Pennsylvania Private Licensed School Bonds

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Pennsylvania Private Licensed School Bonds

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 Pennsylvania private licensed school bond needs.

What Are Pennsylvania Private Licensed School Bonds?

In the Commonwealth of Pennsylvania, private licensed schools must be bonded to provide financial protection for students who pay tuition but don’t receive the services their tuition entitles them to. That protection extends to parents or sponsors who pay tuition and fees on behalf of students enrolled in a private licensed school.

The biggest risk for those who have prepaid tuition is that the school will cease operations without issuing refunds for the unearned tuition. In some cases, a school that is closing will “teach out” the last student cohort before shutting its doors permanently. And in some cases, if there is no teach out, the school will simply issue tuition refunds. But when there is no voluntary refund, a Pennsylvania private licensed school bond provides a way to compensate students and/or parents or sponsors for the monetary loss.

In fact, any violation of chapter 73 of the Pennsylvania code that results in financial harm 2 those who have paid tuition and fees gives the injured party the right to file a claim for damages against the bond.

Who Needs Them?

Purchasing a Pennsylvania private license school bond is a requirement for licensure in the Commonwealth of Pennsylvania. The Pennsylvania Department of Education, which requires the bond, is known as the bond’s obligee. The bond must be purchased in the name of the school’s owner, known as the bond’s principal, and must use the bond form prescribed by the State Board of Private Academic Schools.

The minimum bond amount for schools with more than $500,000 of gross tuition collections annually is $10,000. The bond amount goes up by $10,000 for each additional $500,000 of tuition revenue, up to a maximum bond amount of $100,000.

The bond must be continuous in nature, and can be canceled only with 30 days prior notice to the obligee.

How Do They Work?

The third party to a Pennsylvania private licensed school bond is the bonds guarantor, known as the surety. In guaranteeing the bond, the surety is agreeing to extend credit to the principal for the purpose of paying claims against the bond, if necessary.

The bond forms a legally binding contract among all three parties: the obligee, the principle, and the surety. Upon receipt of a claim against the bond, the surety typically will work with the obligee to establish the claim’s credibility before it is approved for payment.

How Are Claims Paid?

The terms of a Pennsylvania private license school bond legally obligate the principal to pay all valid claims against the bond. But in practice, because the surety has guaranteed the payment of claims, the surety usually makes payment directly to the claimant on behalf of the principal. 

That does not, however, eliminate the principal’s legal obligation to pay valid claims. The surety’s direct payment of the claim is an extension of credit to the principal, which creates a debt that the principal is legally obligated to satisfy. If the principal does not repay that debt, the surety has the right to sue the principal to recover the funds.

How Much Do They Cost?

The annual premium for a Pennsylvania private licensed school bond is the product of multiplying the required bond amount and the premium rate established through underwriting. The surety’s primary concern is the risk of not being repaid for claims paid on the principal’s behalf. 

The main factor determining the premium rate is the principal’s personal credit score, which serves as a benchmark for risk. A high credit score suggests that the risk of nonrepayment of the surety is low. That deserves a low premium rate. Someone with a low credit score, conversely, will pay a substantially higher premium rate because of the greater 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 Pennsylvania private licensed school bond you need at a competitive rate.