MD 529: Prepaid College Trust vs. College Investment Plan

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As I wrote this morning, I opted for the Maryland 529 College Investment Plan (CIP) over the Maryland 529 Prepaid College Trust (PCT) when I enrolled and I did so for a variety of reasons. First off, the Prepaid College Trust is like prepaying and locking in the rates of a Maryland educational institution today but for use sometime in the future (at least three years in the future).

Can Only Enroll Beneficiary After Birth

This made the PCT impossible for me because we don’t have any children yet. The CIP lets me name myself as the beneficiary and then roll that over to my child when he or she is born.

However, let’s say I have a child and the PCT was an option, would I still do the CIP? Yes, here’s why.

1. PCT’s “Legislative Guarantee”

With the CIP, my after-tax assets are put into various funds that grow tax-deferred (tax-free if spent on educational expenses). The PCT, it’s like Social Security, I pay into a system that will put it in a group of investments that will guarantee I can get a payout when my child enters college. If there is a shortfall, then the Legislative Guarantee says:

… the Governor to submit a request for the Prepaid College Trust in his/her annual budget if the Prepaid College Trust experiences a shortfall in any given year. As with the entire State budget, this request would require General Assembly approval.

What happens if they don’t approve it? What if there is a huge shortfall and no way to fund it? Those are questions that I don’t see answers for and one of the fundamental problems I have with these sorts of guarantees (like Social Security). I’d much rather prefer to have an account with funds in it that I know is there and isn’t spent elsewhere.

2. CIP: Potentially Higher Returns

With the CIP, I’m banking on market returns on my funds that may be outpaced by the increasing costs in education. According to their math, the University of Maryland’s tuition and mandatory fees increased 90% in 10 years, or 6.6% each year. Johns Hopkins University increased 63% in 10 years, or 5.0% each year. Now, if your think the market will return 11% on average, you’ll want the CIP.

3. Flexibility Over Price

If you’re certain that a Maryland college is where your child will be going (and the Legislative Guarantee placates your concerns over future fundability), then the PCT is probably your best bet because it guarantees the cost. If you’re not so sure, the PCT’s value for a college outside of Maryland is limited to the “Weighted Average Tuitions” of four year colleges. The increase in how much they’d pay per year for a public college outside of Maryland was a paltry 1.6%; that isn’t that impressive considering they spent the first half of the PCT FAQ telling us about the 90% in ten year increase in UMD’s prices.

Ultimately, the guarantee part was what concerned me but the Flexibility over Price issue was a close number 2. The potentially higher returns part wasn’t as big a factor as the other two but I felt is deserved some mention because ROI should always be on your mind when making investment decisions. Talk to a professional because you make any decisions, these are my opinions and I have little experience in this arena. 🙂

For those Marylanders (or outside Marylanders who are enrolled in either program) in 529 programs, how did you pick which plan to go with? For those who are thinking about it, what are the issues on your mind?

{ 25 comments, please add your thoughts now! }

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25 Responses to “MD 529: Prepaid College Trust vs. College Investment Plan”

  1. Matt says:

    For what it’s worth, one should also consider the payout procedure. My fiancee was literally unable to finish her degree because it had to be paid for through Michigan’s version of this plan. The problem was, the plan only made payments on the last possible day, and the university she attended required that her account be current in order to register for classes…which meant that quite a few classes she literally couldn’t graduate without (and many more she _wanted_ to take) were unavailable to her, because they filled up before the plan was willing to pay.

  2. Mad Mom says:

    This plan twice has refused to accept the documentation I sent to support a distribution and the first time they refused, they took over four weeks to send me the rejection. We were sent a letter stating that the plan had changed and we could get a refund for remaining amount in the fund so I wrote requesting to get out four weeks ago and still have not heard from them. Also, the amount of money we put in is about the same we would have gotten out–if they paid as promised. We would have been better off putting the money in a mattress–at least we wouldn’t have the bureaucratic baloney this plan is putting us through. My advise based on experience–find another plan! I had Coverdell IRAs for each of my children that performed well and disbursed without any trouble at all.

  3. Angry Dad says:

    I couldn’t agree more with Mad Mom. Our daughter went to an out-of-state state school and is receiving much less each semester than the $4,050 that she would get had she opted to go to a Maryland state school. Because the PCT offers only a 1 percent return above what you paid in, we’re not exactly getting a deal here. What makes matters worse is the attitude of the people who push the buttons at the PCT. They’re very poor at explaining things, move VERY slowly, and we recently learned our daughter’s school wasn’t paid because they had misplaced a form. In short, the Maryland priograms are terrible. I’d encourage oeople who are financially conservative to take out a series of bank CDs that would mature around the time of high school graduation–as we should have done. Otherwise, the less risk-averse would likely do better in even the most conservatively managed Roth IRA.

