Every dollar saved. is a step in the right direction. Take the next step now. 1. Read this booklet and the enclosed. 2. Any questions?

Transcription

1 Every dollar saved is a step in the right direction. Take the next step now 2014/2015 Enrollment Highlights Booklet Maryland Prepaid College Trust Maryland College Investment Plan 1. Read this booklet and the enclosed Disclosure Statements first. They describe both Plans in detail to help you make the decision that s best for your family. 2. Any questions? Check the Frequently Asked Questions or call us at 888.4MD.GRAD ( ). 3. Ready to save? Open an account online at CollegeSavingsMD.org or complete the form in the Disclosure Statement.

2 Dear Friends: For our children to succeed, a college education is no longer a point of advantage; it s almost mandatory for entry into today s competitive marketplace. But with college costs continuing to rise, paying for college is becoming increasingly difficult. Doing so requires thoughtful planning and starting your college savings as early as possible. It is our mission to help Maryland families give their children a college education without accumulating significant debt. That s why we re pleased to offer the College Savings Plans of Maryland, which offers tax-free earnings, a generous Maryland State income deduction, affordable payment plans, flexible investment options, and many other benefits. In this booklet, you ll find information about both options offered by the State of Maryland: the Maryland Prepaid College Trust and the Maryland College Investment Plan. Since each is based on a different savings strategy and offers distinct benefits, we ve provided easy-to-read charts and tools to help you decide which is best for you. You may even choose to enroll in both of them. When you re finished, you ll also find everything you need to open an account. Sincerely, College Savings Plans of Maryland Board Nancy K. Kopp State Treasurer, Board Chair Helene Grady Board Vice Chair Lewis A. Robinson Board Secretary W. Gary Dorsch Peter Franchot State Comptroller Catherine McCullough Shultz Acting Secretary of Higher Education Russell V. Kelley, Ph.D. John D. Kenney William E. Kirwan, Ph.D. Chancellor, University System of Maryland Lillian M. Lowery, Ed.D. State Superintendent of Schools Enrolling in the College Savings Plans of Maryland is an important decision for you and your family. Please read the entire Enrollment Kit carefully before deciding to enroll. Section 529 plans offered by other states may offer tax or other benefits to taxpayers or residents of those states that are not available under the College Savings Plans of Maryland. If you live outside of Maryland, you should consider any college savings program offered by your home state or your Beneficiary s home state prior to making a decision to invest in the College Savings Plans of Maryland. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision. In addition, you should periodically assess, and if appropriate, adjust your Section 529 plan investment choices with your time horizon, risk tolerance and investment objectives in mind.

3 Great job! This is the first step toward your child s hopes and dreams. By reading this enrollment kit, you are one step closer to supporting your child s lifelong success. In this kit, you ll find everything you need to know about Maryland s two State-sponsored 529 Plans, both of which are designed to make saving for college easy and affordable: The Maryland Prepaid College Trust lets you lock in tomorrow s tuition at today s prices with affordable payment options and the security of a Legislative Guarantee. The Maryland College Investment Plan, managed by T. Rowe Price, offers a variety of investment portfolios, flexible contribution amounts, and no sales loads, commissions, or enrollment fees. Both Plans Offer Big Benefits Affordability Start saving with as little as $25 a month with the College Investment Plan, or start with a one-semester college plan in the Prepaid College Trust. CHOICE Your child can use both Plans toward nearly any accredited two-year or four-year college nationwide, including U.S. schools with campuses outside the country. Flexibility Both Plans give you options should your child receive a scholarship or grant, delay the start of school, or choose not to use the Plans for other reasons. The Plans also offer a broad range of investment strategies and payment options to fit your family s goals and budget. Tax Savings Earnings in both Plans are tax-free when used toward eligible college expenses. Plus, the College Savings Plans of Maryland are the only 529 plans to offer Maryland taxpayers an annual Maryland State income deduction on contributions of up to $2,500. Saving can cut your out-of-pocket college costs in half. $19,000 To cover $25,000 in college costs, a family could either invest in advance or borrow and repay. A family choosing to invest about $106 a month for 15 years would have made a total out-of-pocket investment of about $19,000. With potential earnings, this could amount to $25,000 to use towards college expenses. A 6% annual return is included but does not represent any particular investment. A family choosing to borrow would pay about $320 per month for 10 years, with payments starting after accruing interest during four years of college and assuming an 8% annual interest rate. This reflects a blend of various interest rates representing various loan types. That s a total of about $38,000 paid for $25,000 in loans. Figures are for illustrative purposes only and not intended to represent the returns of any specific investment. This example does not consider any investment or loan origination fees. Amounts are adjusted to today s dollars and assume an inflation/discount rate of 3% annualized. Saving $38,000 Borrowing? CollegeSavingsMD.org Did you know? You can deduct up to $2,500 from your Maryland State income for each account/beneficiary depending on the Plan, every tax year that you contribute. Every family member who opens an account is eligible for income deductions! /TaxInfo

