Maryland State Treasurer reforms Prepaid College Trust with new policy changes

The Maryland General Assembly's Appropriations Committee meeting on February 6, 2025, spotlighted significant updates regarding the Prepaid College Trust and the state's 529 savings plans. As of June 30, 2024, approximately 27,000 accounts remain in the Prepaid College Trust, which allows families to prepay college tuition at current rates. The state treasurer has introduced a fourth phase of policy changes aimed at reforming the trust, including a 6% retroactive earnings rate on historical balances and an updated online portal for account management.

The committee also discussed the Save for College state contribution program, which offers flexible 529 plans to help families save for education. In fiscal year 2024, around 30,000 applications were submitted, marking a 5% increase from the previous year. However, the number of eligible applicants dropped by 11%, with about 3,000 qualifying. Notably, the number of low-income households receiving contributions surged by 111%, totaling around 6,000 recipients.

Despite these positive trends, the average contribution to the program has seen a significant decline of 36% since fiscal year 2020. Advertising efforts for the 529 plans showed mixed results, with television views increasing by 5 million, while radio listeners decreased by 29%, and new users to the Maryland 529 website fell by 37%.

The meeting also addressed Maryland's bond ratings, with Moody's changing the state's outlook from stable to negative due to projected structural budget deficits. The committee requested a status update from the state treasurer on the implications of these ratings and the measures being taken to improve Maryland's financial standing. The discussions underscored the ongoing challenges and reforms in Maryland's educational funding landscape, highlighting both successes and areas needing attention.