Scores of parents report being locked out of a troubled Maryland college savings plan as tuition payments loom

Six months after the birth of his daughter in 2002, Ray Mahar opened an account with the Maryland Prepaid College Trust. As a state employee, a part of his paycheck was automatically diverted every month and put into the account, which allows Maryland parents like him to save money over years to use for their children’s college education.

Mahar invested $48,000 over 18 years, which, with interest, had grown to $62,000 by December 2021.


“I forgot about it for 18 years,” Mahar said of the account. “I figured, it’s there, and it’s gonna be there when I need it.”

But in August, as his daughter was preparing to transfer from Salisbury University to the University of Maryland, the Howard County resident inquired about withdrawing $8,000 from the account to cover her rental costs.


He was informed that his daughter’s account balance had dwindled to $22,300. He submitted form after form, and repeatedly called a hotline number, receiving conflicting answers about when he might learn where more than $30,000 of his daughter’s college funds had gone.

“That’s when I ran into brick walls,” Mahar said.

Maryland 529, the state agency overseeing the Maryland Prepaid College Trust, has frozen interest payments to participants like Mahar and in many cases has blocked access to accounts altogether because of unresolved internal calculation problems, panicking parents as another round of college payments come due early next year.

Maryland offers two kinds of 529 plans named for the section of federal tax code that allows parents to save money and later withdraw it tax-free for a child’s education expenses. There’s the prepaid college trust and a college investment plan.

The college investment plan works much like an investment account that funds can be withdrawn from for school-related expenses. The prepaid college trust allows parents to purchase one semester or up to four years of college at the tuition rate when they open the account and use those funds at any federally accredited college or university nationwide. The program is backed by a legislative guarantee, meaning the state is obligated to pay benefits owed.

The state pools those prepaid college trust accounts and invests the money. The plan oversees 27,683 such accounts totaling $1.2 billion, according to an annual report published in October. Parents can get a state income tax deduction for contributions up to $2,500 per year.

Maryland 529 hired Florida-based Intuition College Savings Solutions LLC to manage the program in December 2020. The company administers 529 plans in 10 other states, including Vermont, Texas, Michigan, Illinois, and West Virginia, according to its website.

As part of the transition to Intuition, a third-party audit flagged past issues with the way the state agency determined “minimum benefits” paid to account holders, and then found additional problems with the way interest is calculated, according to previous reporting by Maryland Matters.


But even before then, another state agency had flagged problems with how the fund was being run. In a December 2019 report, the Maryland Office of Legislative Audits recommended the board overseeing Maryland 529 order a forensic audit after finding that the state agency suffered from weak oversight, poor record-keeping practices and high staff turnover.

The legislative audits office also found that the fund was too liberal with how it calculated its interest rate payments, after which Maryland 529 said it would study its methods and complete a review in January 2021.

The agency froze interest payments on prepaid college trust accounts in April 2022 and alerted account holders of the problems, saying it hoped to fix the problem by the first week of September, according to its website.

Since then, the state has missed each deadline it set this fall to resolve the issue. The agency said in a Dec. 12 update on its website that most tuition payments are being made for Maryland public colleges.

The problem does not affect the state’s other college savings plan, the Maryland College Investment Plan, which is managed by T. Rowe Price Group, a Baltimore-based investment firm.

Some of those most affected by the calculation issues in Maryland are families with a student in an out-of-state university, for whom payments are calculated differently from families paying in-state tuition, or families who want to roll over their full balances to other accounts, according to interviews with Mahar and two other parents in similar situations.


“I was told it would be rectified by Sept. 1, and here we are in December,” Mahar said. “And now they’re hiding in meetings and talking to attorneys.”

On Monday, the Maryland 529 board called an emergency closed-session meeting after alerting account holders via email that a short, open session would be held beforehand. Some 400 people logged in to the Google Meet setting, including Mahar, assuming they finally would be given some answers.

Instead, the board members declined to answer questions and went into their closed session, leaving hundreds of attendees in the dark with only one another to talk to and compare stories.

Michelle Winner, a Maryland 529 spokeswoman, said Wednesday that the board was in the final stages of manually reviewing accounts with outside certified public accountants using “an intake and priority system to help confirm accuracy of calculations.”

“Tremendous progress has been made toward the resolution of the overall [Maryland Prepaid College Trust] issue,” Winner said via email. “This is a complex issue that involves detailed calculations and the computer coding of information technology software to fully resolve.”

Winner did not specify a timeline for when the issues might be solved, adding that the board expected to post “another substantive update soon,” and that some 425 account holders had requested the agency’s help for issues with their accounts.


Maryland Del. Jheanelle Wilkins and Sen. Brian Feldman, both Montgomery County Democrats, said Tuesday that they are looking to sponsor a bill in 2023 to increase transparency and accountability mechanisms within the prepaid college trust plan.

Wilkins said she doesn’t “think there’s a whole lot of faith” in the agency.

Anthony Savia, the executive director of Maryland 529, said in an emailed statement Wednesday that he welcomed the opportunity to work with legislators and that “tremendous progress has been made toward the resolution of the overall [Maryland Prepaid College Trust] issue” since he was hired in September.

Parents wait and worry

Ned Waugaman, a parent who funded his children’s college educations through the prepaid college trust program, also attended Monday night’s virtual board meeting

“I feel for these poor parents who’ve funded these plans and now the state is saying, ‘Oops, we’re sorry, you’re going to have to wait, because we’re not really sure what you have [in your account balance],’” Waugaman said.


He said he was one of the first investors in the prepaid college trust when it opened for enrollment in 1998. Even then, the venture was poorly managed, he said, recalling an incident when the state accidentally issued handwritten checks showing each participant’s Social Security number.

“I shake my head thinking, you fast-forward to 20 years later, and they’re still having issues of one fashion or another,” Waugaman said.

His young grandchildren now have prepaid college trust accounts of their own that he expects to use to help pay for their future college educations.

Megan Marcin, whose son attends an out-of-state college for which she pays using a prepaid college trust account, said she was told that parents whose children were currently enrolled in higher education would be prioritized.

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She said she was told that if she called Intuition’s hotline number, she’d receive answers to her inquiries within one to two days.

“That hasn’t occurred,” she said.


Jaymie Kohl, a spokeswoman for Intuition, the company that oversees the prepaid trust plan, did not respond to two requests for comment about the plan’s problems.

Marcin said she ended up paying her son’s spring semester tuition bill using other savings her family had put aside.

“I feel for people who put their money into this and are in the same situation but don’t have savings to cover it,” she said.

Other parents on the call mentioned the possibility of looking into taking legal action, she said, as the end of the year approaches with no definite timeline for when parents like her will see their payments resume.

“You kind of wonder, where’s the money? Did they invest it and lose it?” Marcin said. But “people don’t have years to litigate. Their kids are in college now.”