4 Maryland Prepaid College Trust Tomorrow s tuition at today s prices With the Maryland Prepaid College Trust, you lock in future college tuition at today s prices. And, you get peace of mind knowing that the Prepaid College Trust is backed by a Maryland Legislative Guarantee. We ve seen tuition costs increase at public and private colleges nationwide and these costs may continue to rise until the time your child is ready for college. By enrolling in the Prepaid College Trust, your account will pay future tuition Benefits for the number of years purchased, as described in the Disclosure Statement and summarized below: At a Maryland Public College Full in-state or in-county tuition and mandatory fees At an Eligible Private or Out of State College or Graduate School Up to that year s Weighted Average Tuition of the Maryland public colleges toward the tuition and mandatory fees at the selected college, or a Minimum Benefit, whichever is greater. Also, if your child receives a scholarship or grant, you can use your account toward other eligible college expenses such as room and board, books, course-specific fees, etc. Projected 4-Year Average Tuition Cost Maryland Public Colleges $44, $60, $81, $110, $150,024 This chart shows the anticipated Weighted Average Tuition for four years at a four-year college based on our projected Weighted Average Tuition for of $9,361 at Maryland s public colleges, which is a 6% increase in tuition over the prior year. This chart assumes future annual increases in tuition of 6% for and 7% annually for each following academic year. A projected 10% annual increase in mandatory fees is also included. Using these assumptions, the Weighted Average Tuition for four years of college beginning in 2016 would be $44,890, while the four-year Weighted Average Tuition starting in 2032 would be $150,024.

5 Flexible tuition plans and payment options. Tuition Plans The Prepaid College Trust offers you a variety of tuition plans, which include payment of tuition and mandatory fees. university Plan: Purchase one semester or one, two, three, four, or five years at a four-year college or university. Community College Plan: Our most affordable plan. Purchase one or two years at a community college. However, this plan does not require your child to attend a community college. If he or she attends a four-year college, in or out of Maryland, this plan will pay up to that year s Weighted Average Tuition of Maryland s community colleges towards the tuition and mandatory fees at the selected college. Two-Plus-Two Plan: Purchase two years at a community college and two years at a four-year college. Payment Options The Prepaid College Trust also offers several payment options to help you find one to fit your budget. Lump Sum: A one-time payment. Annual: Equal yearly payments. Five-Year Monthly: 60 equal monthly payments. extended Monthly: Equal monthly payments for a specified number of months that generally continue through July 1st of the projected year of the child s college enrollment (or initial year of eligible use for current 10th 12th graders). down Payments: 25%, 40%, or 55% of the lump sum, with the remaining amount paid by either monthly or annual payments, as described above. Legislative Guarantee In the event that the Trust ever experiences a financial shortfall, Maryland law requires the Governor to include funds in the State budget to allow the Trust to pay your full benefits. As with the entire State budget, the Maryland General Assembly has final approval. After receiving an inheritance from my parents, our first priority was to open Maryland Prepaid College Trust accounts for our two sons. It is important to us to save now so they won t have to borrow in the future. Judy O Connor Maryland Prepaid College Trust Account Holder, not pictured

6 Maryland College Investment Plan Professionally managed by T. Rowe Price The College Investment Plan offers a broad range of investment options managed by T. Rowe Price, an investment leader with more than 75 years of experience. You can choose from two different approaches or use a combination of both to save for your child s future. Enrollment Based Portfolios --- Change automatically with your child s time horizon You simply select a portfolio based on the year closest to when your child is expected to enter college. Portfolios for younger students emphasize stock mutual funds to help assets grow over time, and then shift to an emphasis on bond and fixed income investments as students approach college age. 100% 80% 60% 40% 20% 0% Stocks Bonds and Income Years until college enrollment Portfolio 2030 Portfolio 2024 Portfolio 2018 Years in college Portfolio for College Portfolio 2033 Portfolio 2027 Portfolio 2021 Portfolio 2015 Target allocations as of 10/1/14. Fixed Portfolios--- Investment mixes that remain the same You can choose from six portfolios that invest in a mix of stocks, bonds, or money market mutual funds. Portfolios with greater allocations to stock funds generally carry higher risk and the opportunity for higher returns, while portfolios with more bond and money market funds generally offer less risk and lower returns. Stocks Bonds and Income Bonds Money Market MORE AGGRESSIVE MODERATE MORE CONSERVATIVE 100% 100% 60% 40% 100% 100% 100% Equity Portfolio Global Equity Market Index Portfolio Balanced Portfolio Bond and Income Portfolio Inflation Focused Bond Portfolio U.S. Treasury Money Market Portfolio Target allocations as of 10/1/14. We help make saving for college affordable... Every little bit helps! You can save as little as $25 per month with the College Investment Plan. Use the College Cost Calculator at CollegeSavingsMD.org to understand the future cost of college and to estimate how much you will need to save to reach your college investment goal.

