GET college plan now back in line with yearly tuition costs
Aerial shot of the University of Washington campus, shot Friday, September 16, 2016, looking east. 520 bridge is at top in the background, further up is the city of Bellevue. (Ellen M. Banner/The Seattle Times)
Washingtonians who have invested in the state’s prepaid college tuition plan will see a kind of stock split when the worth of the units is recalculated in August.
The committee that oversees the Guaranteed Education Tuition plan (GET) voted Thursday to revalue the units and change the payout amount. That won’t change the value of any customer’s plan; each customer will own more GET units, but each unit will be worth less.
GET is scheduled to reopen to new investors and lump-sum purchases before Nov. 1.
At the same time, the GET staff is negotiating with a global investments firm, BNY Mellon, to create a 529 college savings plan that is expected to open late this year or early next year. A 529 college savings plan is similar to a Roth IRA; investors can decide how aggressive or how cautious to be with their investments. GET is more like an insurance plan, one that guarantees 100 units will always be worth a year of tuition and fees at the state’s most expensive university.
Because the state froze tuition in 2013 and cut it in 2015, the payout value of 100 units of GET is currently higher than the cost of one year of tuition and fees at the state’s most expensive university. It’s been frozen at $117 per unit for several years now — or $11,700 for 100 units. (A year of tuition and fees at the state’s most expensive university in 2016-17 was $10,171. Fall tuition has not yet been set, but legislators have approved an increase of 2.2 percent.)
Revaluing, or “rebasing,” will bring the payout value back in line with the cost of a year of tuition and fees. GET committee member David Schumacher, who is director of the state’s Office of Financial Management, called it “a pretty complicated way to get back to a pretty simple system.”
In deciding to rebase the units, the committee rejected a last-minute appeal from several lawmakers who had wanted to provide an incentive to GET holders to roll their money over to the 529 savings plan.
Senators Mark Mullet, D-Issaquah, and Guy Palumbo, D-Maltby, argued that their plan was a win for investors because it would give them some of the fund’s estimated $615 million surplus.
In an email to the committee, Palumbo asked the committee to hold off on rebasing.
Since last week, when the bill — SB 5923 — was discussed in the Senate Higher Education Committee, “this idea has been steadily picking up support across parties, chambers and agencies,” Palumbo wrote. “If given the opportunity to work on it during the interim and early next session, it might very well be the new legislative direction.”
Duane Davidson, the state treasurer and GET committee member, said he couldn’t support the idea because it amounted to a change in policy, and other committee members also said they did not want to make such a major change. “I believe simple is better,” said Elizabeth Stecher Berendt, one of two GET citizen representatives.
In voting for rebasing, the committee also increased the maximum number of units a customer could hold to 600, up from the current number of 500, and increased the number that could be redeemed in any one year to 150.
And it is giving customers an extended period of time to cash out of GET without penalty. GET holders will be able to get a full refund 60 days after the 529 savings plan opens, although that date has not yet been set.
As of June 30 of last year, GET was funded at 136 percent; that is, it has about $615 million more in assets than it needs to pay off its obligations. Over time, said state Actuary Matt Smith, the “rebase” will reduce the program’s funded status because the additional units to be granted in August will increase the total expected future payments.
He estimated the rebase would decrease the funded status by about 10 percent, leaving $470 million more in assets than is needed to pay off obligations.