State’s prepaid tuition plan frozen for up to 2 years

SEATTLE — Washington’s prepaid tuition program will be frozen for up to two years until the committee that runs the Guaranteed Education Tuition program can figure out the impact of two years of tuition cuts at state colleges and universities.

The tuition program’s committee also decided Tuesday to refund some fees to people who bought tuition credits, known as GET units, during the past four years.

In a meeting in Olympia, the committee decided to postpone until September its decision on whether to allow people to withdraw their money from the prepaid tuition program without penalties and how those refunds would be handled.

“We’re not considering not solving this problem,” said David Schumacher, director of the state Office of Financial Management. “We need to take our time and do this correctly.”

The committee also plans to discuss next month whether the state should start a new 529 college savings plan, and the panel’s members have not decided whether to freeze Guaranteed Education Tuition contributions that are being paid on a custom monthly plan.

The fee refund, which will come in the form of a check to account owners, will amount to about $20 per unit purchased during the past four years when the program was adding a fee to make up for past losses in the Guaranteed Education Tuition program.

The total cost of the refunds will be more than $60 million and will affect more than 50,000 accounts, according to the program staff. The refunds will not result in the program losing its ability to pay out tuition units when customers want to use them, program Director Betty Lochner said.

The program freeze means people will not be able to buy tuition units unless they are already buying through a payment plan in which they can continue to invest. The freeze will give the committee time to study the effects on the program of decreasing tuition costs and the feasibility of starting a new 529 college savings plan.

Washington’s prepaid tuition program is a state-run 529 college savings plan. Investors are guaranteed that no matter what happens to the stock market or state tuition, they will be able to pay for an academic year of tuition and mandatory fees at the state’s most expensive public college or university with 100 units. Tuition and fees at less expensive schools cost fewer units, and housing is extra.

During the Great Recession, the 17-year-old Guaranteed Education Tuition program got to a point where it wasn’t fully funded and lawmakers started getting nervous about its viability. But after a few years without tuition increases, by 2014 the prepaid tuition program was back to being fully funded, with current assets at about $3 billion.

Lochner says the Guaranteed Education Tuition program is 115 percent funded, which means it has more than enough money to pay its obligations to investors. State Actuary Matt Smith has said that even if people start pulling their money out of the program, the fund will have enough money to pay its obligations.

The current issue involves worries by parents who have been buying units at a price of $172, while the plan pays out at $117.82 per GET unit. This probably won’t be a problem for kids who aren’t going to college for years, because tuition has historically gone up over time. But it makes parents with older students and later investments anxious.

The price of GET units increased as tuition jumped during the recession, from $117 in 2011, to $163 in 2012 and $172 since 2013.

Some parents, grandparents and other relatives buying GET units testified at the meeting that their accounts are effectively “under water.” It seems likely they have made a higher investment than the future college students will receive in unit payouts when they attend college.

Committee members and staff assured them they would do their best to make sure their situations would be resolved either by committee action at an upcoming meeting in September or through individual waivers.

“I do believe it’s important this committee do the right thing based on full information,” said committee member Elizabeth Stecher Berendt, who said the decision to charge the “makeup” fee probably was not the right move. “We just ask for a bit more patience.”

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

A firefighter stands in silence before a panel bearing the names of L. John Regelbrugge and Kris Regelbrugge during the ten-year remembrance of the Oso landslide on Friday, March 22, 2024, at the Oso Landslide Memorial in Oso, Washington. (Ryan Berry / The Herald)
‘Flood of emotions’ as Oso Landslide Memorial opens on 10th anniversary

Friends, family and first responders held a moment of silence at 10:37 a.m. at the new 2-acre memorial off Highway 530.

Julie Petersen poses for a photo with images of her sister Christina Jefferds and Jefferds’ grand daughter Sanoah Violet Huestis next to a memorial for Sanoah at her home on March 20, 2024 in Arlington, Washington. Peterson wears her sister’s favorite color and one of her bangles. (Annie Barker / The Herald)
‘It just all came down’: An oral history of the Oso mudslide

Ten years later, The Daily Herald spoke with dozens of people — first responders, family, survivors — touched by the deadliest slide in U.S. history.

Victims of the Oso mudslide on March 22, 2014. (Courtesy photos)
Remembering the 43 lives lost in the Oso mudslide

The slide wiped out a neighborhood along Highway 530 in 2014. “Even though you feel like you’re alone in your grief, you’re really not.”

Director Lucia Schmit, right, and Deputy Director Dara Salmon inside the Snohomish County Department of Emergency Management on Friday, March 8, 2024, in Everett, Washington. (Ryan Berry / The Herald)
How Oso slide changed local emergency response ‘on virtually every level’

“In a decade, we have just really, really advanced,” through hard-earned lessons applied to the pandemic, floods and opioids.

Ron and Gail Thompson at their home on Monday, March 4, 2024 in Oso, Washington. (Olivia Vanni / The Herald)
In shadow of scarred Oso hillside, mudslide’s wounds still feel fresh

Locals reflected on living with grief and finding meaning in the wake of a catastrophe “nothing like you can ever imagine” in 2014.

Everett mall renderings from Brixton Capital. (Photo provided by the City of Everett)
Topgolf at the Everett Mall? Mayor’s hint still unconfirmed

After Cassie Franklin’s annual address, rumors circled about what “top” entertainment tenant could be landing at Everett Mall.

Everett
Everett man sentenced to 3 years of probation for mutilating animals

In 2022, neighbors reported Blayne Perez, 35, was shooting and torturing wildlife in north Everett.

Dorothy Crossman rides up on her bike to turn in her ballot  on Tuesday, Aug. 1, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
Everett leaders plan to ask voters for property tax increase

City officials will spend weeks hammering out details of a ballot measure, as Everett faces a $12.6 million deficit.

Starbucks employee Zach Gabelein outside of the Mill Creek location where he works on Friday, Feb. 23, 2024 in Mill Creek, Washington. (Olivia Vanni / The Herald)
Mill Creek Starbucks votes 21-1 to form union

“We obviously are kind of on the high of that win,” store bargaining delegate Zach Gabelein said.

Lynnwood police respond to a collision on highway 99 at 176 street SW. (Photo provided by Lynnwood Police)
Police: Teen in stolen car flees cops, causes crash in Lynnwood

The crash blocked traffic for over an hour at 176th Street SW. The boy, 16, was arrested on felony warrants.

The view of Mountain Loop Mine out the window of a second floor classroom at Fairmount Elementary on Wednesday, Jan. 10, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
County: Everett mining yard violated order to halt work next to school

At least 10 reports accused OMA Construction of violating a stop-work order next to Fairmount Elementary. A judge will hear the case.

Imagine Children's Museum's incoming CEO, Elizabeth "Elee" Wood. (Photo provided by Imagine Children's Museum)
Imagine Children’s Museum in Everett to welcome new CEO

Nancy Johnson, who has led Imagine Children’s Museum in Everett for 25 years, will retire in June.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.