WASHINGTON – The state has opened the Maryland Prepaid College Trust Fund to residents of Washington, D.C., one of several changes announced Wednesday that are aimed luring more participants into the program.
Officials said Maryland taxpayers will not be affected by the changes to the fund, which is designed to be self-supporting and which they said is on track after a slow start two years ago.
“The idea is to get more kids into college. The hope was this would act as a powerful incentive,” said Karl Spain, a trust fund board member.
The state-run program lets parents put tax-free money away for their children’s college tuition, in one lump sum or in installments. Plan purchasers pay current tuition rates, which are honored when the child attends college, regardless of any tuition increases in the interim.
The money is invested by the fund trustees and paid out when a child goes to college. The state’s only investment is the cost of operations and administration for the board.
During the first enrollment period, in 1998, about 1,100 families joined the program. Enrollment grew this year to 3,700. Once the current participants pay what they promised, they will have contributed $70 million to the fund, which will have a surplus of $4.7 million, said board spokesman Doug Neilson.
The decision to add D.C. residents to the pool of potential investors came after Congress passed the D.C. College Access Act, which would allow District residents to attend Maryland or Virginia public colleges at in-state tuition rates. The bill is expected to be signed by President Clinton, but there is no indication when he will do so, said an aide to Rep. Thomas M. Davis III, R-Va., a sponsor of the bill.
In 1998, only about 1 percent of the undergraduates enrolled in Maryland public colleges listed the District as their “area of origin,” said Chris Hart, a spokesman for the University System of Maryland. Many District residents who could afford college had no incentive to go to school nearby, so many went to college in the South or Midwest, said Neilson.
But many more could not afford college at all: Fewer than 25 percent of District youth attend college, said Neilson.
“It’s because of the ominous financial burden that looms for D.C. parents,” said Neilson.
Spain said opening the Maryland Prepaid College Trust Fund to District parents “will affect how many D.C. kids go to college.”
Other changes announced by the board Wednesday include income tax incentives, an expansion of the age at which Maryland students can qualify for the program and greater flexibility in the way students can spend excess funds.
Maryland residents will now be able to deduct up to $2,500 a year in trust fund payments from their state income taxes. That benefit will not be available to D.C. residents.
Board officials also announced that children in the 10th grade will now be eligible to join the fund, which previously cut off eligibility after the ninth grade. Officials said the change was a response to parents’ requests.
“Many parents focus on how they’re going to pay for college at that (10th- grade) year,” said Spain.
The final new benefit allows students to take savings that were not needed for college and apply them to graduate school. Previously parents who put too much money in the trust fund could only receive a refund or transfer the payment to a sibling.
Neilson said the board’s confidence is growing after a slow start that was overshadowed by unrealistic expectations. He said the fund, which has to average 7.5 percent return on its investments to stay financially sound, ended its first full fiscal year June 30 with a return of 12.8 percent on its investments.