7 Saving now can make a big difference later The Advantage of Starting Early. The chart below shows the difference that starting early and saving monthly can make over time. Investing $200 per month when your child is born could add up to $77,858 in total savings at the start of college. However, waiting just five years means that you could need to save an extra $130 per month ($330 per month total) to potentially reach that same goal. Or consider it this way: if you start saving $200 monthly at your child s birth, you could have over $30,000 MORE than you would by waiting five years to start saving the same amount. That s the power of compounding and tax-deferred growth! $77,858 $47,325 $200 per month $200 per month $200 $330 $470 $1,100 $200 per month $32,940 $14,024 Per month from birth Per month from age 5 Per month from age 8 Per month from age 13 College at age 18 Chart assumes a hypothetical 6% rate of return compounded monthly. This chart is for illustrative purposes and does not represent the return of any specific investment option. Investment returns in a college savings plan will vary and may be higher or lower than this example. Making automatic monthly contributions does not assure a profit or protect against loss during varying market conditions. This illustration does not include fees and any fees assessed by the investment offering could have an impact on returns. I will be opening another account soon for my daughter s second child (#5 grandchild for me). It really makes me happy to be investing in my grandchildren s future. I may not be around when they actually go to college, so the College Investment Plan allows me to be part of their lives forever. Joanie Varney Maryland College Investment Plan Account Holder, not pictured

8 Compare Both Options Within the College Savings Plans of Maryland How can I use the Plans? As a single mother, I want my teenage son to be successful and go to college. When I learned about this program, I immediately enrolled because college costs are so expensive. Since I have been saving little by little, he will have no excuse not to go! Nancy Fuller, with her son Jeffrey What's unique about each Plan?? What are the Maryland tax benefits? Are there federal tax benefits? What are the age requirements? Do I have to live in Maryland? When can I enroll? What are my Plan options? What are my payment choices? How much can I contribute? What are the fees and expenses? Why would I choose both Plans?

9 Maryland Prepaid College Trust Maryland College Investment Plan Use it to pay the full in-state or in-county tuition and mandatory fees at any Maryland public college or up to the Weighted Average Tuition toward nearly any private or out-of-state college. It lets you lock in tomorrow s tuition at today s prices, and it is backed by a Maryland Legislative Guarantee. Any earnings are Maryland tax-free when used toward eligible college expenses. Each account holder can also deduct up to $2,500 of payments each year from Maryland income per account $5,000 for two, $7,500 for three, etc. Payments in excess of $2,500 per account can be deducted in future years until the full amount of payments has been deducted. Use it at nearly any public, private, or technical college nationwide for any eligible expenses such as tuition, fees, room and board, books, course-specific fees or supplies. You can choose from a variety of investment options ranging from more aggressive to more conservative investment strategies. Your investment return and principal value will vary, depending on the investment option you choose. Any earnings are Maryland tax-free when used toward eligible college expenses. Each account holder can also deduct up to $2,500 of contributions each year from Maryland income per beneficiary $5,000 for two, $7,500 for three, etc. Contributions in excess of $2,500 can be deducted for up to the next 10 years. Contributions in following years could be eligible for deduction; however, you cannot deduct more than $2,500 per beneficiary in any year or extend the 10-year limit on each year s contribution. Yes. Any earnings are federally tax-free when used toward eligible college expenses. Enrollment is open to children from newborn through 12th grade, although accounts must be open for at least three years before tuition benefits can be paid. Either the account holder or child must be a resident of Maryland or Washington, D.C. when the account is opened. December 4, 2014 through April 15, 2015 year-round for newborns. There are a variety of tuition plans. Select from one semester or one to five years at a four-year college, one or two years at a community college, or a combination. You may change your tuition plan at nearly any time. There are many different payment options. You can select the one that s right for your family budget. The cost is fixed by the number of semesters or years purchased, age of child, and payment plan selected. You may change your payment options at any time. See What are my payment choices? The Prices and Fees section of the Prepaid College Trust Disclosure Statement contains information on all applicable fees and expenses. Yes. Any earnings are federally tax-free when used toward eligible college expenses. Enrollment is open to children or adults of any age. No. There are no State residency requirements. Any time. You can invest in enrollment-based portfolios, fixed portfolios, or a combination. Each time you make a contribution, you may select a new portfolio. See How much can I contribute? Your minimum investment is either $25 per portfolio through automatic monthly contributions or a $250 minimum initial investment per portfolio by check. You can invest up to a maximum account balance of $350,000 per beneficiary. The Fees and Expenses section of the College Investment Plan Disclosure Statement contains information on all applicable fees and expenses. Choosing both Plans allows you to benefit from the features of each Plan and diversify your higher education savings. You could use the Prepaid College Trust towards tuition and mandatory fees and the College Investment Plan towards room and board, books, or additional tuition at a private or out-of-state college. You may also be eligible for an additional Maryland State income deduction. Select one or both Plans. Either Way It's a smart choice.

