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Iowa Instructional School Bond

What is an Iowa instructional school bond?

The Iowa College Student Aid Commission requires all private post-secondary and instructional schools to obtain authorization and licensure from the state before they can begin enrolling students or offering classes. Part of the licensing process for these institutions is to post a surety bond.

An instructional school bond—also known as a private school bond—is meant to help protect your students and the state. It acts in a similar manner to other surety bonds. In essence, it is a contract between three parties:

  • The surety: The company that issues the bond policy.
  • The obligee: The authority requiring the bond, in this case Iowa College Aid.
  • The principal: The private school posting the bond.

How this surety bond works

Bonds are often required in industries where there is a lot of regulation, governmental oversight, or where a business handles high-level financial transactions, such as college tuition payments

Should your school violate a law or regulation in handling student finances, including tuition, financial aid, or any reimbursements, a claim can be made against your bond.

If the claim is upheld by the court, your bond will be used to pay any losses suffered by the claimant, up to the full value of the policy. Afterward, you will be required to pay this amount back to the surety company.

How much does a private school bond cost in Iowa?

The price of your school bond will vary based on several factors, including:

  • The bond amount required by the authorizing agency
  • Your school's finances and licensing history
  • Your personal credit rating

To acquire a policy, you are responsible for paying a small percentage of the bond's full coverage amount each year. This annual fee is known as the bond premium. In general, a private school bond premium can range from as low as 1% to as high as 15%, depending on your credit rating.

Why do private schools need this bond?

Iowa requires any for-profit school offering one or more post-secondary educational programs that lead to a diploma, license, or professional degree to obtain state licensure. As part of the licensing process, institutions meeting this criteria must post a surety bond. In other words, you need to post a bond to be licensed by the state.

In addition, surety bonds are often required by agencies to help promote best practices and legal compliance by organizations within specific industries.

Private schools require tuition from students and often help to facilitate student loans. If a school fails to comply with laws and regulations in transactions with their students, a claim can be made against their bond.

If a claim is made and upheld, the bond is used to pay for any losses suffered by the claimant, in addition to any applicable fees and fines issued by Iowa state. Upheld claims can make obtaining future bonds difficult, thus jeopardizing your school's license.

Do schools outside of Iowa need to be bonded?

Even if your school is not physically located in Iowa, you must still register and obtain a license if you plan to conduct business inside the state. Below are a few examples of schools located outside of Iowa that will need this license and bond:

  • Foreign schools (i.e., schools with administrative offices located in another state or country) who seek to open a branch campus in Iowa.
  • A foreign school offering any portion of a residential program at a location in Iowa via direct instruction or supervision.
  • A distance education program that includes a component required for program completion, which the school permits an Iowa resident to complete at a location in Iowa (e.g. a clinical, internship, or lab).

Please visit Iowa College Aid for more information.

What's the difference between a private and public school?

A private school, also known as a for-profit school, is one that is not publicly funded in any way. Most states have separate licensing requirements and regulations for private schools. Iowa is no exception.

For-profit schools generally cost more than public schools and have less governmental oversight on curriculum and programs. This does not mean private schools are of lesser quality, only that they are funded by different means and therefore have more freedom in how they structure and offer post-secondary programs.

The Simple Bonding Process

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Sign your contract and pay the premium.
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Receive your surety or fidelity bond.
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