Axing college savings plan: Jury is out
A wait-and-see stance emerged Thursday on what to think about a recommendation to close the Guaranteed Education Tuition program — dubbed "GET."
A legislative panel chaired by Majority Leader Rodney Tom, D-Bellevue, has recommended that the GET program be phased out as a budget-balancing measure. Tom leads a 23-Republican-two-Democrat alliance that controls the Washington Senate. The recommendation is to allow people currently in the GET program to stay but not to let new people join it.
"We're going to have to let this sink in," said Sen. Barbara Bailey, R-Oak Harbor, chairwoman of the Senate's HIgher Education Committee. Don Bennett, chairman of a state committee that watches over the GET program, said that group would have to review Tom's panel's recommendations before voicing an opinion on them. Democratic legislative leaders want to keep GET in place.
Bennett and State Actuary Max Smith briefed the Senate Higher Education Committee Thursday about the GET program. The GET program allows families to make advance payments for state university tuition years in advance of a child actually attending college, with the program — not the child's parents — compensating for any increased tuition. For example, someone paying $40 into the program in 1998 would have $112 applied to his or her college tuition today.
GET accounts have been set up for 146,000 college-bound Washingtonians of all ages, including babies. These people have invested $2.1 billion of their own money into accounts, which were then invested and are now worth $2.9 billion. About 86 percent of the GET investors attend college in Washington.
If everyone — including the most recently enrolled infants and toddlers — were to suddenly seek to pay for college today and withdrew their money, the GET fund would be $631 million in the red. Another way of saying that, however, is that even if everyone used it at once, the fund could handle 79 percent of its obligations. At its present rate of growth, it would be at the 100 percent level in 2032.
The financial health of the GET program is tied to Washington's college tuition increases, which are tied to the amount of appropriations that the Legislature allocates to higher education, Bennett said.
Preliminary estimates are that tuition at Washington's public colleges will grow 12 percent in 2013-2014 — compared to 19 percent in 2011-12 and 15.2 percent in 2012-13. Subsequent predictions are a 10 percent tuition increase in 2014-2015, a 10 percent increase in 2015-2016, and an 8 percent increase in 2016-2017.
If the tuition increases are 20 percent annually for a few years, or balloon up to 50 percent, that would wreck the GET program, Bennett and Smith said.