10 Frequently Asked Questions about the College Savings Plans of Maryland Does my child have to attend a Maryland public college? NO. You can use your accounts toward the costs of nearly any public or private, two-year or four-year college nationwide, as long as the student is enrolled in a U.S.-accredited college, university, or technical school that is eligible to participate in U.S. Department of Education student financial aid programs. To find out if a particular school is an eligible institution, search for a school code at The College Savings Plans of Maryland can also be used for nearly any graduate school, medical school, or law school, among others, nationwide. Can I open more than one account per beneficiary? YES. You can open multiple accounts per beneficiary. In the Prepaid College Trust you can purchase contracts for up to seven years of college with no more than five years in a single account. In the College Investment Plan, you can invest in one or more of the different investment options offered. In both Plans, you cannot have multiple beneficiaries, however, on the same account. What tax benefits are offered? The College Savings Plans of Maryland offers hard-to-beat Maryland State and federal tax benefits, starting with taxdeferred savings and a Maryland State income deduction for Maryland taxpayers. Any earnings are Maryland and federally tax-free when used toward eligible college expenses. If we enroll in the College Savings Plans of Maryland, can we still apply for financial aid? YES. Participation in the College Savings Plans of Maryland does not limit your ability to apply for financial aid or a student s receipt of merit-based financial aid, including academic or athletic scholarships. Like most investments, however, it may affect your ability to receive need based financial aid, although the federal financial aid formula currently counts at most only 5.6% of your non-retirement assets to be used for college expenses each year. This means that if you have saved $5,000 for college, the aid amount you may be eligible for would be reduced by only $280. Since the majority of federal financial aid is offered in the form of loans, any college savings can help to reduce reliance on student loans. What happens if my child receives a scholarship or grant? There are several options you can choose from: Use your account to pay any tuition and fees not covered by the scholarship or grant; Apply your account toward other eligible college expenses such as room and board, books, or course-specific fees (Prepaid College Trust accounts are first used to pay remaining tuition and mandatory fees); Transfer your account to another member of the student s family; Keep any unused funds or benefits in your account to pay for future college expenses, including graduate school; or Withdraw any unused funds or benefits up to the amount of the scholarship or grant without penalty, although income taxes on earnings may apply. Can I change the child that is listed on the account? YES. You can transfer your account without any taxes or penalties to any member of the beneficiary s (child s) family as defined by the Internal Revenue Service. This definition includes the beneficiary s spouse and the following other relatives of the beneficiary: Child or Stepchild, Sibling, Stepsibling or Halfsibling, Parent or Stepparent, Grandparent, Grandchild, Niece or Nephew, Aunt or Uncle, First Cousin, Mother- or Father-in-law, Sonor Daughter-in-law, Brother- or Sister-in-law, Spouse of any individual listed (except First Cousin). Prepaid College Trust accounts must have at least one semester of remaining benefits in order to change the beneficiary. What if my child does not go to college immediately after high school? The College Savings Plans of Maryland does not require the child to attend college immediately after graduating high school. The Prepaid College Trust allows up to a 10-year delay (plus time served in active U.S. military service) before you have to start using your benefits. With the College Investment Plan, there are no restrictions on when the account can be used to pay for eligible college expenses. But with both Plans, you also have the following options: Transfer your account to another member of the beneficiary s family, or Take a distribution or reduced refund from your account. (Plan penalties, federal tax penalties and/or income taxes on earnings may apply. See the Disclosure Statements for additional details.) What if the beneficiary or I move out of Maryland after I open an account? You can continue your account, and your beneficiary can still use the account to attend any eligible college or graduate school in the country. However, if you move out of state and no longer pay Maryland income tax, you will no longer receive the Maryland State tax benefits. With the Prepaid

