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Originally published October 2, 2012 at 9:36 PM | Page modified October 3, 2012 at 12:02 PM

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How state's prepaid tuition program GET might change

A legislative committee is seeking ways to keep the state's prepaid tuition program solvent while also allowing state universities to charge more for the most expensive degree programs.

Seattle Times higher education reporter

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When the economy was bad, Washington state's deal on prepaid college tuition was good — so good that the Guaranteed Education Tuition (GET) program is now underfunded by $631 million, although it expects to make up the shortfall over time.

But GET is a drag on the state in another way, too: It prevents Washington from allowing its public universities to charge higher tuition rates for some of the most popular programs. That, in turn, makes it difficult to expand sought-after degree programs, such as engineering.

On Tuesday, a roomful of politicians, attorneys, policy wonks, higher-education officials and the state actuary tried different ways to resolve the conundrum. The legislative committee, headed by state Sen. Rodney Tom, D-Medina, has been tasked with finding a way to keep GET from going deeper in the red, but also keep it from dictating tuition policy.

Some of the possible solutions?

• Phase out the current GET and replace it with a less-generous GET 2 tied to the average cost of state tuition, rather than tuition at the most expensive institution.

• Allow universities to charge higher tuition for some programs, such as engineering and business.

• Essentially grandfather in those who have already invested in the current program (GET 1), allowing them to pay the base tuition price for expensive degrees, rather than a higher tuition set for some programs.

Buying units

The 15-year-old GET program lets families buy tuition units at a set price and cash in those units at the going tuition rate when their children go to college.

When the financial crisis hit in 2008, the state's GET investments lost money. At the same time, the state's colleges and universities raised tuition steeply to counter state budget cutbacks.

Parents who held GET units did well. For example, one GET unit purchased for $61 in 2005 is worth $117 today — nearly doubling its value in seven years.

"It's one of the best investments I've made — it's phenomenal," Tom said. "But GET isn't meant to be the best investment. It's meant to be a college savings plan."

In the meantime, there's also been a steady increase in demand for certain degree programs. The University of Washington has had to turn hundreds of students away from computer-science and other engineering disciplines, even though the marketplace clamors for students with those skills, and pays graduates well.

The UW estimates that while it costs about $5,000 extra per year to educate an undergraduate engineering student, all in-state undergraduates at the UW pay the same price — for the 2012-13 school year, it's $12,000.

In effect, students in the university's College of Arts & Sciences are subsidizing engineering students, said Margaret Shepherd, director of state relations for the UW.

Costly dilemma

If the UW charges more for an engineering degree, the state would be on the hook for even higher GET payments, because they're pegged to the highest tuition at the most expensive Washington state school. If the UW wanted to raise the cost of one degree by charging extra for it — a policy known as differential tuition — that higher tuition would become the new GET tuition payout rate. And that would increase GET's unfunded liability.

There's really no way around that, even if the university labels the higher tuition as something else, such as a program fee, said Dave Stolier, senior assistant attorney general. "It's a pretty straight contractual matter," he said.

One option: Letting students who are paying for their schooling with GET 1 units pay a base tuition price, even for those degrees that carry a higher price tag.

State Sen. Lisa Brown, D-Spokane, likened it to other state programs that pay different benefits. For example, she said, state pensions pay retirees a variety of different rates, depending on the program they're enrolled in.

Tom called that idea a win-win solution, although he said it would first need to be reviewed by the state Attorney General's Office.

"Most people understand that these are more expensive programs," Tom said of degrees such as engineering. And even if the price went up "it's still a heck of a value."

Shepherd said the UW has no immediate plans to begin charging differential tuition.

Different tuition rates are opposed by student government representatives, who say it would disproportionately affect low-income students and discourage them from choosing high-demand degrees.

The committee also talked about closing GET to new investments and creating a GET 2 program tied to the average cost of a year of tuition at a state college.

Even if GET is reworked, the state would need to continue to put a surcharge on the units to shrink the unfunded liability. This year, families paid $163 per GET unit, a price that included about $19 per unit for a recovery plan to make the plan solvent.

Under a GET 2, the state would need to make it clear to investors that they are being charged extra to help GET 1 recover its losses.

State actuary Matt Smith said it was hard to predict whether consumers would buy into a new GET plan with a less generous payout and the additional charge to help GET 1 — although the units would also be priced at a lower rate.

The current plan has about 120,000 account holders. If a GET 2 were created, it would most likely happen in next year's legislative session, Tom said.

The committee also discussed closing down GET entirely and paying investors back, absorbing the fund's loss — a price that could cost the state as much as $700 million. But there seemed to be little interest in such a scenario.

"My personal feeling is, it would be political suicide to close the program," Tom said.

Katherine Long: 206-464-2219 or klong@seattletimes.com. On Twitter @katherinelong.

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