Investments in Maryland’s college savings plan grew 17 percent over the past fiscal year as the state’s residents looked to relative safe havens to store college funds, according to the College Savings board’s annual report.
Montgomery County drove the increase, claiming a whopping 38 percent of the 16,965 new Maryland College Investment Plan accounts. New investments across the state totaled $348
million, about $28 million more than fiscal 2009, as the average account size increased 17 percent to $12,637.
The board thanked “more favorable investment markets,” as the Dow Jones industrial average climbed 1,327 points, or 15.7 percent, during the fiscal year that ended June 30.
Nearly $1.9 billion is invested in the college plans.
Maryland, like many states, offers its residents a way to start saving for college tuition when their children are infants. Those participating in the College Investment Plan choose from 13 strategies that vary from conservative to aggressive, and can use the fund for any U.S. college.
Another option is the no-risk Maryland Prepaid College Trust, which locks in current college tuition prices and can be used at any in-state college; it grew by 1,943 new accounts — 35 percent from Montgomery — to 28,000 accounts worth $500 million. The trust was 100 percent funded as of June 30, thanks to higher-than-projected investment earnings and lower-than-expected tuition increases at Maryland public colleges, according to the new report.
Both plans offer annual tax deductions of up to $2,500 per account.
“In this case, money isn’t chasing yield — money is chasing safety,” said Roger Staiger, adjunct professor of finance at Johns Hopkins University. “People were putting money in real estate, but because of the financial Armageddon, people are looking to protect their money and their children’s college fund.”
People are opting for the state investment plan because of “the perceived reduction in risk of going through the Maryland plan,” Staiger said. “People no longer have certainty in their ability to invest, and they’re hoping there’s more competency in plan managers.”
In fiscal 2009, Montgomery County residents opened 37 percent of the college fund’s investment plans and 34 percent of prepaid accounts.
Warren Goldman, a Silver Spring accountant who consults on the plans, said Montgomery clients’ interests haven’t wavered: “I saw the same steadiness before the recession and after the recession.”
