The Guaranteed Education Tuition Program, or GET Program, is a 529 savings plan administered by the U.S. state of Washington for residents of the state. As with any 529 plan, account owners invest in the program on behalf of a beneficiary – typically the owner's child or grandchild – in order to prepay for expenses associated with the beneficiary attending a higher education institution.
Overview
The GET Program is a prepaid 529 plan, and accounts may only be opened by, or on behalf of, residents of the state of Washington. The value of an account is dictated by the quantity of "units" purchased. Units have a purchase value and a payout value which are subject to increase yearly. The U.S. dollar payout value of one unit is always equal to one percent of the annual full-time, undergraduate, in-state tuition and state-mandated fees at the most expensive public university in the state – either the University of Washington or Washington State University. Through July 31, 2015, the purchase price of one unit is substantially higher than the payout value: $172 vs $117.82, respectively. This premium over current tuition provides financial stability for the program at the expense of program participant returns, since tuition is guaranteed in the future, regardless of how much it increases. For example, tuition in Washington state saw double-digit increases for four straight years from 2008 to 2012. This purchase:payout price ratio has risen from previously more favorable levels in the past. In 2007 the purchase price was $70 per unit while the payout price was $59, for a ratio of only 1.19. Current estimates project that GET units should be held for at least six years to see financial gain, versus other investment options which provide immediate return. GET is aggressively marketed as a long term program for families with young children, but the benefit of enrollment remains questionable.
Use of the funds invested in GET are restricted to tuition and other expenses associated with higher education (e.g., room and board, books, mandatory fees). Units purchased must be retained for a minimum of two years before they can be used. Investments are not tax-deductible; however, the increase in account value over time, as well as disbursements to pay for higher-education expenses, are both tax-free. Disbursements for purposes other than to pay for higher-education expenses are subject to income taxes and/or penalties imposed by both the program and the Internal Revenue Service; exceptions are made for certain circumstances such as the death of the beneficiary or the beneficiary receiving a scholarship, in which case income tax is still imposed but penalties are not.
Accounts may only be opened by, or on behalf of, Washington residents; however, disbursements from the program may be made to any higher education institution in the United States, as well as some foreign institutions, that participate in financial aid programs through the United States Department of Education. Accounts have the same monetary value wherever they are used. Accounts are fully transferable to other relatives of the initial beneficiary. Contributions may be made in lump sum or regular payments may be made on a custom monthly plan. The Account Owner retains full control of the account.
Investments in the program are backed by the state; i.e., the state assumes all investment risk and guarantees that returns on investments will keep pace with inflation and increases in college tuition over time. The program currently does not receive any appropriations from the state; however, per state law RCW 28B.95.050, the state is required to provide funding in the event that the program's available funds are insufficient to cover its payout obligations. This explains why participants only get $0.68 of value for each dollar invested.