If you think that nothing rises faster than tuition, think again.
Washington state’s college-savings program for families just released its new rates, and they rose faster than the fifth year of a subprime mortgage.
Which is tough to swallow for people trying to plan for college. But what’s tougher is the reason for the increase: The smart money expects even more huge tuition hikes, even less state funding, and universities continuing to play “peer catch-up” – raising tuition above inflation to “improve quality and catch up to peer institutions,” in the words of a state actuarial report.
We might be on the verge of the country’s first wave of home-schooling higher education.
This month, Washington’s Guaranteed Education Tuition program raised its “unit price” to $163. One hundred units buy the equivalent of a year’s tuition and fees at the most expensive public college in the state – the University of Washington – and can be used all over, including most out-of-state schools. This year’s price is 39 percent higher than last year’s. Only in times of runaway tuition inflation could you consider this still a good deal, a safe hedge against the wild and uncertain future.
But that’s what it is.
“It sounds like a lot and it is a lot,” said GET director Betty Lochner. “But it’s going to be even worse later.”
This year’s price went up more than ever before – partly in an effort to get the program back on a solid footing with reserves, and partly because tuition’s been hiked dramatically in the past couple of years. Other states have closed their so-called 529 programs because tuition hikes outstripped their ability to pay off investors.
Lochner said she understands the sticker shock families are feeling. At $163 per unit, someone would have to fork over $65,000-plus to buy four years of tuition. That’s more than you would pay for tuition today – the current “premium” is 59 percent above today’s rate – but unless all the actuaries and experts are delightfully wrong, tuition will surpass it very soon.
In the next five years, under assumptions used in the GET calculations, tuition is expected to increase by 18 percent, 12 percent, 10 percent, 10 percent and 8 percent. After that, it’s predicted to steady out and rise by 5.5 percent a year – though it’s been a long time since tuition rose at such a puny rate, let alone for years on end. But never mind that.
Given these assumptions, the price of a four-year education at a state-defunded university will more than triple in the next 18 years. According to GET estimates, a freshman who just enrolled at UW and who finishes in four years will spend $50,658 in tuition and fees.
A freshman enrolling in 2029-’30 – a baby born this summer – can expect a four-year tuition bill of an estimated $153,775.
Which is to say nothing of room and board, books and pilsner.
The state also assumes that the already dwindling amount of tax money directed toward universities will dwindle on. Washington once contributed 85 percent of the cost of running state schools; now it’s 35 percent. It’s expected to sink to 25 percent in the years ahead.
At some point, we’ll have to stop calling them public universities.
I admit I’ve got a dog in the fight – or a preschooler, anyway. The GET program once seemed like a pretty decent deal. Buy at today’s tuition rates, and the state guarantees the payout. Back before the crash, it seemed almost like a municipal bond – reliable, but less lucrative than the stock market.
(Remember that? Feeling all secure and safe about the stock market? How dumb was that?)
At that point, the GET program had enough money invested to pay for every single enrolled child, with 17 percent left over. It was overfunded.
Then the market tanked, lawmakers and universities raised tuition like crazy, and with more of the same on the horizon, GET suddenly looked like a fantastic deal. Lots of people hopped on board, and the economics of this – which doomed similar programs in other states – required some rejiggering.
Thus the price increase. It reduced the unfunded liability and sets a course to get to fully funded with a 15 percent reserve by the time that hypothetical youngster starts college in 2029.
“It’s just a new world,” Lochner said. “It’s going to be very expensive to go to school.”
Going to be? Like, someday?
Lochner is realistic about the future but manages to sound fleetingly hopeful as well.
“At some point, it’s got to level off,” she said. “It can’t go up at 20 percent forever.”
Let’s hope so. But in a new world, who really knows?