11 College Trust, if the child is no longer a Maryland resident but decides to attend a Maryland public college, we will still pay the full in-state or in-county tuition and mandatory fees. You or the child would be responsible for any out-of-state tuition charges. If you also have a College Investment Plan account, you could apply it toward any other eligible expenses. What if I experience a financial hardship and need to withdraw the funds for a purpose other than college expenses? You may request a distribution or refund at any time. If the funds are not used for eligible college expenses, Maryland State and federal taxes, plus a 10% federal penalty, will apply to any earnings portion of your distribution or refund. For details about specific tax and other penalties for each Plan, please read the Key Federal Tax Issues and Key State Tax Issues sections in each of the enclosed Disclosure Statements. What if I already have a 529 plan? Can I transfer my account to the College Savings Plans of Maryland? YES. We will accept a rollover of your account with another 529 plan into the College Savings Plans of Maryland. To complete a rollover, simply submit an Enrollment Form for your desired Plan, along with a Rollover Form. Both forms are available on our website or you may call us for assistance. You may also need to contact the sponsor of your current 529 plan for additional details on rolling over your account. When can I enroll a newborn? A newborn infant can be enrolled in either Plan from the date of his/her birth. An infant under the age of one year can be enrolled in the Prepaid College Trust any time during the year until his/her first birthday at prices that are in effect when the enrollment is completed. You may also enroll in the College Investment Plan and name yourself as the beneficiary in anticipation of the birth or adoption of a child or grandchild. Do my contributions to the College Savings Plans of Maryland qualify as a gift under federal law? YES. The Internal Revenue Code provides that payments to an account in the College Savings Plans of Maryland are a completed gift for federal gift tax purposes. Under certain conditions, you may average your total gift over five years to remain within the annual IRS gift-tax exclusion. Please consult your tax advisor for more information. What are the risks involved? As with any investment, there are risks involved in investing in the College Savings Plans of Maryland. To learn about the risks, please read and carefully consider the Risk Factors section in the Prepaid College Trust Disclosure Statement and the General Risks and Investment Risks sections of the College Investment Plan Disclosure Statement. Enroll now-- It's Easy For the Maryland Prepaid College Trust: Choose a tuition plan for your desired number of semesters or years of college. Choose the payment plan that best fits your family s budget. Complete an enrollment form for each child you want to enroll by the end of the enrollment period either online or postmarked by April 15, For the Maryland College Investment Plan: Choose one or more investment options. Choose how much and how often you wish to contribute. Complete an enrollment form for each student you wish to enroll. You ll find all the information you need in the Disclosure Statements included with this booklet. Please read them carefully. Enrollment Methods: Enroll online at CollegeSavingsMD.org or by using the forms we ve included, which you may mail or hand deliver. You may also copy these forms for multiple enrollments. Enrolling online may require use of a credit card to pay the enrollment fee(s) for the Prepaid College Trust. This is the only time the College Savings Plans of Maryland will accept a credit card. Payment/Contribution Methods: Among other options, you can pay or contribute by automatic contributions from your bank account, payroll deduction from a participating employer, check or money order. To take advantage of the Maryland income deduction for the 2014 tax year, your enrollment form and contribution must be either completed online and processed by your bank or postmarked by December 31, 2014.

12 Maryland Prepaid College Trust Mailing Address 217 East Redwood Street, Suite 1350 Baltimore, MD Fax: Monday through Friday 8:30 a.m. to 5:00 p.m. For General Inquiries: For Existing Account Holders: Where to find more information Prepaid College Trust Disclosure Statement Investment Options...4 Federal and State Tax Information... 15,16 Account Holder and Beneficiary Requirements About the Administrator...12 Contribution and Withdrawal Limitations and Penalties... 21,22 Risk Factors...10 Fees and Costs...8 Investment Performance...14 Maryland College Investment Plan Mailing Address P.O. Box Baltimore, MD Fax: T. Rowe Price Associates, Inc., Program Manager and Investment Adviser T. Rowe Price Investment Services, Inc., Distributor/Underwriter Where to find more information College Investment Plan Disclosure Statement Investment Options Federal and State Tax Information...19,20 Account Holder and Beneficiary Requirements...2 About the Administrator Contribution and Withdrawal Limitations and Penalties... 7, 22 Risk Factors... 6,16 Fees and Costs Investment Performance This Highlights Booklet is part of the College Savings Plans of Maryland Enrollment Kit. The Enrollment Kit consists of this Highlights Booklet and Disclosure Statements for the Prepaid College Trust and the College Investment Plan, with accompanying Enrollment Forms. The Enrollment Kit has been identified by the College Savings Plans of Maryland as the Offering Materials intended to provide substantive disclosure of the terms and conditions of an investment in the College Savings Plans of Maryland. The Enrollment Kit is designed to comply with the Disclosure Principles Statement No. 5, adopted by t he College Savings Plans Network on May 3, Copyright 2014 College Savings Plans of Maryland and T. Rowe Price Associates, Inc US-4534 November 2014 Administrator 217 East Redwood Street, Suite 1350 Baltimore, MD Monday through Friday 8:30 a.m. to 5:00 p.m. CollegeSavingsMD.org 888.4MD.GRAD ( ) Check out our YouTube channel,youtube.com /CollegeSavingsPlans, to see College Savings Plans of Maryland Account Holders share their stories.!!

