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.

Schwab said Tuesday that its program will be officially launched Dec. 15 and will be available in all 50 states.

Rene Kim, vice president of retirement products at Schwab, said it chose to use a 529 plan created and managed by Kansas City, Mo.-based American Century, because American Century is Kansas' designated manager of Section 529 plans. Federal law requires each state to designate a company to manage 529 assets.

Unlike other states, Kansas does not restrict students who save in a Kansas account to schools in the state. "This plan allows a student in Iowa to save in Kansas to go to school in New York," said Chris Doyle, vice president of communications for American Century.

In addition, the Kansas law lets people put up to $127,000 in an account, compared with the $100,000 limit in most states.

Schwab originally considered other college savings plans as well as creating its own plan, but Ms. Kim said another attraction of American Century was that it offered a flexible product with value-added customer services, including individual investment advice and online customer service.

The deal will give American Century access to 4.2 million Schwab customers. It has been offering the plan since July 1 through its own branches and accumulated $16 million of assets under management in five months.

Schwab will offer the plan through its Web site, '800' number, and branch offices, and Ms. Kim said it will begin direct and online marketing.

Ms. Kim said the 529 plan has clear advantages over other college savings programs. Eventually, she said, people will contribute to 529 plans the same as they do to a 401(k) plan.

"This is the most lucrative type of college savings vehicle available," she said. "After retirement, college savings is the second-most-cited reason for investing, and this allows you to save at a realistic level."

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