  4. Mad Mom 2 says:

    The MD Prepaid Tuition Trust is a minefield of arbitrary rules and misleading statements. When I applied for my son’s enrollment about 5 yr ago, the documentation was less specific than currently. The slogan of “save now study anywhere” fails to spell out that you will not be granted in state tuition equivalents out of state. The” weighted average” also does not spell out that the board has the discretion to drop the two highest tuitions in the state and does include community colleges in their average numbers. So what does that tell you?
    Then should you want your money back, you can’t get it easily. Fees are added and your original investment minus payments is grealy diminished.

    It has been implied to me in a conversation that MD schools give preference to out of state students( $$) thereby rejecting MD student applicants. In our case the only school where my son did not gain acceptance was the U of MD.

    If you read the PPTT contract carefully there is a lot of vagueness. WHen you subtract the load and the fees from the expected 7.5% annual
    return the remainder of the investment is 1.3%.
    If this is not a scam I do not know what is.

    The fund claims that all monies belong to your beneficary. How so? Nobody ever gives you statement. The funds are not segregated.
    The fund claims that you can use excess funds for ten years. How do you know what is excess when there is NO accounting of your contribution? in other words after four years, even if you have contributed more than you were paid out ( out of state)you will never be refunded your unused principal. You will in fact be funding some other child’s education or someone’s pet political project.

    I urge parents to complain loudly to local representatives and seek investigation into the conduct and management of this fund.
    Our children should not have their futures scammed by politicians.

    This is nothing less than theft.

    • angry mom says:

      I bought the prepaid plan for both of my children buying in to the false claims of the plan. After realizing the misrepresented returns, I tried to “rollover” the prepaid plan to the investment plan. My paperwork was sent at the end of April. I checked in May about the progress and was told it takes 4-6 weeks. It’s now July. The rollover still hasn’t happened. I tried to call them. They never pick up their phone and always ask you to leave a message. When they do call back, it’s like a race trying to ge to the phone before they hang up. If you missed it, you have to leave another message and wait another day or two before they may call you again. I can only imaging what kind of agony we’ll have to go through when it comes time to get the reimbursement. I don’t know if they impose any penalties or ouragous fees for the rollover. But I would pay any fee to move away from them.

      • VeryFrustraded says:

        MD Pre-Paid College Trust is horrible. You can never speak to anyone, and it takes them weeks to do anything and when they make a mistake they dont correct it. This is a Nightmare. WHO DO WE CONTACT TO COMPLAIN??? Has anyone had success filing the rollover paperwork to move the money to the savings plan? TRowe’s saving plan is great.

  5. I recently opened PCT accounts for our two newborn grandsons. Three months after cashing our check for one of these accounts, we have yet to receives so much as an account number or a letter acknowledging receipt of our investment. My recorded messages to their “customer service rep” go unanswered. I have communicated with the MD Attorney General asking for an investigation and audit of this political scam. I advise the utmost caution to anyone considering investing in this outfit.

  6. A mad mom says:

    The Maryland prepaid college trust is a horrible program.I did a big mistake to enroll my child to this. The customer service is terrible. I left voice mail messages. I wrote email several times,and no one reply your message. You have not ever had a chance to speak to anybody because no one answer your phone call.
    When I claimed for the contribution/reimbursement,it took a long time for them to do the process, and they always made up something that were not correct to decline your claim. Seem like they took your money and don’t want to pay back. My advise: DON’T EVER ENROLL YOUR CHILD TO MARYLAND PREPAID COLLEGE TRUST.

  7. A mad mom says:

    If you all agree, we can do something together to resolve issues from Maryland Prepaid College Trust. We need to make them to change the ways they have worked. It’s very frustrated for all of us. It’s our money that put to their pockets,and they give us difficult time and don’t want to pay back the money.
    Does anybody know who should we contact to complain about this?

    • Don C says:

      I have had the exact same experience – low (1.5%) return, minimal account information and overall poor customer service. I propose we organize on-line to find out how many other people are having issues, create a list of complaints and proposed improvements to the program, and then create a petition or other broad letter-writing campaign to the MPCT’s Director’s Office, the MPCT Board, our State representatives, and also the Governor’s office. Did anyone notice a few years ago when MCPT tried to modify the contract regarding out-of-state tuition payments, only to send a letter later to rescind the changes? I think there was a backlash then as well. It’s time for a broader one to improve this program. Given the amount of money and the implied number of participants, there is NO excuse. PLEASE REPLY TO THIS POST ON THIS PAGE IF YOU ARE INTERESTED IN ORGANIZING WITH ME.

      • Sheila Turner says:

        My daughter will be graduating next year 2013 and I also have been paying into this plan since she has been in the 1st grade. This does not sound good. Whatever I can do to help correct this count me in. If anyone can give me some insight as to what I need to start doing to request her college funding at that it would be appreciated. I am a single parent that is dependent on this program.

      • ANOTHER Mad MOM says:

        Hey Don,

        I am really interested in organizing with you. Please let me know what we need to do.

