The State Treasurer is restoring interest earned under the same rates prepaid tuition account holders were due under their previous contracts.
Maryland’s Prepaid College Trust has been in turmoil for over a year. The Prepaid College Trust is offered by Maryland 529 and managed by Intuition College Savings Solutions, LLC. It was designed to help individuals and families save for college in a tax-advantaged way.
However, over the last year, hundreds of Maryland families who bought into the Prepaid College Trust component of the plan have complained that the small independent agency administering the program locked them out of their accounts and/or suspended their interest payments.
The 2023 legislative session saw high-profile hearings and legislation to fix what was broken, including having the State Treasure take control of the Maryland 529 oversight agency and manage the Prepaid College Trust Fund.
In a significant move under his new authority, — and the first of what has been described as four phases to resolve the issues — state Treasurer Dereck Davis 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.”
According to the Baltimore Sun:
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.
Additionally, starting July 1, 2024, all account balances and new contributions will not earn interest to allow the agency to afford paying the retroactive earnings and put the Prepaid College Trust in line with similar programs in other states.
A press release from the Treasurer noted that:
Claims will not need to be filed to receive these earnings, as they will appear in accounts as soon as the system is updated. The decision to change the earnings rate to zero percent on a future date to be determined, but no later than July 1, 2024, is applicable to all accounts and is consistent with the approach of most jurisdictions that have a prepaid plan.