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Parents who participate in Maryland鈥檚 college savings plan, frustrated by a year-long accounting problem that has left many unable to pay tuition bills on time, are considering a class-action lawsuit against the state.
The parents claim that administrators of the state鈥檚 529 Plan have effectively frozen portions of their accounts while they try to unwind an interest-calculation issue that surfaced last year.
Despite repeated promises, the families say, the plan has yet to make good on promises to resolve the matter. Although they can access some of their savings 鈥� the amount they deposited into their accounts themselves 鈥� the interest they鈥檝e earned is beyond reach.
Nicola Easterling, a Montgomery County parent, said she can access the $50,000 she deposited into her son鈥檚 college account but she鈥檚 unclear whether she can use the approximately $17,000 in additional earnings she has accrued. She called the problems 鈥渧ery scary鈥� and said she would have invested in a mutual fund if she had known the program would encounter such difficulties.
鈥淚鈥檓 just surprised and shocked,鈥� she said, 鈥渂ecause I trusted the system.鈥�
As a result of the problems, some parents have been unable to make payments to their child鈥檚 college or university. An unknown number have had to take out loans or borrow against retirement accounts to replace monies stuck in the system.
Anthony Savia, the program鈥檚 executive director, told parents at聽聽that outside consultants were working hard to correct 鈥渄ata translation issues鈥� that impacted individual families鈥� interest calculations. Although he declined to set a date for having the problem resolved, he said his team was working with a sense of urgency and would 鈥渢ry to prioritize the most urgent cases.鈥�
Despite those assurances, parents told Maryland Matters on Tuesday that the plan鈥檚 board and staff have failed to communicate clearly with the public 鈥� and they contend that promises to right the system come and go with no change in their predicament.
鈥淭here are these goal posts that just kept getting moved out,鈥� said Brian Savoie, a Montgomery County parent. 鈥淲hat they鈥檝e told us just does not line up with the reality that we鈥檙e seeing.鈥�
The board that runs the 529 Plan (named for the section of federal tax code that allows states to run college savings plans) met online this week. Their goal was to meet briefly in public, then move to closed session to get legal advice. But when the board 鈥� which includes prominent state officials and top educators 鈥� went to the closed session, they left an estimated 300 parents in the main Zoom room.
The parents used the opportunity to organize. They swapped horror stories, established a database of email addresses, and they plotted their legal and PR strategy against the state.
鈥淗it them now. Put the pressure on them聽now,鈥� said one unidentified participant. 鈥淲e spread the news out far and wide (and) get the class action suit鈥� while we鈥檙e contacting everyone.鈥�
A second person expressed hope he could get Gov. Larry Hogan (R) or a member of his staff to return his call.
鈥淚鈥檓 an attorney in Maryland and we do class action [work],鈥� said a third participant. She also claimed to have 鈥渁 direct line to Gov. Hogan.鈥�
Michelle Winner, a spokesperson for the plan, said she was unaware of any lawsuits having been filed already. She said Savia was not available for an interview. In a statement, Winner said the board received advice from its outside counsel on Monday 鈥渢o finalize details for payments under the manual review process to begin.鈥�
鈥淕iven that latest development,鈥� she added, 鈥淭ony is focused on getting the payments issued as soon as possible.鈥� She said that聽聽on efforts to fix the interest calculation issue are online.
So far, Winner said, the Maryland Prepaid College Trust, one of two plans the plan offers, has received 425 requests for help from families. 鈥淓ach request has been prioritized and manual calculations are currently being conducted on each account based on priority ranking,鈥� she wrote. 鈥淢aryland 529 continues to work diligently with its consultants, accountants, and the Prepaid College Trust program manager to start releasing attributable earnings as quickly as possible.鈥�
Del. Jheanelle Wilkins (D-Montgomery) said she and Sen. Brian Feldman (D-Montgomery) are likely to cosponsor legislation to force improvements in the plan. She said the pair are concerned about the lack of transparency and the borrowing costs that families may have incurred. Wilkins called the financial issue the 鈥渕ost complex鈥� nut for lawmakers to crack.
Easterling, the Montgomery County parent,聽, saying it lacks a 鈥渞ed flag鈥� warning about the ongoing accounting problems. A small orange box with the words 鈥渓earn more鈥� appears alongside a banner that reads 鈥淚mportant Information about the Prepaid College Trust.鈥�
鈥淚t鈥檚 not blaring,鈥� she said. 鈥淚t鈥檚 just seems very hidden.鈥�
Savoie started a Facebook page for other parents called 鈥淔ree Our Interest NOW, Maryland 529!.鈥� In November he filed complaints with the Open Meetings Compliance Board, alleging that the 529 Program leaders conducted closed sessions improperly.聽聽were found to be valid.
He said Monday鈥檚 impromptu parents鈥� meeting provided an opportunity for far-flung families who 鈥渇elt disconnected and unsupported by the system鈥� to find community with others. 鈥淔or many it was a cathartic experience,鈥� he said.
