There is no way tuition is going to increase by "high single digits" going forward. Higher education is at, or nearing bubble status. People just can't afford to have $50-$100K in debt upon graduation, and they're realizing that a college degree is no longer a sure job. I wouldn't be surprised if college costs go back to rising at the general rate of inflation, in which case the prepaid tuition would be an awful investment. Open up a regular 529 account and invest in a conservative mix of stock and bond funds.

How did TX do that? Was there an out in state law or was it not really a guarantee under state law? Curious since the WA GET program makes a good hype/case based on the state guarantee:

"GET's tuition guarantee is backed by the full faith and credit of the State of Washington. That means if future tuition increases ever require the program to pay out more money than it has available, the Legislature is required by state law to provide funding to cover the shortfall. GET is one of only a few state 529 plans in the country with a guarantee in state law."

ETA: That said, the 33% premium on current payout value is quite a large burden to overcome (it takes a while just to break even) As you can see from the charts on their site, there was a large increase in prices last year, presumably to address shortfall and recent large tuition increases.

I'm currently trying to figure out whether or not to buy two more years of GET credits (200 units) for my 5 yo son, or to go with a different 529 plan I found a blog that has some good information about whether the GET program makes financial sense. http://blog.rlucas.net/finance/wa_get_529/ Be sure to read the comments at the end of the page. Over the years the original author has switched views from saying the GET program is totally the way to go, to now saying you should completely avoid it.

This was the big eye opener...
"During the 2009 academic year the Unit Purchase Cost rose from $76 to $101 a 32.9% increase, however the Unit Payout Value only rose from $67.20 to $76 an increase of just 13.1%. This equates to a MINUS 19.8% LOSS of real value in just one year !!!"

jivetimes said:I'm currently trying to figure out whether or not to buy two more years of GET credits (200 units) for my 5 yo son, or to go with a different 529 plan I found a blog that has some good information about whether the GET program makes financial sense. http://blog.rlucas.net/finance/wa_get_529/ Be sure to read the comments at the end of the page. Over the years the original author has switched views from saying the GET program is totally the way to go, to now saying you should completely avoid it.

This was the big eye opener...
"During the 2009 academic year the Unit Purchase Cost rose from $76 to $101 a 32.9% increase, however the Unit Payout Value only rose from $67.20 to $76 an increase of just 13.1%. This equates to a MINUS 19.8% LOSS of real value in just one year !!!"

I have a lot of thoughts about the WA GET. See some posts of mine here:

in the primary FWF 529 thread

Also, in full disclosure, I am the "Rob" in the rlucas blog above, and here's what I wrote there in 2009:

rob says: September 19, 2009 at 12:06 am Dead on analysis. I used exactly this line of thinking and funded the maximum (5 years, $38,000) in March, before the price increase, for a child being born in October. When tuition jumped 14%, and with plans to jump another 14% next year, and even assuming average equity returns for the next 20 years, this low-risk/high-return strategy couldn’t be beat. I’m not convinced it’s as good a deal with the new, dramatically higher prices. When our son is born in the next week or two, he’ll have instate college tuition paid for. Our daughter, 2 years old, also has 500 units paid for (bought in 2007). Before the price increase, and given all the reasons you described, WA GET was the steal of the century. Now, I’m not so sure.

There was recent legislation passed by the WA House giving tuition-setting responsibility to the Universities, capped at 14% in any one year and 9% average over any 15 year period; but I don't think that was signed into law.

Among prepaid tuition 529s, WA GET is superior to almost any other for the following 2 reasons:

1. it is guaranteed by the full faith and credit of the state. In other words it is a legal obligation, which is quite different than what happens in most other states.
2. It is completely transferrable at its then current value to any accredited school, even outside of WA state.

Additionally, back in 2007 and until April 1, 2009, credits were selling for only $70-$76 each, a much smaller premium over the then current tuition; and there was plenty of rumblings about the need to increase tuition meaningfully over several years; AND with the stock market gravely overvalued an inflation-adjusted, fixed-income, tax-free instrument had clear appeal.

Today a lot has changed. The stock market is overpriced, but not wildly so, so it presents a more viable alternative. The cost per unit has risen substantially, as has the premium over current tuition rates (from a 15% premium to a 32% premium). Moreover, with 2 back to back years of 14% tuition inflation, some of the 'easy money' has already been made in the GET. While we could get double-digit inflation ad infinitum, it seems unlikely; one of my posts in the other thread summarized that tuition increases tended to be more substantial during periods of economic contraction and poor stock market performance and less during periods of stock market recovery, which we have been in for 1 year.

At $101 per unit, if tuition increases at only 6-7% per year over the next 20, I think you'll have been happier in a traditional 529 with a mix of asset classes. I myself would NOT buy units at $101, which is why I bought the units at $76 last March more than 6 months before my child was born.

poncedelabank said:I use the Ohio College Advantage 529 and am very happy with the service. It is available nationwide. Does Washington State credit state income tax for 529 deposits?
WA has no personal income tax. So question of deduction/credit does not arise.

oopsz said:Texas had something similar a while ago. I believe they ended up refunding participants instead of honoring the prepaid tuition guarantee.

It's still guaranteed. Since tuition was deregulated in Texas, buying into the Texas Tomorrow Fund was a great deal. To make up for the budget shortfall, tuition was increased for non-Texas Tomorrow Fund students, which must have led to even increased tuition costs. It was probably the best investment my parents have made but only for my younger sister.

tripleB said:My experience with prepaid guaranteed state tuition plans is that your son will likely

1) Want to get the heck away from his parents and do college in another state
2) Follow a girl he thinks he is in love with across to country to her college

or the State will reneg on the plan and refund your money.

I think the smarter move would be to get your child a tutor beginning in elementary school to make sure he is good at Math, and continue the tutoring through the SATs to shoot for some scholarships. That is, if he can't throw a football or swing a bat.

again, for those not listening: WA's GET is nearly unique among prepaid 529s.

1. It is backed by the full faith and credit of the state; it is a legal, contractual obligation that they pay the entire amount owed, or the legislature must commit additional money to pay it. This is different from all but 4 other prepaid 529s nationally.

2. The funds are 100% transferable upon usage to any accredited school, even one out of state, at the then FULL VALUE (as if being used at an in-state school).

Texas changed the rules on their prepaid 529 and is being sued in a class-action lawsuit. However, Texas' plan was not backed by the full faith and credit of the state. The specifics in the TX case had to do with reduced payouts in case of scholarships, etc., and it is being severely challenged in court.

the "Indepedent 529" is a 529 affiliated with a number of prestigious schools, including my alma mater. It also was prepaid. However, if your child did not attend one of the schools on the list, you only got your money back plus 2%. Obviously, that is an unacceptable risk, and makes the Independent 529 a sucker's game.

The WA GET has little or nothing in common with these other imposters.