Many parents in the Pacific Northwest choose to start saving early for their children’s education, including participating in Washington state’s Guaranteed Education Tuition (GET) program. However, as tuition starts lowering with the College Affordability Act, the state felt it was necessary to reevaluate the GET program. Board members announced this August that they would be implementing steps to protect participants who bought into the program and assumed tuition would rise. The plan, which goes into effect on August 19th, includes the following:
- Refunds on amortization fees for investors who purchased credits after 2011
- Reimbursements for GET credits bought after July 1st, 2015, and
- Two-year suspension of new enrollments in the program.
Looking to find out how these updates affect you and your savings? The GET Committee provided the following frequently asked questions about what lower tuition means for the program:*
What does lower tuition mean for students today?
This historic event will make college more affordable and accessible for more Washington families and current students. More specifically, tuition will be reduced at the state’s two research institutions (UW & WSU) by 5% in the 2015-16 academic year and by another 10% in the 2016-17 academic year for a total 2-year reduction of 15%. This is important because these are the two institutions for which GET’s payout value is based upon. In addition to the tuition reductions noted above, the College Affordability Act also reduces tuition by 20% over the next two years at the state’s regional institutions (CWU, EWU, WWU and The Evergreen State College) and 5% in 2015-16 academic year at the state’s community and technical colleges. The legislation goes on to say that beginning in the 2017-18 academic year, tuition operating fees for resident undergraduates at community and technical colleges, may increase by no more than the state’s average annual growth rate in median hourly wage as determined by the Federal Bureau of Labor Statistics.
How will this impact my student if they are needing to use their units in the next two years?
In response to lower tuition, the legislation states that for the 2015-16 and 2016-17 academic years, the GET Committee shall set the payout value for units redeemed at the 2014-15 rate of $117.82 per unit.
What happens to the value of my account if I am not going to use my units in the next two years? Will I lose money?
Beginning in the 2017-18 academic year, the GET Committee is required to make the necessary program adjustments to ensure GET customer accounts are not decreased or diluted as a result of lower tuition. This may include a cash refund, additional units, a minimum payout value, or another solution that is deemed appropriate. Part of a feasibility study the program will be conducting during the next 18 months is to develop a resolution to this issue.
What is the GET Committee going to do about the future of the program?
By December 1, 2016, the legislation calls for the GET Committee to review and report to the legislative fiscal and higher education committees on the following:
- The impact of reducing tuition on the funded status of GET and future unit prices;
- The feasibility of establishing a traditional 529 college savings program;
- Alternatives of linking GET to tuition and fees and linking GET to a cost of attendance metric;
- And the current state penalty for non-qualified withdrawals.
Does the two-year freeze in payout also mean a two-year freeze in unit cost? Does this mean the current unit cost is now calibrated to a tuition cost 15% less than today?
These are good questions and issues the GET Committee will be addressing. The Committee will be meeting on September 1st to begin conversations around future unit pricing and payouts; however, a great deal of analysis will need to be done by the State Actuary and other financial experts before any future pricing formulas will be considered.
Want to know more about how this affects you and your financial plan? Contact your relationship manager or client services team today for assistance.
*Excerpt taken from “Tuition cut brings changes to GET program” by Drew Mikkelsen, King5 News, (August 18, 2015)