Washington college tuition plan underfunded
OLYMPIA — Washington’s Guaranteed Education Tuition program may become a problem for the state because the stock market plunge has dropped the value of the fund’s assets to 89 percent of future liabilities.
GET director Betty Lochner told The Seattle Times the program has enough money to pay all obligations for 15 years, but the state may have to rethink the deal it offers to new participants.
The program, which has been around 11 years and has nearly 100,000 participants, offers parents a chance to buy the cost of college in the future at today’s prices.
If tuition rises at the 7 percent annual rate allowed by law, the GET program represents a savings plan with a 7 percent rate of return. Washington universities are seeking authority to increase tuition without legislative approval and are considering much larger increases to offset state budget cuts.
Parents participate in the GET program by buying education units at a rate set annually. They need to buy 100 units to pay for one year of resident undergraduate tuition and state-mandated fees at the most expensive Washington public university, either the University of Washington or Washington State University. It takes fewer units to prepay for less expensive schools and the units may also be used at out-of-state and private universities.
GET units currently cost $76, but they go up every year in May when the GET board resets the price. Lochner said the new price would be at least $7 more a unit, or a total of $700 more per year of college. The extra money is needed to shore up GET’s finances and offset tuition increases.
When University of Washington President Mark Emmert was asked by a legislative committee last week about the effect of tuition increases on GET, he said it was a program “worth saving.”
“The challenge, of course, is that you can’t set a policy that will keep the GET program solvent by making the universities and colleges insolvent,” Emmert said.
He said similar programs in other states have needed to change investments, reset base assumptions or change the payout for new entrants.
“Any number of those kinds of scenarios, I think, are going to have to be looked at under almost any model” in GET’s future, Emmert said.
The number of participants also has been rising fast and soon will top 100,000. New participants will need to open an account by March 31 to take advantage of current prices, and another price increase could come as soon as September.
Information from the Seattle Times
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