A Registered Education Savings Plan can make college, university, trade school, apprenticeship training, or other eligible post-secondary education easier to manage. But once the money is ready to be used, students and families can still make costly mistakes.
Statistics Canada reported that average tuition for Canadian undergraduate students is expected to reach $7,734 in the 2025/2026 academic year, while graduate tuition is expected to average $7,978. That does not include rent, books, supplies, transportation, food, technology, or daily living costs. Source: Statistics Canada, “Tuition In Canada: Modest Increases And Widening Gaps, 2025/2026.”
This is why the RESP planning process must not end once the student receives an acceptance letter. The withdrawal stage is as important as the saving stage. RESP planning for post-secondary students does not only mean having access to funds, but having the ability to withdraw these funds in the correct order and timing.
An effective Canadian RESP planning strategy must link RESP withdrawals with student budgeting, tax planning, scholarship applications, part-time income and debt management. This is because there are five very common mistakes in RESP withdrawal that students make.
Mistake 1: Not Understanding What Expenses Can RESP Funds Cover
A common myth is that the money held within an RESP fund can only be used to cover tuition payments. This is untrue. According to the Government of Canada, Educational Assistance Payments can go towards education costs like tuition, books, tools, transportation, and rent, as long as the student qualifies for post-secondary education. Reference: Government of Canada, “Pay For Education Using The Registered Education Savings Plans And Related Benefits”.
This is important since education costs at the post-secondary level extend beyond the tuition bill. A student would require money for textbooks, a laptop, software, transport costs, residence costs, rent costs, food, supplies, laboratory equipment, uniforms, professional tools, examination costs, and internet connectivity.
The money required for covering education expenses in an RESP fund should depend on the actual budget of the school. Nursing, trades, business, and engineering students may require very different education costs. For example, a trades student requires professional tools, whereas a student in residence requires help with rent and transport costs.
What went wrong was that the funds were withdrawn from the RESP without making a comprehensive list of all the expenses associated with the school term. If the withdrawal is solely dependent on the tuition, then the student will have to get credit cards, a line of credit, or student loans midway through the semester.
The right way would have been for the student to make a comprehensive education budget before withdrawing any money. In the budget, you can include tuition fees, other compulsory payments, books, rent, transport, food, and any other expenses, including personal expenditure.
Mistake 2: Treating RESP Money Like Extra Spending Money
The amount of RESP money received might seem like an enormous lump sum, especially for those who receive it early during the semester. It becomes a very common dilemma regarding budgeting because although the money is received at an early point, the expenses last many months.
This is where the use of RESP and proper budgeting become connected. A Registered Education Savings Plan is intended to help pay for post-secondary education, and not for month-to-month budgeting. A student who uses too much of their money in September would be hard-pressed in November.
Budgeting tips for students using their RESP money would be simple. Split the school year into monthly amounts. Separate school expenses from personal ones, such as tuition and rent. Prioritize textbooks and school needs. Make sure there is some sort of emergency budget for unexpected school expenses.
For instance, when an individual receives RESP amounts for the semester, they would start by paying tuition fees or saving up for them first. Then the next step would be making payments for rent, books, tools, transport, and food. After that, whatever is left over for expenditure should be determined.
Advice on financial management by students is not meant to apply only to those students who have low income. Even the student who has adequate money in his or her RESP account can face difficulties without proper management.
Mistake 3: Ignoring The Tax Treatment Of RESP Withdrawals
Not all RESP withdrawals have the same tax treatment. That’s one of the top RESPs’ tips for college students and their families.
Subscriber contributions may typically be withdrawn without tax because subscriber contributions have already been taxed. But Educational Assistance Payments are an exception to that rule. EAPs include Canada Education Savings Grant amounts, Canada Learning Bond amounts, some provincial incentives, and investment income earned by the RESP.
According to CRA, educational assistance payments will appear on a T4A slip and will be included in income on the student’s income tax and benefit return for the year they received EAPs. Source: Canada Revenue Agency, “Registered Education Savings Plans Payments, Transferring And Rolling Over Registered Education Savings Plans Property.”
It is not always associated with a heavy tax burden because many students have small incomes when studying and might not have to pay any tax at all due to credits and tax deductions on tuition fees. However, it has to be declared.
The error is in believing that all EAP withdrawals do not need to be taxed. It might cause complications for students who have other sources of income apart from their RESP – for example, if a student earns income from a co-op job, internship, summer work, or scholarship. Having an amount of EAP withdrawal and employment income in one year might result in a higher level of taxable income.
Therefore, it would be best to coordinate the withdrawals according to the expected income of the student. If one year is characterized by lower income, while another year is marked by high co-op income, then careful planning is needed.
