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Monday, January 21, 2013

The Seattle Times Makes the Case for Denying Middle-Class Children Access to an Affordable College Education

Posted by on Mon, Jan 21, 2013 at 5:07 PM

The Seattle Times editorial board makes "The case for closing GET, state’s prepaid tuition program." But fortunately, they're the Seattle Times editorial board, so they don't make a very good case for it.

THE state’s Guaranteed Education Tuition program is a special deal for people with the foresight and money to plan for college.

Hear that? GET is "a special deal" for elitists like me who had the "foresight and money" to save for our children's education. We're everything that's wrong with America. If only the impoverished masses would finally rise up against their slightly-better-off oppressors in the lower middle-class, college tuition would become affordable once again!

Given wildly escalating tuition in recent years, those credits are like gold.

Nail me to a cross of gold (credits).

First, here is how GET works: Parents saving for college can buy tuition units (100 units cover a year’s tuition) and then redeem them at one of Washington’s public higher-education institutions in the future — without having to pay more because of tuition increases. A tuition unit could be purchased in 1998 for $35 and today for $172. The investment yields a handsome return, especially because tuition has soared — more than double in the past five years — as state universities have struggled to make up for deep state cuts.

If you're going to start off a paragraph with the words "here is how GET works," you might want to make a genuine effort to explain, you know, exactly how GET works. For while it is true that "a tuition unit could be purchased in 1998 for $35 and today for $172," those figures intentionally misrepresent the so-called "handsome return" on investment. The actual return on investment is the GET payout valuecurrently $117.82—the amount one would receive if a GET unit were redeemed today.

That's still a pretty good return, but about a third less than what the editorial implies. And at an annualized return of 8.4 percent over the 15-year life of program, it's still considerably less than historical stock market returns. Indeed, over its first decade, GET barely returned more than 6 percent a year—it's only the recent out-of-control tuition hikes that have dramatically pumped up its payout value. So this "deal" only became "special" when lawmakers like Rodney Tom decided to fuck the current generation of college students by denying them access to the same affordable college education that they enjoyed.

State lawmakers should be seriously concerned about a projected $631 million future shortfall in GET. The program’s $2.1 billion fund was set up to be self-supporting, as long as new investors continue to enroll. But as the price of new GET units has risen, new investors are buying fewer of them.

So... then... um... why the hell would we want to close GET off to new investors?

The challenge becomes more severe if the Legislature continues to underfund higher education, forcing a continuation of double-digit tuition increases.

Oh. I get it. The editors view GET as an obstacle to "a continuation of double-digit tuition increases." Which it is. So the obvious solution would be to eliminate GET, so that the state can underfund higher education to its heart's content without adding onto the GET shortfall it is obligated to cover. I mean, what other reason could there be for removing an obstacle to double-digit tuition increases than to facilitate increasing tuition by double digits? Right?

To best help students and their families, lawmakers must slow down tuition growth and return state support to the days when half of the funding for in-state undergraduate tuition came from the state and half from students. Currently, tuition accounts for two-thirds of the cost with the state picking up the remainder.

You pretty much just contradicted your prior argument for eliminating GET, for if we slow down tuition growth to market rates, GET's financial health will gradually recover. As it stands the program is already about 90 percent funded; as long as it remains open to new investors and its investments outpace tuition increases, that gap will shrink.

GET’s problems also negatively affect flexibility in tuition policy. Lawmakers gave Washington’s four-year universities authority to set different tuition rates for different majors as a way of paying for more slots in high-demand fields of study, such as engineering. But lawmakers rescinded the authority over concerns about its effect on the college-savings program.

They don't spend much time on it, but that is what this campaign to eliminate GET is really about: Differential tuition. Tom and his surrogates on the Seattle Times editorial board want to free universities to charge thousands more for STEM degrees. And GET, with it's payout tied to the "actual resident, undergraduate tuition and state-mandated fees at Washington's most expensive public university," throws a monkey wrench in those plans. Charge $5,000 a year extra for an engineering degree and the payout on 100 GET units suddenly increases by another $5,000. Ouch.

Personally, I don't see the social value in differential tuition pricing. I mean, the state could always pay for more slots in "high-demand fields of study, such as engineering," by, I dunno... paying for it? But that might require higher taxes. (As if tuition isn't essentially a tax on students. But that's a subject for another post.)

Almost every state offers some kind of a college-savings or prepaid tuition plan. But Washington’s GET plan is too generous. Now Washington is one of just four states that backs the plans with the full faith and credit of the state. Some states have shut down their prepaid tuition plans.

