Camden: DreamAhead offers new way to save for in-state college

“It’s a way to give families an additional set of options” Luke Minor, director of the state’s 529 programs, said. The number comes from the federal tax code that allows the programs.

The state suspended the sale of new GET investment units — equal to a share of the cost of a year’s tuition — from 2015 to 2017 because of uncertainty over the future costs of tuition. During that freeze, the Legislature began talking about a separate investment plan that had been shelved years earlier, in part because GET was working so well.

The difference between the programs is similar to the difference between taking out an insurance policy or a setting up a 401(k) to cover future expenses, Minor said.

With GET, a family can purchase units that each represent 1 percent of the cost of a year’s tuition and fees at the state’s most expensive campus. That means 100 units, whether acquired all at once or over time, can be redeemed in the future for a year at UW or WSU. The units can also be used for room and board, and some other education expenses like computers.

Because GET is based on the most expensive public university in the state, 100 GET units go further for tuition and fees at other regional universities and community colleges. Currently 200 GET units, which would cover two years at one of the major research universities, will cover two years at a community college plus two years at Eastern Washington University. They are also redeemable at any public or private college or institution that participates in federal financial aid programs at the current redemption rate, which this year is $106.01 per unit.

DreamAhead

At the same time as it suspended sales of GET units, the Legislature began looking at establishing the other kind of state-sponsored college funding program allowed under federal law, commonly known as a 529 savings account. DreamAhead, as that program was eventually named, allows a family to invest in certain funds tied to the financial markets, similar to a sponsored 401(k) plan, with the goal of growing the investments tax-free over time when used for qualified education expenses.

With the addition of DreamAhead, Washington joined 48 states and the District of Columbia offering some form of 529 savings account. At one time, 18 states had tuition plans like GET, but seven of those programs were closed because of uncertainty over future costs, and Washington has only one of four remaining tuition plans backed by the full faith and credit of the state.

DreamAhead allows a family to invest based on the year they expect the recipient to enroll in school. They can use a plan that moves their money to more conservative investments as that enrollment year approaches. They can also put money into a portfolio that employs either conservative, moderate or growth strategies, which are tied in part to the amount invested in bonds versus the amount invested in stocks. An experienced investor can also place money in different portfolios and move them around over time.

The state’s 529 office is still sorting out how many families completely dropped out of GET programs to switch to DreamAhead, Minor said.