An RESP plan can be useful in more ways than just funding an undergraduate four-year degree at a university. Depending on where the beneficiary wants to go and what type of program he or she intends to pursue, the money in the plan may cover tuition fees at a college, university, CEGEP, vocational institution, technical institution, or an apprenticeship program. The important thing is not only the continuation of education. It is necessary that the educational establishment and program comply with the post-secondary requirements of the RESP plan.
The Government of Canada states that a Registered Education Savings Plan is a way to save money for higher education after secondary school, including trade schools, CEGEP, colleges, universities, and apprenticeships. Moreover, an adult can open an RESP plan for himself or herself.
It becomes especially beneficial when one considers the government grants. The Canada Education Savings Grant offers up to $7,200 for every eligible beneficiary during their life, and the Canada Learning Bond offers up to $2,000 for an eligible child from a low-income family. It is not necessary to make personal contributions to the RESP plan to get the Canada Learning Bond.
However, opening and contributing to an RESP does not mean every course, school or training program will automatically qualify. Before withdrawing education assistance payments, the subscriber and beneficiary should confirm the school, program length, course intensity and enrolment status with the RESP promoter.
How A Registered Education Savings Plan Supports Education
A Registered Education Savings Plan is an agreement involving the subscriber, the RESP promoter and one or more beneficiaries. The subscriber opens the plan and makes contributions. Government education savings benefits may also be deposited when the beneficiary meets the relevant eligibility requirements.
If the beneficiary registers for an eligible post-secondary education plan, the RESP will have two kinds of withdrawals.
The first withdrawal is the post-secondary education contribution withdrawal. The post-secondary education contribution withdrawal is money contributed to the plan by the subscriber. Since the contribution was not deductible from taxes when it was initially made, it can normally be withdrawn without being considered income.
The second is the Educational Assistance Payment, often referred to as an EAP. An EAP is a combination of earnings on investments, CESG, CLB, and any provincial education savings incentive. The EAP amount is included in the income of the beneficiary and reported on a T4A slip.
The reason for this differentiation is that the CRA has specific rules when it comes to RESP withdrawals.
RESP Beneficiary Requirements
The beneficiary is the individual mentioned in the RESP that may qualify for money in respect of post-secondary education costs. The beneficiary may be a child, but not necessarily, since he or she could also be an adult individual who has opened an individual RESP account and is thus the subscriber and beneficiary at the same time.
In order to utilize the RESP savings for post-secondary education purposes, the beneficiary will usually have to be enrolled in a qualifying educational program or specified educational program.
The RESP promoter usually asks for proof of enrolment before releasing education assistance payments. The document may need to show:
- The beneficiary’s name
- The educational institution
- The program name
- Whether enrolment is full-time or part-time
- The program’s start date and expected duration
- The number of course hours or credits
The promoter is responsible for confirming whether the educational institution and program meet the withdrawal requirements. A school’s marketing material or the student’s acceptance letter alone may not settle every eligibility question.
What Courses Qualify For RESP Funds?
The RESP eligibility will depend on the type of the program, duration and level of the program and not solely on the name of the course.
An eligible educational program basically means an educational program that involves a period of at least three consecutive weeks and requires at least 10 hours each week spent studying. The eligible education program normally covers full-time study.
A specific educational program is basically an educational program that involves at least three consecutive weeks and requires at least 12 hours each month spent studying.
Programs that may qualify include:
- Undergraduate university degrees
- College diplomas and certificates
- CEGEP programs
- Recognized trade and vocational programs
- Eligible apprenticeship classroom training
- Postgraduate certificates
- Master’s and doctoral programs
- Certain distance-learning or online programs
- Eligible studies outside Canada
A short recreational course, personal-interest class or workshop that does not meet the post-secondary, duration or study-time conditions may not qualify, even when it is offered by a recognized institution.
Does RESP Cover College And University?
Yes. RESP funds may be used for eligible college and university programs in Canada when the beneficiary and program meet the applicable conditions.
