BALTIMORE — Parents who paid into the Maryland 529 Prepaid College Trust plan say they’ve been unable to access a portion of their funds to pay college tuition bills.
On August 29, Maryland 529 informed account holders that due to a calculation issue, it was temporarily suspending access to interest earnings.
Savoie’s son, Caleb, began his first semester at Purdue University a week after he received that letter.
“I was going to try and pay the bill and suddenly received the great news that you’re only going to get about 60 percent of what you’re due for this semester,” said Savoie.
The error dates back to November 2021 when Maryland 529 switched its program manager and increased interest accrual rates on some accounts. During this process, Maryland 529 discovered a calculation error involving the minimum benefit for some account holders.
“During the period after conversion, the account holder website showed an inaccurate calculation of this minimum benefit. For some account holders, this overstated the refund amount of what would’ve been provided if someone chose to end participation in the college trust program,” Maryland 529 Executive Director Anthony Savia explained during a Board meeting on September 15.
While Savia said this shouldn’t impact plan holders paying tuition at an in-state school or an out-of-state school based on the weighted average formula, parents disagreed.
Savoie started a Facebook group called "Free Our Interest Now, Maryland 529!!!" where parents could communicate with each other about this issue. There are more than 500 members.
“You have to pay and receive your benefits in the same year and for certain families, particularly those with seniors in college right now, they’re not going to be able to do that and we don’t have any answers from the state on how those individuals are going to be made whole due to that state error,” said Savoie.
Prepaid plans are designed to help families save early to avoid incurring massive debt when paying for higher education. Despite opening a savings account when his son was in kindergarten, Savoie said the plan hasn’t delivered as promised.
“It was a big problem, particularly in August and September. I had a source of funding that I figured would cover my son’s college for at least 2, 2.5 years, so the fact that I was looking at loans, the fact that I was calling family members asking for short-term loans, that’s nothing I ever wanted or envisioned myself doing,” said Savoie.
Savoie added that Maryland 529 initially indicated that the issue would be dealt with quickly.
“Oh, you don’t need to worry about it, you don’t need to execute a rollover, all of this is going to be resolved by July 31. That didn’t occur, so they moved it out to the end of August. That didn’t occur at the end of August, so they moved it to the end of October,” said Savoie.
Maryland 529 then released a timeline in October with accounts reconciled by the end of the year.
WMAR-2 News Mallory Sofastaii contacted Maryland 529. Michelle Winner, director of marketing for Maryland 529, said Executive Director Savia is focused on getting payments issued as soon as possible and isn't available for an interview.
Of the 480 requests for account support, Maryland 529 said 419 have been manually reviewed.
Savia writing on Friday:
“Today, I can say with confidence that the calculation formula has been corrected ... and outside consultants are moving through the remaining individual account manual reviews as quickly as possible to correct all remaining MPCT Tuition Plan accounts.”
Despite this recent update, many parents are still wondering exactly how much in interest they've accrued since opening their account and when they'll have access to those funds.
Maryland 529 said they'll be sending account holders a manual review report with an explanation of next steps. Sofastaii asked the agency how many account holders have been sent their reports. Winner said the agency is unable to address any media requests at this moment in time. The agency’s “top priority is distributing information to the individual account holders who have requested account support to ensure their needs are met.”
Sofastaii has not yet received answers to other questions including whether the agency plans to reimburse parents who suffered financial setbacks due to this error and how much longer accounts holders should expect to wait for their manual review report.
Meanwhile, Maryland lawmakers plan to hold a hearing on this issue at 1 p.m. on January 19 in the House Appropriations Committee.
As of June 30, there were over 27,000 Maryland Prepaid College Trust accounts totaling $1.1 billion. Maryland 529 said this miscalculation does not impact the College Investment Plan.
And this is not the first time Maryland 529's interest calculation method has been called into question. In 2019, the Office of Legislative Audits released a report challenging the agency's method of calculating interest earnings saying it resulted in excessive payments.