When the future of the state’s prepaid college-tuition program was being debated this year, lawmakers often asked whether concerns about solvency and value might cause investors to stop buying into the program.
The answer, it seems, is a qualified “no.”
Last week was the deadline for families to open new accounts under the state’s Guaranteed Education Tuition (GET) program. And while the number of new accounts created is down from last year, the number of units sold is up.
The program allows parents and other relatives to prepay college tuition costs at a premium. Under GET, 100 units — which this year cost $17,200 — pays for the equivalent of a year’s tuition and state-mandated fees at the state’s most expensive institution.
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If cashed in by July 31 of this year, 100 GET units would be worth $11,782. Because of the difference between cost and cash-out value, investment advisers say GET is best suited as an investment for the college costs for young children.
GET began running into funding woes during the economic downturn, when the combined forces of double-digit tuition growth and the falling value of its investments caused the program to become underfunded. The value of all the tuition credits sold is $2.8 billion, but the value of the fund is only about $2.2 billion.
Last year, legislators created a subcommittee to examine GET and propose changes. But those proposals seemed to introduce as many problems as they tried to solve and died for lack of support.
Meanwhile, the state actuary’s office underscored that three big drivers would determine whether GET would recover and become solvent: the cost of tuition, the return on its investments, and purchaser behavior — whether people would continue to buy the units.
GET program director Betty Lochner said 705,695 GET units have been sold so far this year — about 70,000 more than were sold the same time last year.
However, the number of new accounts is down. Customers created just 7,530 new accounts this year, compared to 9,400 last year.
She attributed the smaller number of new accounts to a decision to start marketing the program later than in previous years. GET typically runs an advertising blitz starting in mid-March, but because the program was still being examined by the Legislature, advertising didn’t start until mid-April.
“With all the stuff happening in the Legislature, we didn’t want to get the public more confused,” she said.
People who already have GET accounts can buy additional units until July 1, and Lochner predicted the program would easily meet its goal of selling 845,000 units this year.
A GET committee will set a new unit price over the summer. GET enrollment will open again on Nov. 1, and at that time the new price will be charged.
Lochner also said the state actuary’s office would examine GET’s investments again in June and issue a report on the health of the program.
She said the upswing in the stock market has probably closed some of the gap between the value of the tuition credits sold and the value of the fund. “Every indication is there will be a significant difference,” she said.
Katherine Long: 206-464-2219 or firstname.lastname@example.org.
On Twitter @katherinelong.