We’ve been discussing college savings accounts, when to save and common funding plans available to parents and students. In these challenging economic times, plans that reduce investment risk are likely to give you less heartburn. While some Section 529 plans do present risk, there are other types Section 529 that eliminate uncertainty. They’re known as prepaid college tuition plans.
Washington state’s GET program (Guaranteed Education Tuition) is a great example of a prepaid plan that guarantees the value of your savings until your student is ready for college. In this type of plan, you prepay for your child’s future college tuition and are guaranteed by the state that the value of your account will keep pace with rising tuition.
The GET program works on a system of units, with 100 units representing the cost of one year of college tuition. When you purchase units they will keep pace with tuition at Washington’s most expensive public university. Currently the rate is $117 per unit and the state may adjust unit cost bi-annually based on a number of economic factors. The value of your purchased units remains the same, though, whether your child attends an in-state public college or an out-of state or private university. You can use your units at any college across the country that participates in federal financial aid programs.
If your child’s tuition is less than the value of your saved units, then the excess funds can be used for room and board, books, study abroad or other qualified higher educational expenses. If tuition is higher and your child’s chosen institution, then you’ll need to pay the difference.
Like most 529 plans, your investment grows tax-free and remains tax-free when it’s used for qualified educational expenses.
The state provides a useful overview of the GET program at www.get.wa.gov, or you can contact your CPA for additional information.
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