Parents who participate in Maryland’s 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’s 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 — the amount they deposited into their accounts themselves — the interest they’ve earned is beyond reach.
Nicola Easterling, a Montgomery County parent, said she can access the $50,000 she deposited into her son’s college account but she’s unclear whether she can use the approximately $17,000 in additional earnings she has accrued. She called the problems “very scary” and said she would have invested in a mutual fund if she had known the program would encounter such difficulties.
“I’m just surprised and shocked,” she said, “because I trusted the system.”
As a result of the problems, some parents have been unable to make payments to their child’s 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’s executive director, told parents at a town hall meeting in late September that outside consultants were working hard to correct “data translation issues” that impacted individual families’ 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 “try to prioritize the most urgent cases.”
Despite those assurances, parents told Maryland Matters on Tuesday that the plan’s board and staff have failed to communicate clearly with the public — and they contend that promises to right the system come and go with no change in their predicament.
“There are these goal posts that just kept getting moved out,” said Brian Savoie, a Montgomery County parent. “What they’ve told us just does not line up with the reality that we’re seeing.”
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 — which includes prominent state officials and top educators — 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.
“Hit them now. Put the pressure on them now,” said one unidentified participant. “We spread the news out far and wide (and) get the class action suit… while we’re contacting everyone.”
A second person expressed hope he could get Gov. Larry Hogan (R) or a member of his staff to return his call.
“I’m an attorney in Maryland and we do class action [work],” said a third participant. She also claimed to have “a direct line to Gov. Hogan.”
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 “to finalize details for payments under the manual review process to begin.”
“Given that latest development,” she added, “Tony is focused on getting the payments issued as soon as possible.” She said that recent updates 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. “Each request has been prioritized and manual calculations are currently being conducted on each account based on priority ranking,” she wrote. “Maryland 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.”
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 “most complex” nut for lawmakers to crack.
Easterling, the Montgomery County parent, criticized the program’s website, saying it lacks a “red flag” warning about the ongoing accounting problems. A small orange box with the words “learn more” appears alongside a banner that reads “Important Information about the Prepaid College Trust.”
“It’s not blaring,” she said. “It’s just seems very hidden.”
Savoie started a Facebook page for other parents called “Free Our Interest NOW, Maryland 529!.” In November he filed complaints with the Open Meetings Compliance Board, alleging that the 529 Program leaders conducted closed sessions improperly. Two of his complaints were found to be valid.
He said Monday’s impromptu parents’ meeting provided an opportunity for far-flung families who “felt disconnected and unsupported by the system” to find community with others. “For many it was a cathartic experience,” he said.