When the beneficiary finishes high school and enrols in post-secondary education, they can start taking payments from their RESP. These payments, known as educational assistance payments (EAPs) , are made up of the investment earnings and government grant money in the RESP.
How EAPs work
To qualify, you must show proof that your child is enrolled in a qualifying educational program. Qualifying programs include apprenticeships, and full-time and part-time programs offered by colleges, universities, trade schools and CEGEPs. Learn more about which programs qualify.
EAPs are taxable in the hands of your child. Most students will likely pay little or no tax because they have little or no additional income, and can take advantage of tax credits for students.
In most cases, you choose the amount and timing of the payments. But your child can’t get more than $5,000 in payments until they complete 13 weeks of their program in a row.
You or your child won’t pay tax when contributions are withdrawn. Your child will pay tax on EAPs, which are made up of investment earnings and government grants.
EAPs from group plans
Group plans have their own payment rules. Your child’s EAPs are made up of your government grants, the earnings on the grants and a share of the group plan’s combined earnings.
Group plans often have additional rules about how much and how often your child can take EAPs, and which education programs are eligible. Know the rules before you open a group plan. Scholarship plan dealers (who offer group plans) are required to provide a prospectus that includes a short Plan Summary with the information you need. Be sure to read and understand this document.
How much your child is eligible to take out in EAPs depends on:
- how much you received in grants and how much they’ve earned in the plan,
- what the plan has made by pooling and investing your savings with money from other plan members,
- how many plan members have dropped out and forfeited their earnings to the plan,
- how many plan units you own, and
- the number of children who are sharing in the same pool.
Group plans often have additional rules about how much and how often your child can take EAPs, and which education programs are eligible. Know the rules before you open a group plan.
You can usually withdraw your contributions from an RESP at any time, but it depends on the terms of your plan. You or your child won’t pay taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition on any contributions that are withdrawn. But if you withdraw contributions early, you’ll have to return any matching government grants for these contributions.
During the first 13 weeks of their program, your child can take up to $5,000 in EAPs from their RESP.
If you take out contributions early, you’ll have to return any matching government grants for these contributions. You may also have to pay a fee.
You have 60 days to cancel plans provided by scholarship planScholarship plan A type of Registered Education Savings Plan (RESP) that pools together the money of many investors. An investment manager invests the money for you, often in lower-risk, fixed-income investments such as bonds and GICs. Enrolment fees are often high and there may be strict rules.+ read full definition dealers without any penalty. Be sure to read and understand the rules outlined in the short Plan Summary provided in the plan prospectusProspectus A legal document that sets out the full, true and plain facts you need to know about a security. Contains information about the company or mutual fund selling the security, its management, products or services, plans and business risks.+ read full definition.