Because the very definition of "too generous" is providing middle-class families a financial instrument that actually allows them to plan for their children's education.

Closing GET to new enrollees would cause a $1.7 billion hit to the state treasury over an 11-year period. That’s because without new investors GET’s current fund balance is expected to be depleted by 2025. The state would then have to step in financially.

Then why the fuck would we want to lock in a $1.7 billion loss that we'd never have to pay if we'd just fund higher education at the level we all say we want to fund it? I mean, that's just crazy. Inflation has averaged between 2 and 3 percent over the past few decades. Limit tuition increases to 7.5 percent a year and the GET program easily outgrows its shortfall.

And to be absolutely clear, none of GET's current shortfall is due to financial mismanagement. It is all due to an unprecedented four straight years of double-digit tuition increases, a consequence lawmakers were well aware of when they decided to slash higher education funding.

The state has a contractual obligation to the holders of the 120,000 GET accounts. Any changes, including closing the program, should not affect those families. Those promises must be kept.

"Should not" affect those families? The correct phrasing is "could not." The editors are not being magnanimous here. The state is contractually obligated to pay off current account holders like me, fabulously wealthy that I am on my below median wage salary. (Although if the state could default on their obligations, no doubt the editors would advocate that it should, if only in the interest of protecting the poors and the job creators from gold-plated GET investors like me and our budget-busting "special deals.")

Middle-class families have other marketplace options to save for college. The state’s priorities should be to stop the bleeding in higher-education funding and protect low-income college students. Currently, the Legislature has accomplished this by pairing tuition hikes with commensurate increases in the State Need Grant and other state support. That’s the right priority.

As I've written before, GET is not an investment program. It's an insurance program. No other college savings option allows middle-class families to securely plan for their children's college education. Under other "marketplace options," all the foresight and responsible thriftiness in the world goes for naught if your child has the poor moral judgment to come of college age during an economic crisis marked by plunging markets and skyrocketing tuition. But I guess these middle-class kids don't deserve an affordable college education. Their parents should just sell their homes and thank God that they are Americans.

As for the Legislature "pairing tuition hikes with commensurate increases in the State Need Grant," that is total bullshit.. The State Need Grant remains substantially underfunded, with about 22,000 eligible students not receiving grant funded. But no doubt the editors would have you believe that we greedy GET investors are responsible for this too.

Lawmakers ought to look to Senate Majority Leader Rodney Tom, D-Medina, who chaired the GET legislative committee and calls for a long-term phaseout that protects current enrollees. He plans to introduce legislation to phase out GET.

More meat needs to be added to the bones of Tom’s plan but it leads the state in the right direction.

Yeah, if by "right direction" you mean removing obstacles to perpetual double-digit tuition increases by eliminating the one college savings program that allows middle-class Washington families to securely plan for their children's college education.

If that's what you consider progress, then I guess that makes Rodney Tom a progressive. But you know what it doesn't make Tom? A Democrat! So the editors should drop the "D" following his name before some real Dems sue the paper for defaming the Democratic Party by implying an association that no longer exists.

 

Comments (28) RSS

Oldest First Unregistered On Registered On Add a comment
Original Andrew 1
Because people should be taking financial advice from the ongoing fiscal mismangement fuckups at The Seattle Slimes. Pffft. Why won't they just go bankrupt already???
Posted by Original Andrew on January 21, 2013 at 5:15 PM
2
Goldensteinemberg really wants taxpayers to bail his ass out...
Posted by Mercer Island Goy on January 21, 2013 at 5:23 PM
3
How difficult was it to keep your use of the the "get" to less than ridiculous?
Posted by ultrasuedecushion on January 21, 2013 at 5:23 PM
4
Anyone who is willing to pay $17,200 for one year's tuition at a public university needs to have his head examined. At such a university, only 5-10% of the money you are paying actually goes towards undergraduate education (i.e. professors' salaries, building and maintenance costs, administration costs, and so on). The other 90% or so goes directly towards subsidizing the rest of the university's programs and activities.

On the other hand, Universities such as SUNY and CSU are a good deal.

Go to junior college and transfer, people.
Posted by Approaching 40 in LA on January 21, 2013 at 5:31 PM
5
@2 You're such an ignorant fucker. As Goldy pointed out, participants in the GET program pay money -- cold hard cash -- into the system in exchange for a return in the form of tuition. No bailout involved.
Posted by Moag on January 21, 2013 at 5:36 PM
6
Next week: AAPL investor, Goldensteinenberg, defends Apple's labor abuses as long as it lines his shareholder pockets.
Posted by Mercer Island Goy on January 21, 2013 at 5:53 PM
7
"in exchange for a return in the form of tuition."

