Charles Schwab & Co. jumped into the college savings market this week with its announcement that it would soon distribute American Century's Learning Quest Section 529 qualified college savings program.

These plans, which refer to Section 529 of the Internal Revenue Code, are qualified accounts that let families save money, tax-deferred, for children's (or grandchildren's) college tuition. Like 401(k) plans, assets are contributed pretax, then grow tax-deferred until withdrawal. Withdrawals must be used for college tuition and are taxed at the student's rate, which varies by state, but is far lower than the income tax rate their parents or grandparents would pay.

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