Who must file evidence of financial responsibility?
Under Iowa Code Section 714.18, every person, firm, association, or corporation that maintains or conducts in Iowa any course of instruction via classroom instruction, correspondence or distance education, or that solicits in Iowa the sale of such a course, must file evidence of financial responsibility with Iowa College Aid and reapply to demonstrate continuing compliance, at minimum, every two years.
These requirements include schools and education providers located in Iowa and out-of-state that offer courses and programs via in-person or distance education instructional methods.
Entities that must file evidence of financial responsibility are colleges, universities, and other types of schools and education providers including but not limited to:
- Driver education schools
- Real estate and appraisal educators
- Private non-degree granting allied health schools
- Cosmetology, barbering, and massage therapy schools
- Other non-degree granting vocational schools
- Schools of religious study
What is evidence of financial responsibility?
- A continuous corporate surety bond payable to the State of Iowa;
- Disclosure to prospective and current students of course or program costs; and
- Disclosure to prospective and current students of the school’s policy for refunding course or program charges to a student who never begins attendance or withdraws before course or program completion. Note: A for-profit school with at least one program of more than four months in length that leads to a recognized educational credential must adopt a Tuition Refund Policy that complies with Iowa Code Section 714.23.
What must a school do to file evidence of financial responsibility?
Obtain a Bond
The school must obtain a continuous corporate surety bond payable to the State of Iowa in the amount of $50,000*.
First-time applicants - Language that a school's insurer should use to document the bond is found on page 4 of the Financial Responsibility Application. Iowa College Aid will accept an imaged copy of the bond to process the application. However, the original bond must be mailed to Iowa College Aid at the address provided in the application.
- Renewal applicants - A school must submit documentation substantiating that the school’s bond remains current. This documentation could be, for example, a Continuation Certificate that some insurers issue or an annual premium payment receipt that extends the bond's coverage through the present day.
*Special Provisions for Iowa Cosmetology or Barbering Schools
A school that collected less than $500,000 in tuition during its most recent 12-month fiscal year may calculate a lesser bond equal to 10% of tuition collected. The school must request a worksheet from Iowa College Aid that includes a notarized statement in which the school attests to the total amount of tuition collected during its most recent 12-month fiscal year.
Iowa College Aid may accept a letter of credit from a cosmetology or barbering school in lieu of a bond and for the amount of the bond that would otherwise have been required.
Complete and Submit an Application
A school must complete a Financial Responsibility Application that Iowa College Aid supplies. Instructions are provided on the cover page of the application. The application requires the school to disclose information about the school; the school’s program or course costs; and the school’s policy for refunding charges to students who do not begin attendance or do not complete the school’s course or program. A for-profit school may be required to adopt the Tuition Refund Policy.
What requirements may apply in addition to financial responsibility?
Which schools qualify for a financial responsibility exemption?
Public colleges and universities, schools that do not charge for their courses, and certain other limited types of education providers may qualify for an exemption from filing evidence of financial responsibility.
Who do I contact?
For further information, contact the Postsecondary Authorization Team.