WA State GET Program Is Offering College Savers a Deal: Should You Take It?

Attention college savers: If you (or someone you know) has invested in the WA State GET Plan for college tuition, keep September 12, 2018 well in mind. Up until then, you can get roughly 38% more for your GET units (over current prices) if you roll them over into WA state’s new 529 Plan for college savings. A 38% windfall is nothing to scoff off. This is a great deal for many, and should be carefully considered. First, I’ll explain what GET is, and then if it makes sense to switch to the 529 Plan.

The WA State GET program (Guaranteed Education Tuition) has been in place since 1997. Basically, it’s an insurance plan: The state guarantees that 100 GET units will fully fund one year’s worth of tuition and fees at WA’s highest-cost public university. GET unit pricing has varied widely, with the highest costs occurring 2011 to 2015, when to get 1 GET unit you had to pay between $163 and $172. Since then, WA state tuition has actually decreased. And performance of underlying investments has been very good for a decade. Hence the excess money for the incentive offer.

The offer: GET units, which are now priced at $103 ($106 as of August 1), will be valued at $143 each if they are rolled over into WA State’s 529 Plan by Sept. 12, 2018. What a deal! Should you go for it?

First, you need two pieces of info from your GET statement:

(1) When did you buy your GET units? Only units bought BEFORE July 2015 qualify for the conversion offer.

(2) What is the average price you paid for your GET units? If you paid less than $143 per unit, on average, you have incentive to roll over.

When a rollover makes most sense:

***You bought most of your GET units before 2010, when prices were relatively low and certainly below $143 per unit;

***Your children are approaching college age (in high school or about to be);

***You are comfortable deciding which funds to invest in (stock, bond, age-based, etc.).

The WA State 529 Plan is a good one, with lower-fee fund options and quite a few funds offered. You can limit the investment risk by opting for a conservative fixed-income fund or one that is age-based, since you have only four years or less to college.

If you bought GET units regularly from 2011 to 2015, you have a tougher choice.

During that time, GET units were at peak prices. We estimate that parents who bought an equal amount of units each year from 2011 to 2015 would have an average price of $149.73 per unit. If this is you, there is no incentive to roll to the WA State 529 Plan at $143 per unit.

However, WA State is giving people who bought at peak GET unit prices their own incentive. Those who bought GET units between fall 2011 to spring 2015 will get additional units for free, a process called rebasing. The catch: how many more units will not be known until after Sept. 12, AFTER the conversion offer expires.

So what should you do? It depends.

When to consider holding on to GET units:

***Your average purchase price is above $143 per unit;

***Your child is in high school already; and

***He/she wants to attend a WA state public college or university.

In this situation, it makes sense to hold on the GET units and wait to see how many more additional units you will get for free.

When to consider getting a GET refund (penalty free* until Sept. 12, 2018):

***Your average purchase price is above $143 per unit;

***Your child is young (early teens or younger);

***You want to have the option of sending her/him out of state for college; and

***You are comfortable with a certain amount of investment risk.

Once you get your refund, you have 60 days to deposit it into another college-savings plan; if you don’t, you’re likely to owe taxes and a withdrawal penalty. Which college-savings plan? Carefully consider the options. The WA State 529 Plan – called DreamAhead — offers lower-fee investments and allows a slightly higher contribution amount compared to other top 529 plans. That makes it attractive. But other states’ plans, such as those offered by Utah and Nevada, also have lower-fee investments (low-cost Vanguard funds), and have established records; they consistently rank in the top echelon of 529 plans, according to Morningstar.