By Gary Brooks, CFP
With the Washington state legislature voting to reduce state university tuition by 15% over the next two years, the Guaranteed Education Tuition program will have to adjust how it values units for participants in the pre-paid tuition program.
The following Q&A is the first round of explanation released by GET Director Betty Lochner. The payout value will remain at $117.82 for the next two academic years but significant changes to the program will be required.
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 five percent in the 2015-16 academic year and by another ten percent in the 2016-17 academic year for a total two year reduction of 15 percent. This is important because these are the two institutions for which GET’s payout value is based upon.
- 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.
- Details regarding next steps for the GET program will be discussed at the GET Committee meeting on Monday, July 13 from 2 to 4 p.m. at Senate Hearing Room 3 on the Capitol Campus in Olympia. As information becomes available, updates will be shared on the GET website.
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 Monday, July 13 to begin conversations around future unit pricing; 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.
~ BHJ Wealth Advisors — Gig Harbor, Washington — 253-534-8888