​If your child doesn't continue their education after high school, you can get back some of the money in their Registered Education Savings Plan (RESP). But there may be financial costs and tax consequences.

What happens to the money in the RESP

Federal and provincial government grants

You must return any grant money to the government. You can only use these grants if your child goes on to further studies after high school. You may be able to use Canada Education Savings Grant (CESG) for a sibling's education under certain conditions. For example, you can now transfer money between individual RESPs for siblings without any tax penalties. And, you do not have to repay any CESGs. This applies to transfers that take place after 2010. The child who benefits must have been under 21 when the plan was opened.

You can't use Canada Learning Bonds (CLBs) for any other child.

Contributions

The contributions are returned to you. You don’t have to pay tax on any contributions that are withdrawn.

Investment earnings

• If you have an individual or family RESP – You can get your investment earnings out of the plan if it has been open for 10 years and the beneficiaries have not pursued an education by the time they are 31 years old.
• If you have a group plan – You don't get back your investment earnings. They stay in the plan and are shared with the other plan members to increase their payments. In some cases, you may be able to transfer your RESP savings to an individual plan (depending on the terms of your plan).

What you'll pay tax on

The plan subscriber has to pay tax on any investment earnings taken out of the plan, plus a penalty.

This tax is calculated at your current tax rate, plus a 20% penalty. You may be able to reduce the taxes owing by transferring up to $50,000 to your Registered Retirement Savings Plan (RRSP) or your spouse's RRSP. You must have RRSP contribution room to do so.​