Maryland’s top fiscal official joined parental and legislative calls to better regulate a state education financing agency that has drawn scrutiny for its handling of an interest calculation error that has cost some 500 parents tens of thousands of dollars.
Since last spring, parents with accounts in the Maryland 529 Prepaid College Trust have accused the agency of suspending interest payments to their accounts. Maryland 529 acknowledged the issue in the fall, when board members and executive staff said they’d discovered an interest calculation error during the process of outsourcing operations to a third-party firm.
Although Executive Director Anthony Savia said agency accountants have manually resolved parents’ complaints, an automatic solution is months away.
The error cost parents tens of thousands of dollars in anticipated earnings, panicking them as tuition payments came due. Some refinanced home mortgages, took out loans or turned to other savings to finance their children’s college educations, while a handful of state colleges agreed to consider their requests to delay payments.
Lawmakers have criticized the agency’s response, and Democratic Comptroller Brooke Lierman, who joined the Maryland 529 board after taking office last month, urged it to use its $355.6 million surplus to “make parents whole” by repaying their lost earnings.
State Treasurer Dereck Davis, who was reelected Tuesday to his post by legislators, said during a speech on the floor of the House of Delegates that he would support bringing the agency into the control of his office.
”Our citizens are angry. Our legislators are angry. The governor is angry. The 529 program is under siege,” he said. “I know you all are looking at legislative fixes.
“If you decide to abolish the current setup and put it in the treasurer’s office — like it is in most states — I would ask that you ... give me the resources that I need to be successful, help me manage expectations for when this can be resolved and let me do what needs to be done.”
The Evening Sun
Parents like Brian Savoie of Silver Spring, who pays his son’s tuition using a prepaid trust account, have said the agency’s explanation of what happened is not accurate. He said the error stems from the Maryland 529 board’s decision to renege on a contract clause guaranteeing parents who opened accounts before Nov. 1, 2021, a 6% compounded monthly interest rate.
“It’s fantastic to hear the treasurer speak in specific and unambiguous terms that his office and all parts of the state government are committed to making parents truly whole,” Savoie said. “We stand ready to join the treasurer and the state in these efforts.”
As an independent state agency, Maryland 529 operates outside direct executive oversight, but several state officials, including Davis, sit on the board as ex officio members.
“Maryland 529 is proud of the progress we have made over the past five months to correct the earnings calculation error in the Prepaid College Trust and to provide the correct figures to our account holders,” Savia said in a statement. “We look forward to working with our legislators in helping to improve the program moving forward.”
Any effort to move the agency under the treasurer’s office would “likely” come from proposed legislation in the General Assembly, said Shareese Churchill, a spokesperson for Davis’ office.
“Given the resources, the State Treasurer’s Office is certainly willing to work with the Maryland General Assembly in an effort to solve this unfortunate situation as quickly as possible,” she said via email.
The Senate Education, Energy and the Environment Committee will consider a bill Wednesday that would establish a work group to propose policies to solve the calculation error. Del. Cathi Forbes, a Democrat from Baltimore County, said that bill would provide a scaffolding for identical legislation in the House that is awaiting introduction.