Legislators are once again considering what to do about Washington's popular Guaranteed Education Tuition (GET) program? My suggestion: Leave it be.
GET is a 529 program that allows parents to prepay their children's college tuition and fees. Units are purchased at the current tuition price plus a (currently hefty) premium, and are cashed out tax-free at the going rate at the highest priced public university in Washington state, regardless of where your child chooses to go to school.
For example, back in 2002, during flusher times, we purchased our daughter 400 units (four years of tuition and fees) at a price of $42 dollars per unit. The payout rate for the 2012-2013 academic year is $117 per unit. Due to scheduled tuition hikes, the payout rate should be about a third higher by the time my daughter starts college in 2015.
Through an accident of timing our daughter's GET units turned out to be a helluva an investment, but that's never been the point of the program nor its main attraction. No, the number one benefit GET offers is peace of mind. Ten years ago when we we purchased our daughter these units, I knew that no matter what tragedy befell me—bankruptcy, illness, death, blogging—my daughter could afford a college education at the best state school she could get into.
GET didn't guarantee us a decent return on investment. GET guaranteed our daughter a college education. It was an insurance policy against educational insecurity.
And that's what legislators need to keep in mind as they explore GET's future. By design, prepaid tuition programs are most appealing to families with young children. Legislators want to give colleges the flexibility to charge higher tuition rates for more popular undergraduate degrees, but to replace the GET program with one that may or may not cover your child's tuition depending on what they major in isn't a guarantee at all. How was I to know when my daughter was three years old whether I should be saving for a degree in English or a pricier degree in computer science?
As it stands, the GET program is currently underfunded, its $2 billion in assets only covering about 90 percent of its obligations. But this shortfall isn't due to mismanagement or the Great Recession—the equity markets have already recovered from their lows. Rather, GET's precarious finances and soaring premium (new investors are now paying $172 per unit, a 47 percent premium that will take years to recoup), are directly attributable to the legislature's decision over the past few biennia to disinvest in higher education.
The double-digit tuition increases that have undermined GET's balance sheet in recent years were the result of political decisions. Likewise, the legislature's desire to expand slots in more expensive science and engineering programs can be satisfied by a political decision too: Simply raise the revenue (or reprioritize existing monies) necessary to fund this worthwhile academic expansion. Not only would this approach be more straightforward than multi-tiered tuition, it can claim the added bonus of not disincentivizing low income students from pursuing more expensive degrees.
But whatever legislators do, don't use GET as an excuse for failing to provide the educational opportunities our state needs.