Many traditional university programs will also meet this requirement since they are post-secondary programs that are undertaken over several months or years. Programs such as college diplomas, advanced diplomas, certificates, and applied degrees can be eligible.
However, it is not necessary that the program leads to a bachelor’s degree. An RESP beneficiary can choose to use the money from his RESP savings account to pursue a two-year college diploma, a one-year certificate program after graduating from college or any other eligible program.
It is important for students to find out about the post-secondary program eligibility before using their RESP savings account. Many colleges and universities will provide continuing education, professional development, and personal interest courses along with their post-secondary programs.
RESP Eligible Schools In Canada
RESP funds can normally be utilized in post-secondary institutions in Canada that qualify according to federal eligibility criteria. These might include universities, colleges, CEGEPs, technical schools and other qualified educational institutions.
The Canadian government keeps a master list of designated educational institutions. Educational institutions that have been designated under the Canada Student Loans program may also qualify for utilization of RESP funds.
Nonetheless, while there is a link between the two, it should be noted that the eligibility for the RESP program is not necessarily the same thing as student loan eligibility. It is up to the RESP promoter to make the determination.
A beneficiary considering a private career college or specialized technical institution should ask the promoter to confirm:
- Whether the school is recognized for RESP purposes
- Whether the specific program is post-secondary
- Whether the program meets the minimum duration
- Whether the weekly or monthly study requirement is satisfied
- What proof of enrolment will be accepted
This verification is especially important before paying non-refundable tuition deposits.
Can Apprentices Use RESP Funds?
Yes, apprentices can access RESP money if their apprenticeship training involves an eligible post-secondary program delivered at a qualified institution.
Apprenticeship training usually involves on-the-job learning and schooling or technical training. The school part of the learning can be eligible if it comes from an eligible college, trade school, technical institute, or another eligible educational institution and qualifies as a qualifying or specified educational program.
The government of Canada clearly indicates that apprenticeship programs are one of the eligible education programs that can use RESP money and the Canada Learning Bond.
RESP funds may help an apprentice pay for eligible education-related costs such as:
- Tuition and registration fees
- Required textbooks
- Tools and safety equipment
- Transportation to technical training
- Rent or temporary accommodation
- Living costs during an in-school training period
An apprenticeship registration by itself does not necessarily establish that every part of the training qualifies. The beneficiary should provide the RESP promoter with documents confirming the institution, training dates, course hours and enrolment status.
Do Online Courses Qualify For RESP Funds?
An online program may qualify when it is offered at the post-secondary level by an eligible educational institution and meets the required duration and course-intensity rules.
The delivery format is not the only deciding factor. A structured online college certificate may qualify, while a self-paced course from a private online platform may not.
Before registering, the student should confirm whether:
- The provider is an eligible educational institution
- The course is part of a recognized post-secondary program
- The program lasts at least three consecutive weeks
- The required hours of instruction or coursework are met
- The school can issue acceptable proof of enrolment
A promoter may request more information when an online program does not use a standard academic semester or full-time course load.
Can RESP Funds Be Used For Studies Outside Canada?
RESP funds can be obtained even for studies conducted outside Canada as long as the foreign educational institution and program are eligible under the relevant guidelines.
For an educational institution outside Canada, the course should generally be at post-secondary level and be of at least three weeks duration for certain purposes of the RESP program. Canadian residents studying abroad need to verify the institution and the course from the promoter of the RESP program before making payment requests.
Some of the possible options include university courses abroad, exchange semesters, international colleges, and vocational programs.
Students should keep detailed documents, including:
- Acceptance and enrolment letters
- Program descriptions
- Course schedules
- Tuition invoices
- Proof of full-time or part-time status
- The foreign institution’s address and contact information
Currency exchange and international banking arrangements should also be considered when planning RESP withdrawals for overseas education.
RESP Educational Expenses That Funds Can Cover
RESP money is not restricted to tuition alone. Once a valid EAP is paid to the beneficiary, it can support reasonable expenses connected with post-secondary education.
