Prepaid-college benefits not cut, state says


Maryland's prepaid college tuition plan clarified its recent contract changes yesterday, saying benefits are not being cut in half for students attending private or out-of-state schools as some parents feared.

Officials with the Maryland Prepaid College Trust received as many as 40 phone calls and 40 e-mail messages from families concerned that the state plan slashed benefits, said Joan Marshall, executive director of the College Savings Plans of Maryland.

State officials mailed letters Friday describing the changes.

Under the plan, families can prepay college tuition at Maryland public colleges. If the student attends a private or out-of-state school, the family will receive a sum worth the weighted average tuition of Maryland public colleges.

Along with its annual statement to 24,000 participants, the program included a summary of contract changes.

Among them:

"New language was added to clarify that, if your beneficiary attends an eligible institution that is private or out-of-state as a full-time student, the prepaid college trust will pay no more than one-half of the weighted average tuition of the Maryland public colleges in the tuition plan you purchased toward each semester or the actual tuition, whichever is less."

Translation: Students will get half of the year's tuition in the first semester, and get the rest the second semester.

The clarification of the rules was to address questions by parents wanting the full year's tuition all at once, Marshall said. "We struggled to make it clear," she said. "This is just not simple."

The plan posted a clarification yesterday on its Web site at

Open enrollment in the prepaid plan runs through March 24.

So far, Marshall said, more than 900 have enrolled.

Prepaid plans could become more attractive to families. Under federal legislation taking effect July 1, prepaid plans will be treated more favorably under financial aid formulas. That means more need-based aid may be available to a student.

Currently, prepaid plans reduce need-based financial aid dollar for dollar. Under the new law, the prepaid plan would be considered an asset of the parent who was the account holder. As such, the plan would reduce aid by no more than 5.64 percent of the account's value, said Mark Kantrowitz, publisher of FinAid, an online provider of financial aid information.

This treats prepaid plans similar to other 529 college savings plans under aid formulas.

"The impact of these changes may make people take a look at prepaid tuition plans as a serious option," Kantrowitz said.

The new law might come into effect too late for the coming school year, because colleges might allocate their financial aid before July, Marshall said. It's unclear whether adjustments could be made later, she said.

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