Mistake 4: Waiting Too Long To Request RESP Withdrawals
Another common mistake that students make regarding RESP withdrawals is the decision to withdraw when the money is desperately needed. Not all withdrawals of money from RESPs are done instantly. The subscriber has to contact the RESP promoter, provide proof of enrolment, and ask for the specific kind of withdrawal.
As stated by the Government of Canada, the subscriber has to apply for the EAP with the RESP promoter, and the beneficiary has to provide proof of enrolment. Source: Government of Canada, “Pay For Education Using The Registered Education Savings Plans And Related Benefits.”
If this request is delayed, then the student might have to resort to using his/her credit card or some loan, which will only result in additional interest costs.
There are also restrictions to be aware of. As per CRA, the maximum amount of EAP that can be withdrawn as soon as a student becomes qualified is $8,000 for the first 13 consecutive weeks in the qualifying educational program. If the student completes the 13 weeks and stays qualified, there is no restriction on EAPs for full-time study. Source: Canada Revenue Agency, “Registered Education Savings Plans Payments.”
This rule can influence first-semester planning. In case the student expects high upfront expenses, it is necessary to consult with the RESP supplier beforehand. The student tuition payment deadline, dormitory deposit, purchase of the laptop, and the cost of books may be due before the start of the whole semester.
The correct approach would be to initiate the withdrawal process right after the student receives his admission letter and enrollment information. Consult with the RESP promoter on documents needed, time needed for processing, kinds of withdrawals allowed, and whether any restrictions exist during the first 13 weeks.
Mistake 5: Using RESP Funds Without A Debt-Reduction Plan
RESP can help minimize student loans, but only if the funds are used properly with a debt strategy in mind. Many students use their RESPs for upfront spending and then have to go for loans because there was no budgeting for the whole year.
How to avoid student debt requires first an understanding of how much you will spend during the year and how much money you will have. This means calculating all your RESPs, scholarships, grants, money from summer jobs, part-time job earnings, money from your parents, and other sources against your costs of living.
Avoiding student debt does not necessarily mean avoiding every dollar in loans since some student loans may still be necessary depending on the circumstances. The most important thing is to avoid unnecessary debt.
A student should ask three practical questions before each withdrawal:
Can this RESP withdrawal reduce the need for high-interest borrowing?
Will this money cover essential education expenses first?
Will enough money remain for the next semester or school year?
RESP funds should also be coordinated with scholarships and grants. If a student receives new funding during the year, they may not need to withdraw as much RESP money immediately. Keeping some RESP funds for a later semester can help reduce future borrowing.
How RESP Funds Can Support Better Student Budgeting
The effective execution of the RESP withdrawal strategy must create order in the student’s life rather than cause chaos. Prior to each new academic year, the student and the subscriber must discuss such questions as available finances, their distribution among parties, prioritization of expenditures, and recording of all expenses.
Each family can decide whether it prefers to pay the tuition directly and to provide the student with a fixed monthly sum for his needs, or to transfer money after all payments on accommodation and books have been made. Each method is acceptable, but the plan must be clearly specified.
Budgeting advice for students who spend their RESP money consists of opening a special account for their studies, defining their monthly expenditure ceiling, saving all receipts regarding big expenses connected with education, analyzing the budget after the first month of study, and buying anything unnecessary immediately after the beginning of the term.
It is important to realize that RESP and the student’s budget must be considered only as means for providing better education without causing additional stress and creating extra debts.
What Students Should Check Before Using RESP Money
Before making any withdrawals from their RESPs, both the student and the family should establish some basic facts with the promoter of the RESP. First of all, the institution must be eligible. The particular plan has to satisfy the requirements. The proof of enrolment may be necessary. The withdrawal has to be requested by the subscriber.
The second step will involve establishing from which account the withdrawal will be made – from the contributions account or from the EAPs. The reason for that is that there is a difference in taxation. EAPs are taxable to the beneficiary, while withdrawn contributions are not taxable.
According to the Canada Education Savings Program, the total amount of RESP assets at the end of 2024 amounted to $89.8 billion, demonstrating the importance of RESPs in Canadian education savings. Source: Employment and Social Development Canada, “Canada Education Savings Program: 2024 Annual Statistical Review.”
Final Thoughts
An RESP may be among the most valuable resources that post-secondary students have, but problems might arise in cases where families are concerned more about saving than withdrawing the money. Problems include a lack of understanding of eligible expenses, withdrawal rate, tax implications, delays in making the withdrawal request, and the inability to link withdrawals to a debt management strategy.
A Registered Education Savings Plan will be most effective if it is part of a complete student budget. While tuition expenses are an important component of education costs, they are just part of the total expense.
Those students who withdraw money from their RESPs with a definite plan in mind will be able to minimize stress, unnecessary borrowing, and make sound decisions while attending college or university.
Learn More: What Role Do EAPs Play In RESPs In Canada (2025)? Understanding Education Assistance Payments