OLYMPIA – State officials approved a huge increase in the price of prepaid college tuition on Monday, compensating for fresh tuition hikes and replenishing reserves hurt by the global financial meltdown.
The Guaranteed Education Tuition Committee’s unanimous vote raises the price of a tuition credit from $76 to $101, the largest one-year increase in the program’s history.
The program, called GET for short, allows parents to bank tuition vouchers at today’s rates and withdraw them when a kid heads off to college.
Money paid into the program grows tax-free, and withdrawals aren’t counted as taxable income if they pay for qualified education expenses. Buying 100 credits guarantees a full year’s tuition when they’re cashed out, and the credits are portable to most public and private schools nationwide.
Washington state’s tuition credits were $35 each when the program was launched in 1998, with typical yearly price increases of a few dollars. The previous high one-year jump was in 2002, when the price increased $10, or about 24 percent.
But when enrollment reopens on Sept. 15, purchasers will face a price jump of about 33 percent. The new price will be in effect through April 2010, unless further changes are needed.
Committee members didn’t take the steep increase lightly, with some wondering how well the state will be able to sell the more expensive tuition credits.
But Chairwoman Ann Daley said the big increase was necessary to ensure the program’s long-term financial health. “I think we made a good balance today,” she said after the meeting.
Some amount of increase was certain, particularly since the Legislature just voted to allow annual tuition hikes of 14 percent in the next two years at Washington’s four-year universities.
But officials also needed to raise GET prices even higher to replace the program’s investment losses, brought on by the recent collapse in financial markets.
As of Monday’s briefing, the program’s roughly $860 million portfolio could pay for about 81 percent of all outstanding tuition credits. Only a few years ago, the program had a 17 percent surplus, officials said.
“Over the next 20 to 30 years, we have to make sure we have assets that match our obligations,” Daley said.
Also on Monday, the committee approved selling GET credits all year long for parents with newborns, hoping to bring people into the program earlier.
Previously, credits for any child could only be purchased from Sept. 15 to March 31. The new policy allows parents with babies up to 1 year old to buy tuition credits year-round, beginning this Sept. 15.