13 2014/2015 Maryland Prepaid College Trust Disclosure Statement & Enrollment Form Enrollment Period: December 4, 2014 April 15, 2015

14 TABLE OF CONTENTS Frequently Asked Questions... 1 Prices and Fees... 4 Operations and Additional Information Risk Factors Prepaid College Trust Operations...11 Plan Governance and Administration...12 Comprehensive Investment Plan...12 Performance Information Contract Pricing Key Federal Tax Issues Key State Tax Issues Privacy Policy...17 Creditor Protections...17 Contract Enrollment Form... Center of Booklet Section 529 plans offered by other states may offer tax or other benefits to taxpayers or residents of those states that are not available under the Maryland Prepaid College Trust. If you live outside of Maryland, you should consider any college savings program offered by your home state or your Beneficiary s home state prior to making a decision to invest in the Maryland Prepaid College Trust. Keep in mind that state-based benefits should be one of many appropriately weighted factors to be considered when making an investment decision. In addition, you should periodically assess, and if appropriate, adjust your 529 plan investment choices with your time horizon, risk tolerance and investment objectives in mind. This Disclosure Statement is part of the College Savings Plans of Maryland Enrollment Kit. The Enrollment Kit consists of a Highlights Booklet and Disclosure Statements for the Prepaid College Trust and the College Investment Plan, with accompanying New Account Enrollment Forms. The Enrollment Kit has been identified by the College Savings Plans of Maryland as the Offering Materials intended to provide substantive disclosure of the terms and conditions of an investment in the College Savings Plans of Maryland. The Enrollment Kit is designed to comply with the Disclosure Principles Statement No. 5, adopted by the College Savings Plans Network on May 3, CollegeSavingsMD.org

15 MARYLAND PREPAID COLLEGE TRUST DISCLOSURE STATEMENT This Disclosure Statement contains important information you should review before opening an Account in the Maryland Prepaid College Trust (Prepaid College Trust), including information about the benefits and risks of investing. This information is believed to be accurate as of the print date, but is subject to change without notice. No one is authorized to provide information that is different from the information in the most current form of this Disclosure Statement. Please read it carefully and save it for future reference. Certain capitalized terms used in this Disclosure Statement are defined in the Contract starting on page 18. FREQUENTLY ASKED QUESTIONS What is the Maryland Prepaid College Trust? The Maryland Prepaid College Trust allows you to lock in future college tuition at today s prices, and your Account may be used at nearly any college nationwide. You are eligible for generous federal and Maryland State tax benefits and the Prepaid College Trust is backed by a Maryland Legislative Guarantee. There are three types of tuition plans. University Plans can be purchased for one semester up to seven years, with no more than five years purchased on a single Account, or a more affordable Community College Plan can be purchased for one or two years. For more flexibility there is also a Two-Plus-Two Plan that combines the first two years of the Community College Plan with two subsequent years of the University Plan. Who can enroll? The Prepaid College Trust is open to children from newborn through 12th grade. Accounts must be open for at least three years before tuition benefits can be paid. Either you or the child must be a resident of Maryland or D.C. at the time of enrollment and both must be a U.S. citizen or resident alien. When can I enroll? Your Enrollment Form and Enrollment Fee must be completed online or completed and postmarked no later than April 15, 2015 to be eligible for prices. Enrollments are accepted outside of an enrollment period for the following types of enrollments at prices in effect when we receive your enrollment: Newborn infants, who can be enrolled anytime during the year from the date of their birth until their first birthday; Purchase of additional semesters/years for a current Beneficiary of a current Account Holder; or A new Account if the same Account Holder and Beneficiary are currently enrolled in the Maryland College Investment Plan. What are the fees associated with the Prepaid College Trust? The operating expenses of the Prepaid College Trust are covered by 2.5% of Contract payments. In addition, each new Prepaid College Trust Account is charged an Enrollment Fee. A complete Schedule of Fees can be found on page 8. What will the Prepaid College Trust pay when my child attends college? For the tuition plan you purchase, provided that your child (Beneficiary) enrolls in college as a full-time student; at least three years have passed since his or her enrollment in the Prepaid College Trust; and all payments have been satisfied on the Account: If your Beneficiary attends a Maryland public college, the Prepaid College Trust will pay the full in-state or in-county tuition and mandatory fees (Tuition) at that college or your Minimum Benefit, whichever is greater. If your Beneficiary attends a private or out-of-state college, the Prepaid College Trust will pay Tuition up to either the Weighted Average Tuition or your Minimum Benefit, whichever is greater. You would then have to make up any difference. See Half-Time Benefits in Article IV of the Contract if your child enrolls as at least a half-time student. What is the Weighted Average Tuition? The Weighted Average Tuition is the in-state or in-county Tuition at each Maryland public college times the number of full-time equivalent in-state or in-county students enrolled at that college, added together. This total is then divided by the number of full-time equivalent in-state or in-county students enrolled at all Maryland public colleges. There is a separate calculation for the four-year public colleges and the two-year public community colleges in Maryland. The Board calculates the Weighted Average Tuition once each year, typically in the fall for the following year, by applying its projected increase for tuition and mandatory fees, as used to determine Contract prices, to the current year s Weighted Average Tuition. The Weighted Average Tuitions for the Academic Year are $9,361 for the four-year public colleges and $4,403 for the community colleges. Enrollment at current prices is open until April 15, After that, enrollments can be accepted if they meet certain conditions MD.GRAD

