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Access to some college savings funds will be curtailed until at least Oct., official says

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Access to some college savings funds will be curtailed until at least Oct., official says

Sep 30, 2022 | 6:50 am ET
By Bruce DePuyt
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Access to some college savings funds will be curtailed until at least Oct., official says
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Photo by carmichaellibrary on Flickr.

Families enrolled in a popular college savings plan will face additional delays in accessing their funds, the official in charge of Maryland’s “529” programs said on Thursday.

Anthony Savia, the head of the Maryland Prepaid College Trust and the College Investment Plan, said his team has made “significant progress” in its efforts to fix an error in how interest for trust account holders is calculated. But he declined to commit to a “date certain” for resolving the issue completely.

“We are committed to doing this right and fixing an ongoing problem,” he said. Savia, who took the reins of the program over the summer, spoke during a virtual “town hall” meeting at which he provided an update on efforts to set accounts straight.

Savia said accounts are being corrected manually while the plan works to fix the electronic calculation of participants’ benefits, a process that is expected to conclude in October. “The first step in that process is determining which accounts require immediate attention,” he said. “We will try to prioritize the most urgent cases.”

The program is working with outside consultants on a “longterm strategy to address the data translation issues.”

For months, parents have been unable to tap all of the funds that have accrued in the trust. Plan officials said they froze the interest portion of families’ funds because they encountered “an issue” as they transitioned from one vendor to another.

Although the issue surfaced late last year, parents complain they were only made aware of it this year. Some have been unable to pay fall tuition because of the problem.

A program spokesperson declined to say on Thursday how many account holders have been impacted by the botched handoff.

During the 45-minute meeting, a staffer relayed questions that parents submitted electronically but they were not allowed to speak or ask follow-ups.

Savia said the 529 board is considering “multiple options” to correct the calculation errors. “The goal is to ensure all benefits are calculated accurately… so that no one receives more than they should and no one receives less than they should.”

One unidentified family complained they had to take out a loan, at 14% interest, to pay fall-semester tuition. In an interview, Treasurer Dereck E. Davis (D) said there needs to be a “conversation” about whether such families should be compensated.

“That is something that needs to be discussed,” he said. “I’m not sure how viable an option that is, but at a minimum some conversation needs to take place.” Davis said he was speaking as state treasurer, not as a member of the 529 board.

A handful of members are appointed to the 529 board by the governor; the rest serve by virtue of the positions they hold in state government.

Brian Savoie, a Montgomery County parent who started a Facebook page called “Free Our Interest NOW, Maryland 529!,” said the town hall provided “very few direct answers.”

“Transparency is not Maryland529’s strong suit,” he wrote in an email. “They didn’t answer all submitted questions despite ending the call early. We are starting to gather a list of unanswered questions to present to the executive director.”

Savia, stressed that the funds are not at risk. Rather, he said, officials are working to resolve an interest calculation problem. “The funds in the Prepaid College Trust are secure,” he said. “The issue does not impact money held in trust — the earnings or the funds held for the benefit for the public. This is not a situation where funds are missing.”

Maryland offers two 529 college savings programs (named for the section of IRS code that makes them possible). The trust allows parents to lock in their child’s future tuition costs when they are young. The other, the College Investment Plan, is administered by an outside money manager and functions similar to a 401(k). That investment plan is unaffected by the software glitch, officials insist.

Families impacted by the glitch can contact the plan at [email protected]. The Maryland 529 Program homepage makes no mention of the ongoing interest-calculation issues, though there is a secondary page that attempts to provide resources.