When Joanna Noonan was pregnant with her daughters, Sofia, now 3, and Stella, 4 months, she didn't ask for toys and clothes for the baby showers. The Seattle mom and her husband, Justin, asked family and friends to write a check to the state's Guaranteed Education Tuition Plan (GET). With the foundation of those initial gifts, the Noonans make monthly payments to pay for future college tuition at today's prices. "It's the greatest gift we could get them, to pay for their college education," Noonan says.
Dana Colwell of DuPont agrees. She and her husband, Jeff, set up a GET account for their 2-year-old daughter, Rylan, when she was a few months old, and wish they'd started even sooner when unit prices were lower. "We did a lot of research in investments, and GET stood out because you buy the tuition at today's prices and use it at tomorrow's prices," Colwell says. They are sacrificing car trips, more frequent vacations and meals out to make monthly payments. "We didn't want finances to be a deterrent to Rylan if she chooses to go to college," her mother adds.
Starting early is the best thing parents can do if they want to slowly and safely invest in their children's college education, emphasizes Susan Martensen, GET's associate director of marketing and communication.
This is because the price of one unit has skyrocketed from $35 when the program opened in 1998 to $172 today. Today's high price is based on current and projected tuition, operating expenses, an amount to build program reserves and an additional amount to amortize losses from recent unexpected tuition increases. It's higher than the current pay-out value of $117.82. This means that if you start saving when your child is in high school, you will lose money.
By law, GET accounts must be held for two years before they are used. "It takes four or five years for GET to pencil out, so start early, when a child is born or up to their 13th or 14th birthday, Martensen advises. The average GET client opens an account when their child is just under 7.
Those account holders will still come out ahead because college tuition is rising faster than the cost of GET – an average of 10 percent a year in the past 10 years, with 19 percent and 16 percent increases in the last two years.
The astronomical tuition increases made some legislators, including Senate majority leader Rodney Tom, worry that GET might be unsustainable and advocate closing it to new customers. Public discussion about its future has reduced consumer confidence and resulted in fewer new accounts being opened, according to a 2013 legislative brief.
The legislature decided not to consider closing GET, and it will remain intact. The state's treasurer, Jim McIntire, gave the opinion that the $2.2 billion fund is sustainable and has enough reserves to weather ups and downs. In the future, the idea of differential tuition – charging more for higher-cost degrees such as engineering – may impact GET because the program is supposed to pay out at the highest tuition rate charged by the leading public universities.
The biggest advantage of GET, other 529 college savings plans (authorized by Section 529 of the Internal Revenue Code), or Coverall Education Savings Accounts (Education IRAS) is that the funds grow tax-free over the years and you pay no tax if you use the money for qualified education expenses. However, the other types of savings plans are tied to the stock market, whereas the GET is guaranteed by the state of Washington to keep pace with resident undergraduate tuition. (Compare options at www.collegesavings.org.)
"GET was never designed to be a get-rich-quick scheme, but it's a way to safely save for college over the long term," Martensen concludes. "Jump in and start."
The Nuts and Bolts of GET
Current unit price: $172
Enrollment period: Through May 31, 2013. If you have an account open by that date, you may continue buying units at the current price through July 1, 2013.
New price: To be decided by July 2; it will certainly be higher.
How many: You can buy up to 500 units per child. One hundred units is the cost of one year’s resident undergraduate tuition at the state’s most expensive public university (the UW or WSU).
Where: You can use them at nearly any public or private college, university or vocational school in the United States and at selected colleges in other countries.
What: The money you withdraw from GET can be used to pay any qualified educational expenses, including tuition, fees, room and board or textbooks.
Contact: 1-800-955-2318; www.get.wa.gov.
