Washington’s pre-paid tuition program could lose some of its financial stability if state universities start adopting differential tuition for more expensive majors, a new report states.
Last year, the Legislature passed a bill allowing the state’s four-year schools to charge higher tuition for certain programs such as engineering that cost more to provide.
That plan may help colleges balance their budgets, but a state actuary said it could cause problems for Washington’s Guaranteed Education Tuition program, or GET, which is set up to anticipate college costs.
If tuition is differentiated, those costs could change more than originally expected.
This year’s price for one GET unit was $163, and it takes 100 units to cover one year of tuition and state-mandated fees at the University of Washington or Washington State University. That doesn’t include room and board.
The price usually goes up each fall to reflect increases in tuition at the state’s most expensive public universities.
The GET program allows parents to prepay tuition for their kids, at a rate above the current cost but below what they would expect when the students actually enter college. They’re guaranteed that 100 units will pay for a year of Washington’s most expensive tuition, and the units can be turned into cash for out-of-state and private colleges.
The Seattle Times reported that the Senate Higher Education Committee discussed the relationship between differential tuition and the GET program late last week, including a variety of ways to address the problem, one of which was repealing differential tuition.
At the Thursday meeting, Troy Dempsey, an actuary, or risk analyst, with the Office of the State Actuary, said the popularity of the pre-paid tuition program puts it roughly on track to be fully funded in 17 years.
The GET program has met double-digit tuition increases at the state’s universities with big increases in its unit price over the past few years. The program also has seen its investments fall.
About $19 of every GET credit purchased this year is being used toward a recovery plan to make the fund solvent, Dempsey said.
The value of all the tuition credits sold is $2.8 billion, but the value of the fund is only $2.3 billion. Theoretically, if everyone cashed in their tuition credits at once, the state would have a shortfall of $527 million, Dempsey said. But that would not happen, because many of the units are held by families with children far from college age.
The likelihood that the Legislature would have to subsidize a GET shortfall over the next 50 years is about 2.4 percent, Dempsey said.