To help you save for your children’s future education, the state of Washington sponsors two 529 plans, a direct-sold option and a prepaid tuition program. Both offer several tax benefits and allow you to contribute up to $500,000—one of the highest maximums for 529 plans nationwide. The direct option, the DreamAhead College Savings Plan, also offers substantially low investment portfolio fees compared to plans across the nation, even though the types of investment options are rather limited. The Guaranteed Education Tuition (GET) prepaid program lets you pay for tuition at today’s prices and redeem your education units in the future no matter how much tuition increases by then. Your payouts are guaranteed by the state of Washington, but you may need to fill in the gaps for other qualified expenses like books and room and board. If you’re looking for more guidance, a financial advisor can help you invest in both to create a personalized and strategic college savings plan.
|Plan Name||Program Type||How to Enroll||Fees|
|DreamAhead College Investment Plan Read Review||College Savings Plan||Direct-Sold||0.293% - 0.400%|
|GET Program Read Review||Prepaid Tuition Plan||Direct-Sold||Varies|
DreamAhead College Investment Plan
The DreamAhead College Investment Plan that Washington State sponsors began in 2018. The plan lets families start investing in their children’s educational future with as little as a $25 deposit. The plan allows you to invest in a variety of portfolios including ones that change their asset allocation, or the mix of stock and bond funds they’re invested in. These take the guesswork out of investment decisions, because they automatically change their investment mix to become less risky as your child gets closer to college—when you need to start paying tuition and your savings matter the most.
The plan doesn’t offer state tax deductions, but you can still benefit from other 529 plan perks like tax-exempt growth on your contributions.
How Do I Enroll in Washington State’s 529 College Savings Plan?
You can enroll online, or you can download an enrollment form and mail it in. You’d need the following information for yourself and your beneficiary: address, phone number, date of birth, Social Security number or tax identification number and your bank account and routing numbers if you're making the $25 minimum opening deposit electronically.
Keep in mind, however, that the plan limits online transaction contributions to $15,000. To make a larger contribution, you must fill out a contribution form. You’d also need to pick your investment option or options at the time of enrollment.
How Much Does Washington State’s 529 Plan Cost?
The DreamAhead College Investment Plan charges a total annual-based fee that combines a service fee and state administration fee, as well as underlying mutual fund expenses. This fee is factored out of the assets in each portfolio, so you bear a pro-rata share from your account balance depending on the portfolio or portfolios you invest in.
The total annual asset-based fee currently ranges from 0.276% to 0.400%, which is significantly low compared to portfolio fees in direct 529 plans across the country.
In addition, the plan also charges an annual account maintenance fee which equals $35 plus 0.22% of assets. It’s deducted directly from your account balance.
Tax Benefits of 529 Plans
The DreamAhead College Investment Plan that Washington State sponsors is open to all U.S. citizens and resident aliens with valid Social Security numbers or Tax Identification Numbers. This means all account holders can enjoy its tax benefits.
When you invest in the DreamAhead plan, your contributions grow tax-free, and they can take full advantage of compound interest. The money you take out of the plan is also tax-free as long as you use it on qualified higher education expenses like tuition. You can use your 529 plan funds at virtually any accredited institution—from vocational schools to universities—that accept financial aid from the U.S. Department of Education. Some foreign schools are eligible as well.
However, you may encounter some headaches if you don’t use 529 plan money as it was intended. If you take money out of the plan to fund something other than a qualified expense, you’ve made a nonqualified withdrawal. The earnings portion of it may be subject to federal income tax and a 10% penalty.
You should talk to a financial advisor or tax professional to discuss how a nonqualified withdrawal may affect you based on your unique circumstances. In a few cases, you can waive the 10% penalty. It’s always important to weigh the pros and cons of a nonqualified withdrawal with a financial professional, should the need for one arise. Your advisor can also help you find less expensive alternatives.
What Are My Investment Options?
If you’re new to investing, you may be interested in the plan’s Year-of-Enrollment portfolios. These options generally change their asset-allocations or investment mix to become more conservative as your beneficiary gets closer to college. However, the DreamAhead College Investment Plan lets you choose a Year of Enrollment portfolio based on your specific risk level. So if yours is high, you may be attracted to the growth option. This portfolio would invest 10% of your money in stock funds by the time your child is 18 in order to aim for moderate returns by taking on some risk. Its conservative counterpart, however, would be entirely invested in safer fixed-income and money market funds by then.
If you’re not sure what type of portfolio option closely reflects your risk level, you can use our asset allocation tool to view how certain investment mixes would reflect particular risk levels. You can use this data to explore the plan’s Static portfolios. Each one is based on a specific risk level and invests in a single underlying fund. You can invest in one or more of these.
But remember that portfolio options and their underlying investments can change, so be sure to periodically review your investments.
How Do I Withdraw Money from the DreamAhead College Investment Plan?
You can request a withdrawal by visiting your account online. You can also download a withdrawal form and mail it in. You can arrange to send the payment to yourself or your beneficiary, electronically or via check. You can also send a payment directly to an educational institution.
The Guaranteed Education Tuition (GET) plan is a 529 prepaid college tuition that Washington State sponsors. It allows you to buy credit “units” of tuition at today’s prices in order to redeem them for your child in the future even if college costs skyrocket by the time your child is ready to walk through the doors of his or her first university class. Units equal the price of tuition and state mandatory fees for a certain amount of time. For example, 100 GET units equal one year of in-state tuition and state-mandated fees at the highest-priced public university in Washington State.
