(A) Before an institution is licensed under this chapter, the commission may require that a surety bond be provided by the institution in an amount in compliance with the regulations prescribed by the commission. The obligation of the bond is that the institution, its officers, agents, and employees shall faithfully perform the terms and conditions of contracts for tuition and other instructional fees entered into between the institution and persons enrolling as students. The bond must be issued by a company authorized to do business in the State of South Carolina. The bond must be to the commission, in that form as approved by the commission, and is to be used for the benefit of students who suffer financial losses of tuition and fees prepaid to an institution as a result of the closing of the institution. The commission may use the funds for these purposes to pay refunds to these students for unearned tuition and fees, to pay for or subsidize the cost of providing facilities and instruction for these students to complete their programs, or to pay expenses to store and maintain student records of these students.

(B) The bond company may not be relieved of liability on the bond unless it gives the institution and the commission ninety days’ written notice of the company’s intent to cancel the bond. If at any time the company that issued the bond cancels or discontinues the coverage, the institution’s license is revoked as a matter of law on the effective date of the cancellation or discontinuance of bond coverage, unless a replacement bond is obtained and provided to the commissioner.

(C) Instead of the surety bond required in subsection (A), the institution may pledge other means of collateral acceptable to the State Treasurer, in an aggregate market value of the required bond. The commission shall deliver a safekeeping receipt of collateral to the State Treasurer to be held until the commission serves notice for its release to the commission.

(D) The commission may promulgate regulations establishing a student recovery fund for nonpublic educational institutions. The fund must be used to benefit students because an institution has failed to perform faithfully its contractual obligations for tuition and instructional fees in the event of an institution’s closing. The commission may use the funds for these purposes to pay refunds to these students for unearned tuition and prepaid fees, to pay for or subsidize the cost of providing facilities and instruction for these students to complete their programs, or to pay expenses to store and maintain student records of these students.