With Christmas less than a month away, it’s natural to be thinking about holiday gifts. This year, you may want to take a closer look at the gift of education by contributing to a child’s GET account.
The enrollment year opened up this month.

The Guaranteed Education Tuition program is a 529 plan — so called after section 529 of the Internal Revenue Code. It is a state-run investment program that allows parents to prepay for college tuition and lock in prices long before children grow up and head off to an institution of higher learning.
Similar to a pension fund, money is invested in stocks, bonds and other investments.

GET was launched in 1998, and since then, 136,000 accounts have been opened. The fund contains $1.7 billion in assets, according to Susan Martensen, GET marketing and communications manager.

The value of an account is dictated by the quantity of “units” purchased. Units have a purchase value and a payout value subject to a twice-yearly increase. The payout value of one unit is always equal to 1 percent of the annual full-time, undergraduate, in-state tuition and state-mandated fees at the most expensive public university in the state — in this case, either the University of Washington or Washington State University. The purchase price of one unit is slightly higher than the payout value.

GET offers flexible savings options, plus tax-free growth and withdrawals. Kids can use their GET accounts to attend colleges, universities and technical schools anywhere in the United States.

For those who decide not to go to college or receive a scholarship, parents can hold onto the account for up to 10 years, transfer the account to another child or request a refund.

Given rising college costs, GET allows grandparents, aunts, uncles and friends to provide support along the way. Saving for a child’s college fund can seem daunting to parents, yet even small contributions add up over time. 

Unlike a regular 529 savings plan, where growth is based on market performances of the underlying investments, GET accounts are less subject to the ups and downs of the market.

Funding a GET account when children are young can save substantially on future tuition.

“Tuition is still going to be a lot higher in the future — you can bet on that,” said Betty Lochner, GET program director. “Everything goes up.”

As with any type of investment, however, there are risk factors that should be taken into account.
Across the nation, college prepaid plans are operating in the red, putting their promises to investors in jeopardy. Some states are closing tuition-assurance plans to new enrollments, and some plans rely on schools to make up shortfalls, or use other reserves, such as unclaimed property funds.
For now, states are paying tuition as agreed.

In Washington — one of a handful of states that promises to cover any shortfalls if the fund can’t meet its obligations — that’s not a problem.

An October 2011 report to the governor, “The Guaranteed Education Tuition (GET) Program: Program Options and Analysis” puts the chances of GET ever needing state assistance to meet its obligations at just over 1 percent, Martensen said.

“It’s designed differently from other prepaid programs. We’ve been adjusting it along the way,” Lochner said, explaining the program can be adjusted twice a year by setting a unit price that accommodates anticipated variables.

The state’s budget problems — a $1.4 billion shortfall between revenue and what the state wants to spend is the subject of a legislative session that started Monday — are largely a non-factor with regard to GET.

“GET is not dependent on the state budget, as it is self-sustaining,” Martensen said.

She said legislators are focused on keeping the program financially sound because it does offer a state-backed guarantee, and they want to minimize any possible future liabilities.

GET’s history shows it to be relatively stable. About three years ago, the program was running a 17 percent surplus — what Lochner called a “rainy day fund.” But that was before the recession hit, the stock market took a nosedive and the Legislature approved 14 percent tuition increases two years in a row at UW and WSU.

In 2003, GET weathered another financial storm when a sharp increase in tuition and a plunging stock market caused families to rush to invest, potentially costing the state money.

But that turned out not to be the case as invested money returned to the program’s fund.
“We recovered nicely,” Lochner said.

Although chances are slim, in theory, taxpayers could end up taking the hit on any possible future unfunded GET liabilities. In other words, while a prepaid tuition plan is less subject to the direct ups and downs of the market, it would be a mistake to assume market volatility has no impact on GET — it does, but it’s just a little more subtle and after the fact.

GET officials remain optimistic about the future of the program, and judging by the signup rate, they have good reason to be.

“This year’s numbers are where they were last year,” Lochner said. “We had our second-highest enrollment last year.”

Lochner doesn’t see any major changes on GET’s horizon.

“I do not anticipate any legislation regarding GET,” Lochner said of next year’s regular legislative session, although she noted program officials will be keeping an eye on differential tuition — charging higher fees for certain courses of study — and any rate adjustments that need to be made in light of economic conditions.

“That’s the one thing we’re going to watch — purchaser behavior,” Lochner said.

If a child already has a GET account, gifting is as easy as mailing a check. Gift announcements can be downloaded at www.get.wa.gov.

Those who wish to open a new account can do so online or by mailing in an enrollment form. For more information, call 800-955-2318.