A state committee that oversees Washington’s prepaid college tuition plan is considering refunding some, or even all, of the money parents and relatives poured into the plan in recent years.
Under one proposal, everyone who purchased Guaranteed Education Tuition (GET) units over the past four years — when the units were priced at $163 and $172 — would be able to get a full refund on those units, without paying a penalty.
Under a second proposal, parents and grandparents who bought GET units in the past four years would hold onto their units but receive a partial refund — the difference between the price they originally paid and a new, lower purchase price that would be set this September.
The idea is to ensure that those who’ve invested in GET units don’t lose ground from the Legislature’s decision last month to roll back tuition at the state’s public colleges by as much as 20 percent over the next two years.
Washington is the only state in the nation to make tuition cuts this year.
As it happens, Washington is also one of the few states that offers a prepaid college tuition plan, which charges a premium price today in exchange for assurance tomorrow that 100 GET units will pay for a year’s worth of tuition at the most expensive public college in Washington. In the past, that has been a good deal, with parents paying less per unit, even at the premium price, than what tuition ends up costing when their child goes to college.
But since 2013, GET units have cost $172 apiece, and the payout value has been just $117 per unit. The tuition rollback raises the possibility that parents might never recover the premium they paid to lock in the cost of tuition.
As part of its tuition-rollback bill, the Legislature froze the payout value at $117 for the next two years. Lawmakers also charged the GET Committee with coming up with a plan for the future, and to make recommendations to ensure that unit values are not decreased or diluted as a result of lower tuition. That plan is due in December 2016, but GET committee members and staff said they want to finish that work much sooner — by this December, if possible.
GET staff presented the two options to the five-member committee during a public meeting Monday. But the committee wasn’t ready to settle on either one — it wanted more time to study the ideas.
“The state guarantee has been a wonderful thing for middle-income families,” said Beth Stecher Berendt, a citizen committee member who herself owns 400 GET units. “There are a whole number of issues that need to be thoroughly vetted. Tuition reduction is a great thing — and GET is also a great thing.”
Echoing her words, committee member and state Treasurer James McIntire said the committee should present investors with a well thought-out plan, not choices presented piecemeal, to help them make the best decisions about their college savings.
“We are legally bound and personally committed” to protecting account holders, he said. “We need to proceed with some caution.”
The GET Committee meets again Aug. 18.
The committee also discussed refunding the roughly $20 per unit fee that GET-holders have been charged since 2012. That fee was meant to help GET recover financially after it was hit with the double blows of a plummeting stock market and rapidly rising tuition. Since then, GET has fully recovered.
The fund now totals about $3 billion. Nearly four million GET units were sold between 2012 and 2015, and refunding the fee would reduce the size of the GET fund by one-two percent, or about $80 million.
It’s not known how much it would cost to refund all GET units sold in the last four years, although based on sales figures the GET committee has previously published, that figure is likely to be about $600 million.
GET is currently closed to new accounts until November — part of a routine, annual process — and one option would be to suspend the program all together until the new payout and purchasing details are worked out, said GET Director Betty Lochner.
Yet another option: To waive a 10 percent penalty GET currently charges account-holders who want to roll their money into another type of college savings plan, such as a 529 plan.
If the state doesn’t fix GET so that it’s fair to all investors, a class-action lawsuit may result. A lawyer for the state Attorney General’s office told the committee that some individuals and lawyers have said they are contemplating taking legal action, depending on what the committee decides.