Yes, but this no longer looks like he simply wants a 'return', now he's demanding vigorish from taxpayers.
Posted by Mercer Island Goy on January 21, 2013 at 6:01 PM
8
And at an annualized return of 8.4 percent over the 15-year life of program, it's still considerably less than historical stock market returns.

Bullshit. The historical average return on stocks is 9.2%, but that's not tax affected. GET is a bonanza, and everyone knows it. The state can't afford it, unless we raise taxes. Which we are not going to do.
Posted by Mister G on January 21, 2013 at 7:06 PM
Supreme Ruler Of The Universe 9
If the state were operating according to free market interests, it would only take out of state and foreign students who see tens or hundreds of thousands of dollars as no object when sending their kids to the US to "see the world" and between drinks, get an education.

As such, you taxaous types should welcome unfettered fees for tuition as it would bring much more capital back to Washington State and pay the high salaries of employees.

At the same time Universities could offer far more scholarships, internships with free tuition riding on the coattails of EuroPartiers and Oil rich jet set brats for those who qualify academically. For the rest of people, they'd be happier getting a high wage job up at Boeing Renton, sticking luggage racks on the 737. Like in the old days.

Posted by Supreme Ruler Of The Universe http://www.you-read-it-here-first.com on January 21, 2013 at 7:12 PM
10
p.s.: Maybe a GET program for Western Governors University, which is all-online, accredited, and costs about one-quarter (maybe even less?) what the brick-and-mortar schools do. But wait: It's really not about education, is it, "progressives?"
Posted by Mister G on January 21, 2013 at 7:19 PM
11
Seems like a dumbass idea to buy an education where your kid might not even want to go. If your kid wants to go to Stanford or UMass, those GET dollars are just gone. I've seen many kids, even poor kids, go through the college admissions process. Most would move heaven and earth to go to their "dream college", debt be damned. Kids are 17 and have been fed the marketing for years.
Posted by wxPDX on January 21, 2013 at 7:43 PM
12
@wxPDX, you are misinformed or just lazy. From the GET website FAQ: You can use your GET units at nearly any public or private college, university or technical school in the United States and at selected colleges in other countries. Your GET units may not be enough to cover the full cost of tuition and fees at private or out-of-state colleges. If your school costs more than University of Washington or Washington State University, you pay the difference. If it costs less, you can also use GET units to pay other higher education costs such as room and board, books, etc.
Posted by GET participant on January 21, 2013 at 7:59 PM
Goldy 13
@8 Gee, I hadn't realized 8.4 percent wasn't less than 9.2 percent. Though I dispute your numbers. The average annual S&P 500 return since its inception is 11.69 percent. And that includes the previous atypically crappy decade (due to the financial collapse).

Back in 2002, when we bought into GET, financial advisors warned that it's projected 6.5 percent return was too conservative. And it would have been, had the state not abdicated on its responsibility to fully fund our state university system.
Posted by Goldy on January 21, 2013 at 8:40 PM
14
It is my sincere hope to someday be intubated by a nurse with a degree from Western Governors Univ. whose "In-Hospital Clinical Experience" consists of "mandatory attendance to high fidelity Clinical Simulation Learning Labs".......NOT
Posted by patient on January 21, 2013 at 9:27 PM
Mahtli69 15
The GET party is already over, Goldy. You said it yourself ... $172 for $117.82 worth of tuition. That's a 45% mark-up, or a 5-6 year delay before realizing even a penny of the 8.4% average return you cited. It is no longer a good deal.
Posted by Mahtli69 on January 21, 2013 at 9:31 PM
Goldy 16
@15 Hold the line on tuition for a few years, and those premiums will come down. Then GET can go back to what it was intended to be: A safe, secure financial instrument for planning ahead for your children's education.

(Or, instead of paying out $1.7 billion over the next couple decades to close GET, the state could put a portion of that into GET to shore up its finances. )
Posted by Goldy on January 21, 2013 at 10:00 PM
thatsnotright 17
Most comments seem to forget that the state university system was designed to provide local higher education in order to make American students equally competitive in a world market. American graduates were to be the equal of every other major nation. I challenge anyone to find a charter which lists a primary goal of luring foreign students in order to make a profit.. State schools should benefit the residents of the state first.
Posted by thatsnotright on January 21, 2013 at 10:32 PM
18
Lower tuition is the best form of financial aid, period. Even if low-income students, like myself, are able to have their education funded, the prospect of debt, or the inability to pay, are a deterrent to achieving a college education, especially for first-generation and students of color. Every piece of paper is an obstacle.

