In a week that has me signing one son up for kindergarten and another for the Scholastic Aptitude Test, I don’t want to think about making payments on something new.
If it’s SAT time, college can’t be far behind for my 17-year-old. My little boy won’t start college until (gasp) 2017. While their sister has only a year of college left, my future looks mighty expensive.
After hearing radio ads for the state’s prepaid college tuition program, I’m doing some quick thinking. Should I, or shouldn’t I? There’s a deadline next week — as if I don’t have enough of those — for people wanting to take advantage of the greatest savings from the Guaranteed Education Tuition program, known as GET.
Wednesday is the last day for families in the state to enroll in the GET program at this year’s price of $57 per unit. The cost will rise when enrollment reopens in September, said Betty Lochner, director of the Guaranteed Education Tuition program.
"Right now, tuition is going up 7 percent next year, and we’re looking at our price going up 7 percent, too," Lochner said. "The earlier you buy, and the younger your child, the better."
Washingtonians may buy up to 500 tuition units for use as far as 18 years into the future. One hundred units equal one year’s tuition at the state’s costliest university, the University of Washington. Currently, one year — 100 units — costs $5,700.
If I opened a GET account today at $57 per unit, I’d pay that price for all the years I’d be investing. When my kindergartner-to-be goes to the UW in 2017, say for fun that a year’s tuition will be $10,000.
If I had purchased 500 units, I’d be guaranteed five years’ worth of tuition. My son’s peers might be paying $10,000 in 2017, but I’d have paid only $5,700 a year.
"The difference in value, that gain, you never pay tax on it if you use it for school," Lochner said.
Funds may be transferred to other family members. But if the account isn’t used for education, there are penalties and you’ll pay tax on the gain similar to a retirement fund, Lochner said.
The accounts can be used at any public or private college, university, trade or technical school in the United States.
"Using the $10,000 example, you could spend it at Harvard and pay the difference," Lochner said.
Harvard, hmm. I’ll be plenty pleased if my youngest is a Husky.
Those payments I’m reluctant to think about? There are options for monthly plans, there’s a lump-sum plan, or you can combine both. A monthly payment plan includes 7.5 percent interest over the life of the contract.
To buy 500 units for my youngest, I’d need to pay $286 a month for 13 years — less than a house payment but a lot more than pizza money. That’s the sobering fact of the cost of college.
"As long as tuition goes up more than 7 1/2 percent over time, you’re ahead of the game," said Lochner, who has GET accounts in her family for a college freshman and a 14-year-old.
The accounts are intended for tuition, but if a student attends a less expensive school, for example a community college, surplus funds can be used for room and board or books.
Paul Bailey of Clearview has set aside three years’ worth of tuition for each of his two children. He used lump-sum payments to set up GET accounts two years ago, taking money from other college savings accounts. Grandparents also pitched in.
His son Christopher is a freshman at Washington State University. He paid the first year’s expenses, about $13,000, out of pocket because a two-year wait is required before using GET funds. Next year, the accounts will ease his financial burden.
His daughter, Chandra, a Bothell High School senior, will attend either WSU or the UW.
"We bought in when tuition was lower," said Bailey, who works in marketing for a software development company. "I wish we could have saved more."
He’s way ahead of me in terms of a college kitty for my 5-year-old. Tick, tick, tick … that GET deadline is Wednesday. I have 13 years to save a small fortune.
Then again, maybe child No. 3 will run off and join the circus.
Columnist Julie Muhlstein: 425-339-3460 or muhlsteinjulie@heraldnet.com
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