16 How do my payments compare with projected future Tuition? The chart below demonstrates how your payments for the four-year University Plan compare to our projected cost of four years of the Weighted Average Tuition when your Beneficiary reaches college age. For example, if your Beneficiary is in Kindergarten, using the Extended Monthly Payment Option, your total payments to the Prepaid College Trust for four years of university Tuition will be $65,664 ($456 per month for 144 months). This is 64% of our anticipated four years of Tuition cost beginning in 2027, your Kindergartener s projected freshman year of college, which is $102, Year University Contract Costs vs. Projected Weighted Average Tuition $150,000 $150,024 $140,000 $130,000 $120,000 $110,000 $100,000 $90,000 $102,459 Projected Weighted Average Tuition Growth is for illustrative purposes only. Actual Weighted Average Tuition growth may be higher or lower than projected and is updated annually. $80,000 $75,737 $70,000 $60,000 $50,000 $56,121 $40,000 $30,000 $20,000 $10, th grade 4 th grade Kindergarten Infant Lump Sum 5-Year Monthly Annual Extended Monthly Projected Weighted Average Tuition Is there a minimum amount the Plan will pay? Yes. Your Minimum Benefit is defined as the payments you make, plus a reasonable rate of return. This rate is equal to a monthly rate of return of a U.S. Government Security with a constant maturity of one year minus 1.2%, but will never be less than zero. However, this rate has been zero since October In the event that Tuition is less than your Minimum Benefit, you may use the difference for other Qualified Education Expenses (as defined on page 19) such as room & board and books. See Minimum Benefits in Article IV of the Contract for a complete description. How does the Legislative Guarantee work? In the event that the Trust ever experiences a financial shortfall, Maryland law requires the Governor to include funds in the State budget to allow the Trust to pay your full Benefits. As with the entire State budget, the Maryland General Assembly has final approval. For additional information, please see the section titled Prepaid College Trust Operations on page 11. How does the State income deduction work for the Prepaid College Trust? Maryland taxpayers receive a maximum $2,500 deduction from their State adjusted gross income annually per Account for contributions to the Prepaid College Trust. The Account Holder is the only person who can take advantage of the Maryland State income deduction for contributions he or she has made. Contributions made in excess of $2,500 per Account in a single year may be carried forward and deducted from your State adjusted gross income in consecutive future years until the full amount contributed to the Account has been deducted, subject to the $2,500 annual limit. For additional information, see the section titled Key State Tax Issues on page 16. CollegeSavingsMD.org 2

17 Can there be two Account Holders on an Account? No. Only one person can be named as the Account Holder. Only the Account Holder can make decisions regarding the Account such as choosing a payment option, changing Beneficiaries, claiming Benefits, etc. However, the Account Holder may designate another person in writing who may request or receive information regarding the Account. Am I allowed to have both a Prepaid College Trust Account and another 529 Account such as the Maryland Investment Plan? Yes. Complementary college savings options may be beneficial for families seeking a diversified college savings portfolio with an investment in the Prepaid College Trust and an investment like the College Investment Plan. Can I change my payment option or pay off my Account early? Yes. You can change your payment option at any time for a nominal administrative fee (see Schedule of Fees on page 8). You may also pay off your Account at any time. Payoff amounts will be less than your original total Contract payments and are available by accessing your Account on our website or by contacting our office. You may accelerate your payments in either of the following ways: 1) Pay more than your monthly or annual payment amount. This may lessen the number of monthly or annual payments you will have to make. This will not reduce the total amount of your payments. 2) Reduce the total amount of your payments by making a single payment of at least 25% of the payoff amount. How do I make my payments? Payments must be made by check, money order, electronic funds transfer or payroll deduction. Does the Prepaid College Trust send me an Account statement or a tax form for my payments? The Prepaid College Trust sends an Annual Statement of Account for each Account during the first quarter of the year. It will show your payments and any Benefits that have been paid on the Account. At any time, however, you may view your Account on our website or call our office to request an Account Statement. You will not receive a tax form reporting your annual payments to your Account. Is there a daily value for my Account? No. The Prepaid College Trust is not like a mutual fund investment. Your Account does not have a daily net asset value. The Prepaid College Trust is a pooled fund that invests payments made by Account Holders to provide future Benefits. The value of your Account will ultimately be determined by the Benefits that your Beneficiary receives based on the college or university that he or she attends. Your Account may also be valued when you make certain changes such as requesting a refund, reduced refund or initiating a transfer. In these instances, your Account will be valued as of the date of the transaction and as specified in the Contract. What if my Beneficiary receives a Scholarship? If your Beneficiary receives a Scholarship, you have a several options: You may continue to use your Benefits up to the amount of the Scholarship towards other Qualified Education Expenses such as room, board, books, or additional tuition at a private or out-of-state college; You may change the Beneficiary to another Member of the Family of your Beneficiary; You may keep Benefits in your Account to pay for future Qualified Education Expenses at either the undergraduate or graduate level; or You may request a refund up to the amount of the Scholarship. There are many options if your Beneficiary receives a Scholarship including changing Beneficiaries. What if my Beneficiary delays college attendance? A Beneficiary has up to 10 years after his/her projected year of college enrollment to begin to use Benefits. In addition, any years spent in active U.S. military service are added to the 10-year limit MD.GRAD

