranteed the payment of claims.

Because of that guarantee, the surety will pay a valid claim initially, as a loan to the principal. That extension of credit must then be repaid. If it isn’t, the surety can take legal action against the principal to recover the funds.

How Much Do They Cost?

To purchase a New Mexico private postsecondary school bond, the principal pays an annual premium that is the result of multiplying two factors—the required bond amount and the premium rate, which the surety assigns on a case-by-case basis. The premium rate emerges through an underwriting assessment of the risk that the principal might not repay the debt created by the surety paying claims on the principal’s behalf.

The risk is low when the principal is a creditworthy individual, with a high personal credit score. The reverse is true as well; a low personal credit score is a sign of higher risk.

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 New Mexico private postsecondary school bond you need at a competitive rate.