Growing student debt has been troubling Americans for some time now. Currently at $1.2 trillion, student debt is growing by $2,726.27 every second. According to analysts, student debt is snowballing into a real threat to the U.S. economy. The reasons for this phenomenon can be traced back to rising tuition fees, lack of sufficient public funding for colleges, and salaries that have been stagnant rather than growing.
Florida senator Jeff Brandes is proposing a new way to tackle this problem. Bill 800 has been designed to protect students financially, in case the private school they attend closes down before they complete their program. The principal way to do this will be by requiring some private schools to post a $100,000 school bond. If you are a private school owner, you will understandably have some questions about this new requirement in case the bill is signed into law.
To make it easier for you, let’s look at it in more detail, and explain what you need to do in order for your school to stay compliant.
What does the requirement mean?
The $100,000 school bond is a type of surety bond protection (hint: be sure to learn more about what a surety bond is), which guarantees students that they will get their money back in case their school closes its doors, or violates the terms of Bill 800.
A surety bond is often compared to insurance, because to obtain a bond you pay a bonding company yearly premiums in exchange for their backing. However, unlike insurance, the bond protects your clients instead of your business. In essence, it means you can be liable for up to $100,000, if you commit a violation under the new bill. Without an active school bond, you would no longer be able to operate your private school. Understandably, the surety bond requirement is set in place to raise standards of accountability for private education institutions in the state.
Who needs to get a school bond?
So, how do you know whether your school needs to post a school bond in Florida? Typically, it is small private colleges that this requirement applies to.
When applying for your business license, you would be notified about the bond. Typically, the school bond needs to be in place before the license is issued. According to the text in the bill, the surety bond should remain in place “until the institution applies for and receives a first annual licensure renewal and demonstrates financial stability as determined by the commission.”
How can you get your bond, and how much will it cost?
The school bond is underwritten by a bonding company, which vouches that your institution is trustworthy and will cover potential financial losses incurred by students. The surety company charges annual premiums, which are a small percentage of the $100,000 bond amount.
The surety will look at your personal credit score, which is without a doubt the most important piece of the application, but also at your financial statements, both business and personal. Applicants with a good credit score and financial history typically pay between 1% and 4% of the bond amount, whereas applicants with credit issues may see their premiums rise up to 8%.
The bonding company, however, does not directly work with the public, so you need to apply for the school bond through a reputable surety bonds agency. Here at Bryant Surety Bonds, we closely examine every bond application, so we can propose a personalized solution to make sure you are paying the lowest possible premiums.
What are the other provisions included in Bill 800?
The $100,000 school bond is not the only measure Senator Brandes has included in the bill. The other provisions are equally important and you need to know about them in order to stay out of claims against your school bond.
For starters, the school bond will also have to be accompanies by a “student protection fund” which will kick in case a school shuts down unexpectedly. Schools will also have to disclose all fees associated with completing a program, so students and their parents are more aware of the risks they are undertaking. This needs to be done at least a week prior to the student enrolling or paying tuition fees. This will be complemented by student retention programs, so students aren’t wasting their money.
Finally, students will have to be notified if there are licensing application deficiencies within 30 days, rather than the current timeframe of 60 days. The bill, if approved by Senate, and its measures will come into effect starting Jul. 1 2016.
What are you throughts on the proposed Senate Bill 800? Do you think it can help curb the growing amount of student debt? Let us know what you think in the comments below. And as usual, for any questions related to surety bonds, don’t hesitate to give us a call at 866.450.3412.