University of Washington President Michael Young took a swipe at the state’s prepaid college tuition program Thursday during a public interview with an Atlantic Magazine editor.
Answering a question about differential tuition before an audience of about 70 people, Young described how the UW has been unable to charge different amounts for different majors in part because of the state’s Guaranteed Education Tuition (GET) plan. He described GET as “a strange program — a Ponzi scheme, essentially,” which elicited a chuckle from the audience.
UW spokesman Norm Arkans said Young has used the phrase to describe GET before, and called it “a handy quip to explain what he perceives as the financial fragility of the GET program.” State Sen. Rodney Tom, D-Medina, also described it as a Ponzi scheme earlier this year.
A Ponzi scheme is defined by the Securities and Exchange Commission as “an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.”
GET works by selling prepaid tuition “units” at a premium on today’s tuition prices, guaranteeing that when it’s time to cash in, 100 of the units will be worth a year of tuition at the most expensive state university.
The program got into financial trouble during the economic downturn, when the double whammy of skyrocketing tuition rates and declining investment returns caused it to be underfunded by as much as $680 million, or about 20 percent. GET administrators have since raised the unit price significantly, even as the stock market has rebounded; the program is on track to be fully funded in about five years.
In the wide-ranging interview, which took place at the Four Seasons Seattle hotel downtown and was conducted by Alexis Madrigal, a senior editor at The Atlantic, Young discussed the future of the UW campus, its connections to China and how he expects the university to evolve over the next two decades.
Among the highlights:
- On the increasing numbers of international students: There are 3,000 Chinese students studying at the UW now, half of them undergraduate, Young said. The UW recently hired Jeffrey Riedinger as vice-provost for global affairs; among other things, he’s responsible for finding ways to better tap into the global knowledge that international students bring to campus life. Young said his aim was to find ways for international students to become “not just recipients of education, but teachers themselves,” and to create opportunities for more collaborative learning with their American counterparts.
- On admitting more in-state students: Young said it’s become harder for Washington students to get into the UW as freshmen because the in-state applicant pool has become so competitive. The average Washington freshman now has a 3.8 GPA. “We would love to admit more — I take no pleasure in turning kids down,” he said.
- On financing higher education: Young said there “needs to be a national conversation” about higher education funding. Noting that UW’s state funding has been cut by 52 percent over the last four years, he said universities need to think more creatively about different streams of revenue, different ways to deliver financial aid and new ways to work with private industry.
- On student debt: Young noted that slightly fewer than half of all UW undergraduate students graduate with debt, and the average debt is about $20,000. “I wish it was zero — it’s still a good value proposition,” he said. The national average is $29,400, and more than 70 percent of students nationally have at least some debt.
- On financial aid: Young made a pitch for fully funding financial aid in Washington; about 32,000 students, or roughly one-third of those who are qualified, receive no financial aid from the state. He also said the state needs to establish “a predictable stream of revenue in higher education.”
A taped version of the interview is expected to be posted on the Atlantic website at a later date.