Between managing a business and a household with three busy kids, Kate Ehrle always has a running to-do list, but there was one thing she thought she had checked off years ago: saving for her kids’ college education.
With the help of her in-laws, Ehrle said her family invested about $70,000 into Maryland’s Prepaid College Trust plan for her oldest son and daughter when they were born. This allowed them to lock in the cost of Maryland’s in-state tuition at that day’s price, and if their kids decided on an out-of-state school, the Ehrles would pay the difference.
When her son, Christian, decided he wanted to attend the University of Alabama, Ehrle said she checked the December 2021 statement she had received from her Maryland 529 plan. It stated that between her son’s and daughter’s accounts, the total federal student aid reporting value was more than $173,500. Statements provided to News4 show Christian’s accounts alone were valued at more than $85,000.
“We told him … ‘Pick where you want to go,’” Ehrle said. “He picked Alabama. No problem.”
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But Ehrle said when she tried to withdraw money to help pay Christian’s first tuition bill, she learned she could only access about $5,500 – roughly the equivalent of one semester of in-state tuition at a Maryland public school and about half of what she expected. Her access to the interest money she thought she’d be able to apply toward other college bills was frozen.
“I said, ‘Where is my $173,000 for my kids to go to school?’” she recalled asking the 529 plan administrator. “Well, there's an audit. Well, it's complicated. Well, there are some miscalculations.”
The Ehrles are among nearly 500 families Maryland 529 officials say were impacted by an interest calculation issue that began in November 2021 and resulted in many account holders being overpaid interest.
At the time, the 529 board voted to increase the interest rate to 6% on balances held prior to Oct. 31, 2021, but the calculation problems arose when the plan was transferred to an outside plan manager, according to an explainer on the Maryland 529 website.
Many families have said they unwittingly relied on the inflated balances when deciding where to send their kids to college.
After Maryland 529 discovered the interest calculation issue with the prepaid program, it suspended interest payments while it fixed the problem and recalculated account balances.
“We are in the process of conducting final reviews and sending [Maryland Prepaid College Trust] tuition plan manual review reports to the individual prepaid trust account holders with an explanation of the individual report,” Maryland 529 spokesperson Michelle Winner said in a prepared statement.
News4 asked Maryland 529 for an interview, but Winner said the executive director was unavailable because he was busy contacting impacted account holders. The agency did not respond to questions about just how many families are now learning they have less interest than they previously thought.
The Maryland Prepaid College Trust, in which account holders purchase future semesters of in-state tuition credits at that day’s price, is separate from the state’s College Investment Plan, which operates more like a 401(k) savings plan.
Maryland House lawmakers are expected to hold a hearing into the problem Thursday.
Brian Savoie, a Silver Spring man behind a Facebook group for frustrated account holders, will be there.
“They failed me. They failed tons of families,” he said of Maryland 529.
Beginning in 2011, Savoie said he invested more than $57,000 into his son’s prepaid plan and purchased eight semesters’ worth of tuition. Ten years later, when his son wanted to attend an out-of-state school, Savoie said he called the Maryland 529 plan administrator – Intuition College Savings Solutions – to confirm the 2021 statement he received that said the plan was worth more than $76,000.
“I used that number and relied on it in making the decision of where I was going to allow Caleb to go to school,” he said.
Like Ehrle, he said he was only able to access roughly $5,500 to pay his son’s first tuition bill. And with the state now recalculating interest in plans like his, he said he’s worried the $20,000 in interest he was counting on for his son’s education is gone.
Looking back, Savoie said he wishes he had invested elsewhere.
“You know the old analogy of, ‘You're better off putting your money in a mattress?’” he said. “In the case of the prepaid college trust, you're better off putting your money in a mattress.”
State Sen. Sarah Elfreth, a Democrat who represents Anne Arundel County, said lawmakers like her are hearing from a “lot of very frustrated, and rightfully so, constituents.”
In addition to the Maryland House Appropriations hearing on Maryland 529 set for Thursday, Elfreth said she expects the Senate’s Budget and Taxation Committee to hold hearings, too.
“As an appropriator, my main concern here is the lack of oversight and the lack of accountability. And that's something that I can promise you we will be working to fix over this legislative session,” she said.
Elfreth recently led a group of lawmakers in penning a letter to in-state schools, asking them to delay bills for affected families. She acknowledged that’s little help to families whose kids now attend out-of-state schools.
Ehrle, meanwhile, is still waiting to hear how much interest her kids’ accounts have actually accrued. Until then, she said she’s dipping into retirement plans to help pay for their son’s schooling, and she isn’t sure what this means for her high school daughter’s college future, either.
“Personally, it's frustrating not knowing where the next payment is going to come from,” she said. “On a bigger scheme, I just – I feel cheated.”
Reported by Susan Hogan, produced by Katie Leslie, and shot and edited by Steve Jones.
