A new, state-sponsored option for investing to save for college won’t be ready until next year, so Guaranteed Education Tuition account-holders have until at least Sept. 1 to pull their money out without penalty.
A state committee that manages a prepaid tuition savings plan for college-bound students says it expects to give its customers a new investment option by this summer — but in the meantime, account-holders have until at least Sept. 1 of next year to pull out their money without incurring state penalties.
Some members of the committee that oversees the state’s Guaranteed Education Tuition (GET) plan had hoped to set up a 529 college savings plan by the end of this year. Now, it’s more likely the savings plan will be in place by the summer. Because it’s taking longer than expected, the deadline to pull out of the program also has been extended — it’s either Sept. 1, or 60 days after the 529 savings plan opens, whichever is later.
Washington is one of the few states in the country to offer a prepaid tuition plan, which allows parents to buy tuition “units” in advance. One hundred units are guaranteed to cover a year of tuition and fees at the state’s most expensive public school, and the program is based on the idea that tuition would always go up in price.
But in 2015, the state Legislature voted to lower tuition for two consecutive academic years. This year, for example, a year of undergraduate, in-state tuition and fees at the University of Washington’s Seattle campus — typically one of the state’s most expensive public schools — is $10,503, down from $12,168 in 2014-15.
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The GET committee responded by freezing the payout value of a GET unit to $117, then giving a refund to those who paid $163 or more per unit — the cost of GET units at their peak.
Between September 2015 and October 2016, the agency that oversees GET issued 19,000 refunds to customers. The total value of those refunds was $361 million.
The committee also froze sales of GET units and began working to set up a 529 plan.
In a 529 plan, investments grow free from federal taxes, and the money is not taxed when it is taken out to pay for college. The money is typically invested in mutual funds or similar investments, much like a 401(k). Most states offer 529 plans, which are open to investors from any state.
During the recession, when tuition at state colleges and universities rose rapidly, GET was underfunded by millions of dollars. But since that time it has recovered its financial footing, and then some. As of the end of September, according to the state actuary, it had $2.16 billion in assets, more than enough money to pay all account-holders; in fact, its assets currently exceed its obligations to account-holders by about $600 million.
The prepaid tuition plan is still scheduled to reopen to new investors by July 1 of next year, said Lucas Minor, associate director for GET marketing and communications.
In the meantime, the state has been seeking a company to manage and administer a 529 plan. A request for proposals was issued in October, and the deadline for those proposals is Nov. 30, Minor said. The state anticipates picking a company in January, and opening the new plan in the summer of 2017.
Minor said some GET customers have rolled their money into 529 plans offered by other states. But many have said they’re waiting to see what options the state will offer with the new plan before they decide what to do with their money.