The number of people enrolling in Washington’s booming prepaid tuition plan keeps rising – new accounts are up 12 percent so far this year, and it’s the nation’s fastest-growing plan.
For Spokane families like the Harrises and the Dickmans, the reasons are obvious. By opening an account with the state, families can freeze the cost of tuition, paying today’s rates for tomorrow’s classes.
Ashley Harris is a freshman at Eastern Washington University. Because of her parents’ investment several years ago in a state Guaranteed Education Tuition account, she’ll be able to avoid student loans, at least for a few years – while seemingly everyone else around her is taking them out.
“I’ve even talked to older adults who go to my church, and they’re still paying off their college debt,” said Harris, a 19-year-old studying dental hygiene.
Nancy and Richard Dickman are at the opposite end of the spectrum. They’ve opened accounts for their 8-year-old and 6-year-old twins, looking ahead to the time when even today’s tuition might seem tame by comparison.
“I didn’t want to be in my 50s and have three boys in college, worrying about how to pay for that,” said Nancy Dickman, who’s 41.
Like more than 67,000 other Washington families, they’re investing in something that seems like more of a sure bet than the stock market: rising tuition.
In the past 20 years, tuition at Washington public colleges has tripled, outpacing inflation and family incomes. Those who enrolled in the GET program in its first year, 1998, have seen a 68 percent increase on their investment, according to the program.
Meanwhile, at the present rate of increase, a family with a newborn today could expect to spend $90,000 for four years of tuition alone at Washington State University in 18 years, state officials said.
“The year tuition went up 16 percent, people in our program got a 16 percent return,” said Betty Lochner, director of the GET program. “The one thing that’s different about investing in the stock market versus tuition is we know that tuition is going up.”
Washington’s program is one of 19 prepaid tuition programs in the country, and it’s opened more new accounts per capita in recent years than any other, Lochner said.
Prepaid plans have run into trouble in other states in recent years, as tuition rose steeply while the stock market posted losses. Several states, such as Texas, Ohio and Kentucky, ran into deficits and froze enrollments, because the cost of tuition was outpacing the money invested.
Lochner said Washington’s program is in better shape, partly because the state did not halt sales when the market got rocky last year. The GET program has reserves of almost $68 million, 8.8 percent above what’s needed to cover all current accounts at current prices. Of course, not all of those accounts will be cashed in now, and the fund is expected to earn enough to keep pace with tuition.
In the worst-case scenario, the state guarantees the program and would have to turn to taxpayer money to back it up. But Lochner said she doesn’t think that’s going to happen. As other states froze their programs, Washington kept selling and came out of last year’s difficult time, she said.
“We keep selling, and we get through the bumpy years, the rainy day years,” she said.
Many other states, such as Idaho, offer a savings plan that provides tax breaks to parents who save, but the plans are not guaranteed by the state, as is Washington’s.
Idaho’s program, known as IDEAL, has seen enrollments more than double in the past three years. But Liza Carberry, chairman of the state’s college savings board, wants to see more people than the current 14,388 take advantage of the tax breaks. The state is seeking bids for a new administrator of the program, and looking to ramp up publicity efforts on the IDEAL accounts.
“In any case, we’re going to start working a lot heavier on marketing,” she said.
Idaho started the program in March 2001. The accounts, known as 529 savings plans, offer federal and state tax benefits.
Harris, the EWU freshman, expects to cover her first two years of school with GET funds. People can use the money for college-related expenses beyond tuition, such as housing, books and other costs.
“GET helped me with all that stuff,” she said.
The program is transferable to almost all public or private schools in the country. Families purchase “units” based on the most expensive tuition in the state – typically the University of Washington – with 100 units equal to a year’s tuition. People can buy up to five years of tuition, and can enter a monthly plan as well: four years of tuition in the year 2025 would cost $236 a month starting now.
Harris also works at least 10 hours a week for dining services to help pay expenses. Her GET account has been transferred into her hands, so she can get experience handling money and dealing with financial matters. She says she’s grateful for both the money from her parents and the experience.
“They’ve been saving up for a while,” she said. “Now it’s my responsibility to see it’s used for college.”
Nancy Dickman said her kids are a little young to be thinking about college just yet, but she’s already beginning to establish expectations.
“College is not an option in our family, is pretty much what I try to drill into them,” she said. “But they don’t really get it yet.”