The Government of Canada identifies tuition, books, tools, transportation and rent as examples of costs that RESP money may help cover.
Depending on the student’s situation, RESP educational expenses may include:
- Tuition and compulsory school fees
- Textbooks and digital learning materials
- A laptop or required software
- Trade tools and protective equipment
- Public transit or reasonable transportation
- Rent and residence fees
- Meal plans and groceries
- Utilities and internet
- Relocation expenses
- Certain student-support services
The cost should be viewed in relation to the context of the beneficiary. There could be situations where very large amounts of EAP would be needed by the beneficiaries. In such situations, the promoter may ask for evidence.
The costs of a person studying part time locally are not the same as that of a person who comes to Canada for education on a full-time basis.
RESP Education Assistance Payments
The RESP education assistance payments are taken from government benefits and earnings that have been set aside in the account. The education assistance payments will be made for the beneficiaries after determining that there is qualified enrolment.
In the case of a student in an eligible educational program, EAPs cannot exceed a total of four weeks out of a total of 13 consecutive weeks of enrollment. During and after this period, the beneficiary can normally receive additional reasonable amounts as long as he qualifies.
If the beneficiary qualifies in a specified educational program, the EAPs cannot exceed $4,000 for a total of 13 weeks.
The above are limits that apply to EAPs and not withdrawal of the subscriber’s contribution.
The subscriber should ask the promoter to explain how each withdrawal will be classified. This can help prevent an unnecessarily large taxable amount from being issued to the student in one calendar year.
How RESP Withdrawals Are Taxed
Original RESP contributions can generally be returned without tax because the subscriber did not receive an income-tax deduction when making them.
Education Assistance Payments are taxable in the hands of the recipient. Because of the lower income levels of many students and the availability of tuition credits, the taxable amount may be reduced. Yet the outcome will vary based on the total income level, scholarships, employment income, and other taxable income sources of the student.
Promoters issue a T4A form regarding EAPs to the recipient.
Families might consider splitting their withdrawals from the EAPs between different calendar years where possible. For instance, making a withdrawal request of the EAPs for the first semester and again after January.
Tax planning must not jeopardize the real need for money by the student. The money must still be paid for education costs.
RESP Contribution Rules And Grant Eligibility
There is no annual RESP contribution limit under current federal rules, but the lifetime contribution limit is $50,000 for each beneficiary across all RESPs established for that person. Government grants and designated provincial benefits are not counted toward this contribution ceiling.
Basic Canada Education Savings Grant will generally contribute 20% on the first $2,500 of annual contributions made, generating a maximum of $500 of basic CESG annually. More CESG can be received depending upon income level. The total CESG limit is $7,200 per beneficiary.
Unused basic CESG room is carried forward. Where there is enough unused basic CESG room, the beneficiary could receive up to $1,000 of basic CESG in a future year where at least $5,000 is contributed.
Beneficiary age, residency status, Social Insurance Number and contribution timing are additional criteria that are used to determine RESP grants. There are special contribution rules for obtaining CESG for beneficiaries aged 16 or 17.
Where there are several RESPs opened for the same beneficiary, coordination of contributions is essential. Total contribution limit of $50,000 and CESG limit of $7,200 are calculated considering all RESPs together, not separately for each one.
Who Qualifies For RESP Funds?
A person may qualify to receive RESP education funds when they are named as a beneficiary and enrolled in an eligible post-secondary program.
There is no rule requiring every beneficiary to begin education immediately after high school. An RESP can generally remain open for a long period, allowing the beneficiary time to work, travel, change career direction or return to school later.
A beneficiary may qualify whether studying:
- Full-time or part-time
- At a college or university
- In a trade or apprenticeship program
- At an eligible Canadian or foreign institution
- Through an eligible online program
- As a younger student or adult learner
The decisive question is not the beneficiary’s age alone. It is whether the withdrawal and enrolment satisfy the plan, institution and program requirements.
What Happens If The Beneficiary Changes Programs?