The state of Washington guarantees that when you buy a certain number of units, say enough to cover tuition and state fees at a Washington four-year university, the same number of units will be paid out to you in the future even if tuition prices increase. If tuition rises to the point where the plan needs to pay out more than it has in assets, the legislature would be required by state law to provide enough funding to fill the gap.
How Does Washington’s 529 Prepaid College Tuition Program Work?
Unlike several 529 prepaid tuition programs sponsored by other states, the GET program offers Units instead of credits.
With GET, 100 units is equal to 1 year of resident undergraduate tuition and state mandated fees at Washington’s highest priced public university at any given time. So if you purchase 100 units today, you can redeem them to cover that much when your child is ready for college in the future.
You can buy anywhere from one to 600 units (6 years) and you have several payment options to choose from. Individual units are worth 1/110th of the price of tuition and mandatory fees at the state’s highest priced public college.
The value of a unit will always be tied to the highest tuition and mandatory fees at in-state public universities. Schools determine these prices each year with the Board of Regents, so the price of a unit can fluctuate each academic year. That’s why these plans are potentially more effective if you open an account when your child is very young or even a newborn.
And you don’t have to redeem your units at schools in Washington. You can use them at any eligible institution where you can use 529 plan money including vocational schools, technical schools and some foreign institutions. Regional and community colleges, however, tend to be less expensive.
If the value of your units surpasses the amount you owe in tution and state-mandatory fees, you can use the remaining units to cover other qualified higher education expenses such as textbooks and computers, as well as room and board. Several prepaid tuition plans don’t allow this, so Washington State stands out here.
And If the value of your units are not enough to cover full tuition and mandatory fees at out-of-state colleges, you can still use them and pay the difference. And remember, you can always use your units in conjunction with your child’s partial scholarships.
How Much Does Washington’s GET Program Cost?
At any given time, 100 units are equal to the cost of tuition and state-mandated fees at the highest priced public university in Washington State. Anything less or more than 100 units is factored proportionally. Because tuition is set by public universities each year, the price of a unit can change each year. For most current prices, look up the costs of units for the current academic year.
However, units are sold at a premium. This means you will pay more for a unit than it’s currently worth in order for the plan to account for several factors such as administrative costs, projected tuition increases, and projected investment returns. The plan pools money from all accounts and invests it in stocks and bonds in order to support future payouts, but the unit payouts are still guaranteed by the state.
The Office of the State Actuary (OSA) and the GET Committee set unit prices each year, and projected long-term rate of investment return and expected tuition growth heavily influence the cost. Although it has been rare in recent years, tuition prices don’t always go up. In the case that costs drop for public schools in the state, the value of the units you purchased may go down as well.
A qualified financial advisor can help you determine weather this type of plan is right for you and which payment option may be suitable based on your unique circumstances.
What Are My Payment Options in Washington's GET Program?
The GET program offers several ways you can save for your child’s future college education. You can purchase units in lump sums or lock in the current unit price by establishing a monthly payment plan where each payment remains the same even if tuition prices increase. Below, you can find more information about your payment options.
- Buy units whenever you want (1-600 units)
- Unit costs would reflect the price at time of purchase, which means it can fluctuate in time
- You must hold units in your account for at least two years before you can redeem them
Custom Monthly Payment Plan
- Set monthly payment for the length of your contract (1-18 years)
- You can purchase up to 600 units in 50-unit increments
- Charges a 7.5% fixed finance charge and a $1.54 payment processing fee (It may be most beneficial to choose shortest term you can afford)
- If you open a monthly plan, you can buy units in lump-sum at anytime
- If you open a lump-sum plan, you can add a monthly plan during any enrollment period
Tax Benefits of Washington’s 529 Plans
Because the GET program is a type of 529 plan, it enjoys several tax benefits. Your contributions toward purchasing units, for example, can grow tax-exempt. You can also redeem your units tax-free when used to pay for qualified higher education expenses. Tax perks are just some of the ways 529 plans can help you save for college.
How Do I Enroll in the GET Program?
The fastest and least expensive way to enroll in GET is online. You should gather the following information about yourself and your beneficiary where applicable: full address, birthdates, Social Security numbers or Tax Identification Numbers and year you expert your child to enroll in college.
You can also fill out a paper Enrollment Form and mail it in, but you’ll be charged a non-refundable $50 fee per account.
How Do I Withdraw Money from Washington’s Prepaid Tuition 529 Program?
Your units are eligible for use on August 1 of the benefit use year you listed on your account, which is typically the year you expect your child to enroll in college. Up to 105 units are available for use per academic year in addition to any rollover units from the previous year. You can start redeeming your units by logging on to your account and visiting the “Use Units” section. You can also download, print and mail a Direct Payment Request form. All payments can be made directly to the eligible educational institution.
But keep in mind that you don’t have to invest in just one of these plans. You can open different 529 plans for the same beneficiary and a financial advisor can help you make the most out of them. If you’re not sure how to go about seeking a professional, you can use our SmartAdvisor tool, which connects you to local advisors based on your preferences and current financial situation. Several specialize in specific areas like helping families save for their children's college education.