(a) The general assembly recognizes:

(1) The need to establish a fund from which reimbursement can be made to students who reside in Tennessee or attend an authorized location with a Tennessee address, or an entity making loans to those students at postsecondary educational institutions that close without earning tuition collected from enrollees; and

(2) That the moneys for the fund can be most properly raised based on the level of tuition collections at each such educational institution.

(b) There is established the tuition guaranty fund, which is established in the state treasury as a separate, revolving, nonreverting agency account for the purpose of receiving fees and paying claims authorized by this section. The moneys in the fund shall be invested by the state treasurer, as are other state funds, and any interest so obtained shall be added to the fund. Payments out of the fund shall be made by warrant of the state treasurer, as directed by the board of directors of the tuition guaranty fund.

(c) There is established the board of directors of the tuition guaranty fund, which shall be composed of the comptroller of the treasury, the commissioner of finance and administration, the state treasurer, the executive director of the Tennessee higher education commission, a member of the committee on postsecondary educational institutions named by the chair of the commission, and a representative of the private postsecondary education industry named by the chair of the commission, or their designees, so designated in writing. The state treasurer or the state treasurer's designee shall be chair. The board is authorized to take any actions necessary to administer the fund, including promulgation of rules and bylaws. The board shall report annually to the general assembly and governor on the condition of the fund.

(d)

(1) There is imposed on each postsecondary educational institution authorized under this part, unless exempt under § 49-7-2004, a tuition guaranty fund fee in accordance with the schedule set out in the administrative rules under this chapter.

(2) The fee shall be based on tuition collections, however described, in the previous academic year, unless the board determines a different time measure is more appropriate for an institution. The fee shall be paid to the tuition guaranty fund at least thirty (30) days before the beginning of a new academic year; provided, that the board may establish alternate dates to account for variations in institutional programs and schedules. The board may also establish late payment penalties by regulation.

(e) At such time as the board, in its discretion, determines that the fund is adequately funded to insure against institutional closure, it may suspend collection of the fee, but may institute it at such time as the fund balance drops below a predetermined minimum balance. For a new postsecondary educational institution that begins operation in this state after July 1, 2006, the institution must meet bonding requirements as specified in § 49-7-2013, and pay guaranty fund assessments as specified in subsection (d) for at least six (6) years.

(f) In the event an institution participating in the fund goes into bankruptcy, or ceases operations without completing its educational obligations or reimbursing its students, the board may reimburse valid claims of students for tuition paid to that institution, in accordance with guidelines and regulations established by the board. If a student is attending on a loan, the board shall direct reimbursement to that lender rather than to the student. As a condition of receiving reimbursement from the fund, a student or lender shall agree to subrogate the person's right of recovery against the institution to the board.

(g) The board is authorized to audit the accounts of any institution covered under this section to ascertain the correctness of any tendered fee and to take appropriate actions, through the attorney general and reporter, to enforce its rights and responsibilities under this section.