Lower tuition helps everybody, and this article pinpoints the structural problem. It's only because the legislature hasn't committed to specifically funding affordability in higher education (we can talk about new programs, which are good, but need to be paired with affordability measures) that GET is even a problem.

I do have a smaller correction, though. The State Need Grant currently doesn't fund 33,000 eligible students, not 22,000. It's much worse than the number in this article, and when you add cuts to work study, the picture just darkens.

http://www.leapwa.org/Downloads/SNG%EF%8…
Posted by JustAnotherStudent on January 21, 2013 at 10:35 PM
19
There is no "average" return in securities anymore. Historic = pre-globalization.
Posted by sarah70 on January 21, 2013 at 11:10 PM
Soupytwist 20
@17 - BUT THAT'S NOT CAPITALISM!!!
Posted by Soupytwist http://twitter.com/katherinesmith on January 21, 2013 at 11:29 PM
21
Don't fuck with the numbers, you slimy piece of shit. I actually was generous when I wrote 9.2%. The rule of thumb taught in business schools is 8%, but more recent experience is higher. There are reasons for that, none of which you would like. (Hint: Look at the change in average R.O.E. in the past 40 years, and ask yourself exactly how that happened.)

In any case, if you don't apply taxes to stock returns you're lying. Of course, you're a "progressive" so lying isn't a problem. But for everyone else, when Goldy compares the untaxed inside buildup of the state guaranteed GET program to inherently risky equity returns, he's pumping bullshit out of every orifice.

Posted by Mister G on January 21, 2013 at 11:35 PM
Christampa 22
@21 - And hey! That's your department!
Posted by Christampa on January 21, 2013 at 11:54 PM
kk in seattle 23
Goldy, you are 100% correct to rail on this. The failure of this state to invest in the education of its residents (at all levels) will be our everlasting shame. When the Seattle Times concedes that its own special tax exemption loophole is repulsive and utterly unjustified, then they can start preaching to the rest of us about how to spend tax revenues. But until then, they should just shut the fuck up already.
Posted by kk in seattle on January 22, 2013 at 12:25 AM
24
@11
I've been teaching in a high school for 24 years. Every year I see students either apply to their dream schools ad not get in, or they do get in, but even with financial aid, they realize they can't afford to go. When they realize it is a choice between Dream University with six figures in student loans at the end of four years, or State University with much, much less, many of them go to State. Yes, we do have alumns who have gone to Stanford or Harvard or Yale or Tulane. But for every one who attends, we have at least one who decided to go to State so they could wait to incur debt until grad school.
Posted by Clayton on January 22, 2013 at 7:40 AM
25
We bought GET credits about ten years ago, too. Everyone said it was a bad investment, that we should invest in a 529, that 'we can borrow for school but not for retirement,' etc...

GET was always an insurance plan.

Goldy is spot-on on this issue. I only wish he could sum up his points in under 200 words.

Rodney Tom can suck my crank.
Posted by six shooter on January 22, 2013 at 10:17 AM
26
GET is a subsidy for the upper middle class, which is what Seattle "progressives" are all about. Tax the working stiffs, and send the money upward. Same with the buses, which are subsidized for the well-off, and the various rail schemes. In the end, Seattle's "progressives" are no different than Bellevue's Republicans.
Posted by Mister G on January 22, 2013 at 11:13 AM
Goldy 27
@26 A) I'm not "upper middle class." I earn less than the median wage. B) GET is not a subsidy. It has never cost taxpayers a dime. And absent perpetual double-digit tuition hikes, if left alone, it will never cost taxpayers a dime. Zero subsidy.
Posted by Goldy on January 22, 2013 at 11:39 AM
28
The hell it's not a subsidy. The reason the closing GET would require a state outlay is because there wouldn't be new money coming in to pay off the prior investors. The only difference between GET and a classic Ponzi scheme is that the state's taxpayers are on the hook.

If this were a private plan, the GET people would be sitting next to Bernie Madoff. A financially sound plan would be backed by a sinking fund. This one isn't. Face it, Goldy, you're just another piglet at the trough.
Posted by Mister G on January 23, 2013 at 7:35 PM

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