The beneficiary could change his school, courses, or direction without necessarily becoming disqualified from receiving benefits under the RESP.
For instance, one may start a university education but then join college education, while another may stop the college and join an apprentice program that is an eligible one under the RESP program. The beneficiary can use his RESP even when he changes.
The subscriber should inform the RESP promoter of the change through the enrolment papers and request the EAP.
A gap between programs does not necessarily disqualify the RESP. Sometimes, even after the beneficiary has stopped being enrolled, it would still be possible to receive the EAP but only for a certain time.
What Happens If The Beneficiary Does Not Attend School?
If the original beneficiary does not pursue eligible post-secondary education, the RESP does not always need to be closed immediately.
Depending on the type of plan and family circumstances, the subscriber may be able to:
- Keep the RESP open in case the beneficiary studies later
- Replace the beneficiary
- Transfer funds to another eligible RESP
- Share certain earnings and grants with another beneficiary in a family plan
- Withdraw original contributions
- Request an accumulated income payment when the conditions are met
- Transfer eligible investment earnings to an RRSP, subject to the rules and available contribution room
Grants which are not used by the eligible beneficiary may have to be refunded. The Canada Learning Bond is tied with the eligible beneficiary and cannot simply be transferred to another child. The plan-sharing rules for family plans vary between CESG, CLB and the provincial benefits.
It is advisable for the subscriber to discuss with the promoter of the RESP before making changes as replacing a beneficiary will have certain effects.
Common Mistakes When Checking RESP Post-Secondary Eligibility
- Assuming Every Course At An Eligible School Qualifies: A recognized college may offer short recreational or continuing-education courses that do not meet the RESP program requirements.
- Waiting Until Tuition Is Due To Confirm Eligibility: Verification should happen before non-refundable deposits are paid or RESP money is included in the education budget.
- Confusing Apprenticeship Registration With Eligible Classroom Training: The apprentice’s formal in-school or technical program must satisfy the relevant requirements.
- Ignoring Part-Time EAP Limits: A student in a specified educational program may be subject to a $4,000 EAP limit during a 13-week period.
- Requesting Only Contribution Withdrawals: Withdrawing contributions while leaving EAP funds untouched can create problems if the plan is later closed and grants or earnings remain.
- Taking A Large EAP Without Tax Planning: EAPs are taxable to the beneficiary, so the timing and amount should reflect the student’s income and education costs.
- Assuming Foreign Or Online Schools Automatically Qualify: The promoter should verify the institution, course level, duration and study requirements.
Questions To Ask The RESP Promoter Before Enrolment
Before committing to a program, the subscriber or beneficiary should ask the RESP provider:
- Is the school eligible for RESP withdrawals?
- Does the specific course qualify as a qualifying or specified educational program?
- What proof of enrolment is required?
- Is the student treated as full-time or part-time?
- What is the maximum EAP available during the first 13 weeks?
- Can contributions and EAPs be withdrawn together?
- Will receipts or an expense estimate be required?
- How long will the withdrawal take to process?
- Will the payment be issued to the beneficiary or directly to the school?
- What happens if the student changes or leaves the program?
Getting written confirmation can reduce delays and prevent misunderstandings when tuition or living expenses become due.
Final Thoughts
RESP funds may cover various forms of education other than the usual university education. College education, CEGEP education, training for a skilled trade, apprenticeship education, post-secondary education, online education, and education from institutions outside of Canada could all be eligible as long as the institution and the program are qualified under federal rules.
The most crucial aspect is to verify eligibility before making any payment toward the cost of tuition or depending on withdrawals from the RESP. The institution, duration of the program, hours of studying, and enrollment categories may all influence eligibility for Education Assistance Payments.
Families should also plan the mix of contribution withdrawals and taxable RESP education assistance payments carefully. Good withdrawal planning can help cover tuition, books, tools, transportation, rent and other reasonable education costs while preserving the RESP’s grants and earnings for the beneficiary’s complete education journey.
Learn More: Family RESP: Pros And Cons For Education Savings