September 28th, 2015 | Miller Advisors

Tuition cut brings changes to GET program

Olympia, Wash.–Upcoming tuition cuts are changing the state’s Guaranteed Education program.

Board members approved changes Tuesday and will consider additional proposals next month in an attempt to protect investors who bought into the program assuming tuition would continue to rise.

Tuesday afternoon the GET committee allowed all investors who bought credits after 2011 to get refunds on amortization fees paid to off-set losses to the GET program during the recession.

The board also voted to suspend new enrollments for the next two years until the state can further examine what impact the tutition cuts will have on the GET program.

Those who bought the GET credits after July 1, 2015 will get refunds.

Those changes go into effect Wednesday, August 19.

Tutition reductions were never a part of the program’s pricing assumptions, GET director Betty Lochner told board members Tuesday.

“These are the first steps of many to come,” said Lochner.

Lochner also proposed all GET account holders should be allowed to withdraw their accounts without paying any penalties.

She also suggested board members allow account holders who paid more than $117 a credit, the current rate, to get full refunds at the rate they paid, without paying penalties.

Board members voted to delay voting on those two proposals until the board’s September 1 meeting, at the earliest.

Members said they want to solve the potential problems created by the tuition cut, but they were not prepared to take action at Tuesday’s meeting.

The board also approved establishing a feasibility study to look into creating a state 529 savings plan.

The GET committee provided the following FAQs about what lower tuition could mean for the program:

What does lower tuition mean for students today?

The historic event will make college more affordable and accessible for more Washington families and current students. More specifically, tuition will be reduced at the state’s two research institutions (UW and WSU) by five percent in the 2015-16 academic year and by another ten percent in the 2016-17 academic year for a total two year reduction of 15 percent. This is important because these are two institutions for which GET’s payout value is based upon. In addition to the tuition reductions noted above, the College Affordability Act also reduces tuition by 20 percent over the next two years at the state’s regional institutions (CWU, EWU, WWU and the Evergreen State College) and 5 percent in 2015-16 academic year at the state’s community and technical colleges. The legislation goes on to say that beginning in the 2017-18 academic year, tuition operating fees for resident undergraduates at community and technical colleges, may increase by no more than the state’s average annual growth in median hourly wage as determined by the Federal Bureau of Labor Statistics.

How will this impact my student if they are needing to use their units in the next two years?

In response to lower tuition, the legislation states that for the 2015-16 and 2016-17 academic years, the GET Committee shall set the payout value for units redeemed at the 2014-15 rate of $117.82 per unit.

What happens to the value of my account if I am not going to use my units in the next two years? Will I lose money?

Beginning in the 2017-18 academic year, the GET Committee is required to make the necessary progam adjustments to ensure GET customer accounts are not decreased or diluted as a result of lower tutition. This may include a cash refund, additional units, a minimum payout value, or another solution that is deemed appropriate. Part of a feasability study the program will be conducting during the next 18 months is to develop a resolution to this issue.

What is the GET Committee going to do about the future of the program?

By December 1, 2016, the legislation calls for the GET Committee to review and report to the legislative fiscal and higher education committees on the following:

  • The impact of reducing tuition on the funded status of GET and future unit prices;
  • The feasability of establishing a traditional 529 college savings program;
  • Alternatives of linking GET to tuition and fees and linking GET to a cost of attendance metric;
  • And the current state penalty for non-qualified withdrawals.

Details regarding the next steps for the GET program will be discussed at the GET Committee meeting on Monday, July 13 to begin conversations around future unit pricing; however, a great deal of analysis will need to be done by the State Actuary and other financial experts before any future pricing formulas will be considered.

Please visit get.wa.gov to read about recent updates.

Source: Drew Mikkelsen, King 5 News | Image: Wfmj.com