  8. Frustrated accountholder says:

    The customer service of the MPCT is worse than horrible. I have had an accunt question for the past 3 months and have called over a dozen times leaving messages and never once received a return call. I was told that the MCPT has no staff to answer calls and a third party answersd all calls and emails them to a MCPT rep. Unbelievable, I have contacted my State Senator to complain about this scam.

  9. SoAngry says:

    I am also incredibly frustrated at this program. They have held my money for over a year, never sent me confirmation of acceptance or a receipt. I contacted them multiple times and finally got a response that said, literraly, “sorry, your account is invalid, we should not have cashed your check.” They still have my $40,000. They need board approval to give it back to me even though I am not enrolled in their program. They are illegally holding my money. I have contacted the governor’s office, the treasurer and anyone who will listen. I am going to the board meeting in February, with my attorney, to demand an answer. If anyone else would like to join me, I can provide time and dates. This program is ridiculous.

  10. doug freed says:

    do not invest in the Md prepaid..they are impossible to contact and do not return calls.they are slow on payments…have been waiting 6 mos for last payment

    College inveswtment trust is best option

    • John F says:

      the savings program run by TRowe Price is awesome. The Pre-Paid Trust program must have one part time person coming in once a month. 4-6 weeks to answer an email or a phone call. They screw up the simplest of benefits / tuition requests, and then dont fix it. Very very slow response time (or none).

  11. Martin says:

    We have had the same experience. We have been attempting a small refund to deal with some financial issues and we are going on 3 months with no results. Just excuses. This is scary. Has anyone made any progress?

  12. VeryFrustraded says:


  13. John F says:

    Google “board of directors maryland prepaid college trust”
    for the listing of the board.

    Joan Marshall, Executive Director
    Phone: 443.769.1024
    Email: jmarshall at
    Carol Kaiser, Chief Operating Officer and Chief Investment Officer
    Phone: 443.769.1021
    Email: ckaiser at

    Make them aware of this page, as the complaints are numerous – and all the same. Also call them directly since the PrePaid College Trust never returns calls, even when they have very obviously screwed up the paperwork… what a horendous program… absolutely horrible

  14. Frustrated Account Holder says:

    After reading through the previous comments I could not agree more. The MD prepaid college trust program is horrible in terms of providing TIMELY payments and information. The people running it are very incompetent. You NEVER can get them on the phone. At best you can leave a message and you’re told it’s a 2 business day wait for a return phone call. Emails go unanswered for weeks and follow up emails must just get trashed. Complaints and copies to the executives in charge are a waste of time. These people do not know how to work with others. Everyone employed there should be FIRED. They are all losers and there isn’t a good thing to say about anyone of them.

    Bottom line is the MD prepaid college trust plan is a joke and the people running it are very incompetent. There isn’t anything good to say about this program. It’s almost a scam.

  15. Grateful says:

    Thank you all for posting these comments, even to such and old thread. I’m in the CIP and thought maybe I made the wrong decision. Thankfully, not.

  16. OmalleySucks says:

    I enrolled my baby in the MD prepaid trust and the investment plan on the same day using ACH bank withdrawal. The investment plan went through very smoothly. My prepaid trust has not gone through. It has been 8 weeks now. The customer service is really horrible, I got a return call about 2 weeks ago. It sounded like the girl was in her car on a cell phone. She basically said we are a small agency and very backed up. That’s it, it seemed she only had my name and number and never even looked at my account.

    I’m going to retransfer my money to another bank account, so good luck getting it. If you try to contact me, good luck there too. This plan’s poor administration and incompetence have now saved me from giving the state a 20 yr loan.

    I’m just glad our state caters more to illegal immigrants than it does its own citizens.

  17. HelpToPCT says:

    This post is really helpful. I could have put money in PCT. But all of you guys had saved me from doing it. Thanks all for your comments & writer for this article. I can’t thank you more..because this helped me easily to decide where to put money.

  18. WorstEver says:

    I have never dealt with an organization that is run as poorly as the Maryland Prepaid. Absolutely no one answers the phone and absolutely no one is held accountable for the constant problems and improper handling of my money. I cannot believe that such a company is backed by the state and allowed to be run in such a ridiculous manner. I’ve been waiting for nearly 3 months for them to fix a distribution that they have screwed up 3 times. Unbelievable. No wonder Maryland is in such a horrible state.

  19. Maryland says:

    Fortunately, our financial advisor steered us a away from the PCT way back in the late 90s and we went with the CIP. Our returns have been excellent thanks to a strong stock market and T Rowe’s service in terms of payouts when we request them has also been good. Am posting, just so people know not to abandon the whole Maryland College Savings Plan, but to seriously consider the College Investment Plan. All told, I think we ended up paying just 60% of the total tuition and the rest was covered by earnings because we had invested early and often when our kids were young.

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