From our partners at The Seattle Times: Washington's prepaid college-tuition program is back on firm financial footing for now, the result of a decision earlier this year to freeze tuition at the state's colleges and universities for two years.
Washington's college-tuition program is back on firm financial footing — at least for now — after a yearlong drama over its future and even a proposal, at one point, to close the program entirely.
The Guaranteed Education Tuition program, or GET, has been given an A rating for soundness from state actuary Matt Smith, and a committee that oversees the program voted Monday to keep the price of a unit of GET at $172, the same price as last year.
"We weathered a pretty big storm last year," said GET executive director Betty Lochner. At one point last year, GET's unfunded liability — the value of all units sold when compared to the market value of all of its assets — was $631 million. Today, according to Smith's report, its unfunded liability is just $160 million.
The fund has found more solid financial ground because the Legislature voted earlier this year to freeze tuition at the state's colleges and universities for two years. That means the payout value for each unit won't change, allowing the fund to catch up as new investors buy in.
The fund lost value during the recession years, after lawmakers approved double-digit tuition increases several years in a row.
The fund's payout value is tied to the cost of one year at the state's most expensive four-year public university — in most years, that's the University of Washington — and when tuition went up many times faster than GET's managers anticipated, the program's unfunded liability rose sharply.
The fund has also been hurt by swings in the stock market, especially during the recession. This year, GET's one-year return is 9.59 percent, although it's lost 2 percent during the current quarter.
"The big message is, the stock market is still volatile," Lochner said.
The program, now in its 16th year, lets families buy tuition units at a set price and cash in those units at the going rate when their children go to college. The fund will open to new investors on Nov. 1.
"Our message will need to be that we are in a bit of a reprieve, and that's great — but the reason you save for college is that tuition always goes up eventually," Lochner said.