18 PRICES AND FEES All prices are based on several factors; for a full list of these factors, see Contract Pricing on page 14 of this Disclosure Statement. If you wish to take advantage of the Maryland State income deduction for the 2014 tax year, your completed Enrollment Form and applicable payment must be completed electronically (processed by your bank) or postmarked by December 31, The following tables provide Enrollment Period contract prices. To determine a price, decide which tuition plan you want, then find the Beneficiary s grade or age and projected enrollment year (or earliest year he/she is eligible to use Benefits) on the left-hand side of the chart. For example, if the Beneficiary will be in the 9th grade during the school year, the projected year of college enrollment will be For Beneficiaries in the 10th-12th grades, the earliest year they are entitled to use Benefits will be For further information, see Minimum Maturity in Article IV of the Contract. Next, the columns moving across the chart will provide you with the prices and number of payments for different payment options: lump sum, annual, five-year monthly, and extended monthly. If you would like to use the down payment option, please see page 9 as an example. The down payment options for all tuition plans and additional contract price options are posted on our website or available by calling our toll-free number. The monthly and annual payment prices include a 7.5% interest component. If you enroll during the Enrollment Period, your first payment will be due August 1, If you choose the down payment option, your first payment and the down payment are both due August 1, COMMUNITY COLLEGE PLAN 1 YEAR Annual Payments Extended Monthly Payments Grade/Age Projected Lump Sum 5-year Monthly 9/1/14 Enrollment/ Payment Amount Number Payment Amount Number Initial Eligibility $4,947 $1,774 3 N/A $ ,907 1,760 3 N/A ,869 1,746 3 $ ,832 1, ,795 1, ,761 1, ,727 1, ,695 1, ,663 1, K ,634 1, ,606 1, ,579 1, ,552 1, ,527 1, Infant ,504 1, CollegeSavingsMD.org 4

19 COMMUNITY COLLEGE PLAN 2 YEARS Annual Payments Extended Monthly Payments Grade/Age Projected Lump Sum 5-year Monthly 9/1/14 Enrollment/ Payment Amount Number Payment Amount Number Initial Eligibility $9,854 $3,530 3 N/A $ ,776 3,501 3 N/A ,701 3,474 3 $ ,628 3, ,557 3, ,488 3, ,422 3, ,359 3, ,299 3, K ,240 3, ,184 3, ,130 3, ,079 3, ,031 3, Infant ,986 3, UNIVERSITY PLAN 1 SEMESTER Annual Payments Extended Monthly Payments Grade/Age Projected Lump Sum 5-year Monthly 9/1/14 Enrollment/ Payment Amount Number Payment Amount Number Initial Eligibility $5,718 $2,050 3 N/A $ ,687 2,039 3 N/A ,657 2,028 3 $ ,629 2, ,604 2, ,579 1, ,556 1, ,535 1, ,515 1, K ,497 1, ,479 1, ,465 1, ,453 1, ,440 1, Infant ,430 1, MD.GRAD

20 UNIVERSITY PLAN 1 YEAR Annual Payments Extended Monthly Payments Grade/Age Projected Lump Sum 5-year Monthly 9/1/14 Enrollment/ Payment Amount Number Payment Amount Number Initial Eligibility $11,266 $4,035 3 N/A $ ,206 4,013 3 N/A ,147 3,991 3 $ ,091 3, ,040 3, ,994 3, ,947 3, ,906 3, ,866 3, K ,830 3, ,798 3, ,768 3, ,744 3, ,719 3, Infant ,699 3, UNIVERSITY PLAN 2 YEARS Annual Payments Extended Monthly Payments Grade/Age Projected Lump Sum 5-year Monthly 9/1/14 Enrollment/ Payment Amount Number Payment Amount Number Initial Eligibility $22,472 $8,042 3 N/A $ ,351 6,212 4 N/A ,239 5,117 5 $ ,133 4, ,033 3, ,939 3, ,851 3, ,771 3, ,696 3, K ,628 3, ,566 3, ,512 3, ,461 3, ,419 3, Infant ,383 3, CollegeSavingsMD.org 6