It appears that the State of Nevada will require a surety bond from private education loan lenders and servicers. Assembly Bill 332 amends Nevada Rev. Statutes Title 55 relating to Banks and Related Organizations, adding a new chapter regulating private education lenders and student loan servicers. The provisions of the new law will become effective on January 1, 2024. The statute DOES exempt certain financial sector participants that will not be required to file the Nevada private education loan servicer surety bond nor license applications, including:
Banks
Savings and loan associations
Savings banks
Thrift companies
Credit unions
The Nevada System of Higher Education
The Western Interstate Commission for Higher Education
Pursuant to Sec. 15 of AB 332, any person or entity responsible for the servicing of any student education loan to any student loan borrower may be considered a “loan servicer”. Section 15 requires those persons and entities to obtain a license before engaging in student loan servicing. One of the licensing requirements is a surety bond.
A “surety bond” is a financial instrument that guarantees that a party, natural person or business entity (the “principal”) will perform certain contractual terms, or will comply with the statutory requirements of specific professional or occupational licenses. Surety is not insurance in the traditional meaning of the word. Insurance contemplates a shift of risk from an insured to an insurance company. The insured pays the insurance company a premium (fee) for accepting his or her risk of loss. A surety bond is a third-party financial guarantee of a principal’s promises. There is NO shift of risk from a principal to the surety company, as there is an assumption that each principal will comply with the agreements that he or she makes. In simpler terms, a surety company “wraps” the promise of a bonded principal with the good name and creditworthiness of the surety company.
Nevada surety bond leader, Surety One, Inc. is a specialist in providing for the bonding needs of education professionals in every field. We offer surety bonds to all applicants in every state, Puerto Rico, US Virgin Islands and Canada. Call (800) 373-2804 or email Underwriting@SuretyOne.com for a conversation about a Nevada private education loan service bond or any other surety need.
