More than five weeks after taking over the troubled Maryland 529 college tuition savings agency, state Treasurer Dereck Davis said his staff is restoring interest earned under the same rates prepaid tuition account holders were due under their previous contract, though it will take time to determine how much to each of them is owed.
Interest rates under the Maryland Prepaid College Trust will be 6% compounded monthly for contributions made before Nov. 1, 2021. Smaller monthly compounded rates equal to the 10-year treasury note, which is determined by the Federal Reserve, will be set for payments made on that date or later.
Starting on or before July 1, 2024, all account balances and new contributions will not earn interest — a decision Davis’ office said was not made “lightly,” but one that will allow the agency to afford paying the retroactive earnings and put the Prepaid College Trust in line with similar programs in other states.
“It is my hope that with today’s announcement, we can provide certainty and some sense of relief to account holders, their beneficiaries, and the public about the path forward,” Davis said in a statement.
The decisions marked the first of what the treasurer’s office described as four phases to resolve long-term accounting and communication issues with the Maryland 529 program.
After hundreds of parents enrolled in the Prepaid College Trust — which lets parents purchase semester credits — spoke out about being locked out of their accounts or having interest payments suspended, state lawmakers earlier this year moved to change the program. Its board of directors was disbanded and the small agency moved under the control of the treasurer on June 1.
Some parents on Monday applauded Davis’ decision to keep the rates set by their initial contract.
“Today is a day of victory, but a long, overdue day. It’s a day many of us thought would never come,” Silver Spring parent Brian Savoie, who formed a Facebook group that organized prepaid account holders, said in a statement.
While there was initially “universal optimism” that the treasurer’s office would be able to quickly understand the problems, a combination of staff and data issues, along with the complicated nature of the financial agency, meant the process needed more time, according to the treasurer’s office.
“As soon as we believe we understand or resolve one set of problems, we uncover a deeper set beneath it. We know from experience that there may be other historical issues yet to be unearthed,” Davis wrote in documents outlining the updates Monday.
In the documents, Davis repeatedly urges patience on the part of both account holders and institutions of higher education, saying his office has communicated to every in-state institution that there may be delays in processing payments. For students attending out-of-state schools, the treasurer’s office will make letters available, at account holders’ requests, to notify those institutions.
The next step will be updating the automated record-keeping system to reflect the retroactive earnings and provide an updated balance.
Account holders with students attending college and paying tuition this fall will be prioritized, the office said. That’s an estimated 11,000 of the 31,000 accounts, and staff members already have started working on manual calculations for them. Account holders can submit requests for manual calculations on the treasurer’s website.
After the record-keeping update, the treasurer’s office will announce a claims process.
Savoie, in the statement, said “swift action is required” by the treasurer moving forward, especially with many tuition bills due by the end of the month.
“We have already waited too long for nothing more than what was in our contracts,” Savoie said.
Baltimore Sun reporter Lia Russell contributed to this article.