Aden and Debra Wilkie never expected they’d have to pay their daughters’ tuition with a credit card. The couple has more than $80,000 invested in three separate tuition savings plans with the state of Maryland. But they can’t withdraw a dime.
‘A broken promise’: Maryland college savings plan blocks parents from withdrawing money
“It’s a broken promise,” Aden Wilkie said.
The account holders, mostly parents, say the trust has never been clear on why this happened. It offered no timeline to resolve the problem, even though students now face bills for the spring semester. When will everyone have full access to their money? Can the state guarantee they will all be made whole?
Officials have not answered those questions, shocking parents — who thought their savings would be available — with the absence of transparency or accountability.
Anthony Savia, executive director of the Maryland Prepaid College Trust and the College Investment Plan, was unavailable for an interview Tuesday and Wednesday, but Michelle Winner, a spokeswoman for the trust, pointed to a FAQ on the trust’s website and said, “This is a complex issue that involves detailed calculations and the computer coding of information technology software to fully resolve.”
She added that “tremendous progress has been made toward the resolution”and said the trust is “expecting to post another substantive update that we believe will be good news to account holders.” She did not say when that update would come.
Maryland offers two types of 529 college savings accounts: a standard investment plan and a prepaid college tuition trust. The investment plan is like a 401(k) account: Its value fluctuates with the price of the equities it holds, and families assume the risk. These accounts were not affected.
Prepaid plans, by contrast, let families lock in future tuition payments at today’s prices. Here, the state bears the risk because it will have to absorb the cost of tuition inflation. It charges families a fee to carry that risk, and officials invest in stocks, bonds and other vehicles, using the returns to pay for tuition. Most prepaid plans cover only in-state tuition, but Maryland also lets families put their investment toward tuition at a private or out-of-state college.
Brian Savoie of Silver Spring said this flexibility and the guaranteed payment were selling points when he opened an account for his son nearly 20 years ago.
“It seemed like a safer bet [than a traditional 529 plan]. It was backed and guaranteed by the state of Maryland, and that was a big deal for me,” Savoie said.
But administrators informed Savoie in August of a calculation glitch that prevented them from paying out interest on the plan. He should have received $9,000 but was going to get only $5,400. The email landed days before Purdue University expected the first payment for his son’s first semester.
Savoie decided to roll over the balance of the prepaid account to a conventional 529. But instead of the $78,000 listed in the statement last year, the account only showed $50,000, he said.
According to the Maryland Prepaid College Trust, trouble in the prepaid plan surfaced shortly after the trust transitioned program management from an in-house team to a third-party vendor, Intuition College Savings Solutions, in November 2021.
Officials at the trust and Intuition discovered that the calculation to determine an account holder’s minimum benefit was off. Some accounts were now undervalued; others were overvalued. Officials said no person or entity has been identified as the cause of the error, and the focus of the entire team has been a prompt resolution. Intuition referred all questions to the trust.
At a 529 board meeting on Sept. 15, Savia, the head of the trust, stressed, “The funds in the prepaid college trust are secure. This is not a situation where funds are missing. I understand how frustrating this can be, however, I want to make sure we are calculating the amount correctly.”
With more questions than answers, Savoie created a Facebook group in August called “Free Our Interest NOW, Maryland529!,” in search of other parents in the same bind. The group has 311 members who have used the space to vent and organize. Parents have called state lawmakers, urging them to investigate.
The Wilkies first found trouble in May when they tried to roll over money from prepaid tuition plans to ordinary 529s, which would have let them use the funds for a wider array of college expenses than the prepaid plan permitted.
But the Wilkies’ request was inexplicably denied, they said. After hours on the phone with various staffers, Aden said he was told there was a problem with the earnings calculation on the accounts that should be fixed in a matter of weeks.
That was in June. As of this week, nothing has been resolved.
“There is just the anger and frustration that I am now going to be hit with interest charges on a credit card,” Debra Wilkie said. “It’s thousands of dollars that we don’t have in our budget, so we had no choice. Universities don’t want to hear about problems with 529 plans. They want their money.”
In September, the 529 board hired outside counsel to monitor an audit of the prepaid plans and communicate with families.
Third-party accountants are now reviewing the accounts, with priority given to roughly 430 families who need their distributions immediately, Winner said.
Charles Maggio of Ellicott City needed to tap his individual retirement account, and face early withdrawal tax penalties, to pay for his son’s upcoming semester at the University of Delaware. Before this academic year, Maggio had used his prepaid tuition savings to cover his son’s first two years of college.
Maggio said the trust assured him he could take a distribution from the principal amount in the account this year, but representatives there didn’t say what would happen to the earnings on that money.
“I was concerned about depleting the account because if I take the money, they may never pay me the interest,” Maggio said.
Maggio feels he’s being left in the dark. The trust has sent monthly updates, but communications reviewed by The Washington Post largely asked account holders for “continued patience” as the administrators worked toward fixing the calculation. When the 529 board held an emergency meeting Monday, it rushed families off the call before they could inquire about the interest payments.
At the virtual meeting posted on YouTube by Savoie, board Chair Peter Tsirigotis told irate families the board was required to give notice of the emergency meeting but had no intention of providing an update. The board then voted to go into closed session, leaving more than 300 people on the line. Tsirigotis did not respond to requests for comment on the meeting.
Del. Jheanelle K. Wilkins (D-Montgomery), who remained on the line with account holders, said she is disappointed in the way the 529 board has handled the error and communication with account holders. Earlier in the year, she said, the board told her and others the matter would be resolved by the end of October. But when the 31st came around, there was no explanation about why the deadline was missed.
“There are serious issues around transparency, issues around accountability, and a loss in trust from the account holders, and certainly from legislators,” Wilkins said. “The constant executive session meetings and [Monday’s] meeting … do not lend themselves to confidence in terms of where we are and how quickly this will be resolved.”
Wilkins is drafting legislation to provide redress for families who had to come out of pocket to cover tuition. But any bill she introduces would be past the spring semester tuition deadline at most schools and offer little help to families who desperately need it now.
Through a spokesperson, Comptroller Peter Franchot (D), who also sits on the 529 board, said he “shares the frustration of impacted families,” but believes the trust is doing everything it can to resolve the matter.
For the spring semester, the Wilkies are using installment plans for their 21-year-old daughter at North Carolina State and their 19-year-old at the University of North Carolina. These plans charge fees. It’s not ideal, but it was the best they could do, Debra said.
Source: WP
