Back to school: Using an RESP to pay for CEGEP or University
PHOTO COURTESY CREATIVE COMMONS/ KEN TEEGARDIN FLICKR
Saving early for your children’s education will help ease the financial burden of rising tuition costs – just be sure to hang onto all the paperwork.
If your child is in CEGEP or university and you set up a Registered Education Savings Plan (RESP), back to school may mean you can finally use the funds you spent years putting aside for your child’s post-secondary education.
But how do you access the money? If you’re lucky, a representative or financial advisor from your family, individual (non-family) or group RESP plan provider has told you all about the process. If they didn’t, you’ll want to contact them as soon as possible to get things going.
You’ll need to bring or mail proof of your child’s enrolment. Since each RESP provider (the federal government calls them “promoters”) has its own rules, requirements for that proof can vary from one provider to another. That letter of admission from a CEGEP or university may not be enough. Providers may request invoices and proof of payment of tuition. Some providers may ask that the registrar’s office at your child’s CEGEP or university fill out a form or a letter of attestation declaring that your child is indeed a full-time student at their institution this fall. The registrar may charge a fee and it could take a few days to obtain a letter of attestation or get a form filled out.
Once you’ve provided proof and your child is considered eligible, you’ll need to fill out paperwork.
As the plan’s subscriber, the person making contributions to the RESP, you arrange withdrawals for your child, the beneficiary. RESPs involve different types of payments, Educational Assistance Payments (EAPs), which come from federal and provincial government grants and interest earned in the plan, and the Refund of Contributions and Accumulated Income Payments. They’re treated differently for tax purposes so be sure to ask your provider questions before you make any withdrawals.
The first withdrawal you’ll make will likely involve EAPs. For a full-time post-secondary student whose RESP was opened after 1998, EAP withdrawals are limited to $5,000 for the first 13 consecutive weeks of enrolment. The cheque is issued to your child, the beneficiary and the amount must be declared as income on his or her taxes. But as a student they most likely have limited income and won’t be required to pay tax on this amount.
As for spending the RESP, Gordon Pape, a Canadian author who specializes in personal finance, wrote in a Toronto Star column that as far as the federal government is concerned, “as long as the money is used for educational purposes, just about anything goes.”
According to Julie Pronovost, regional spokesperson for the Canada Revenue Agency (CRA), Quebec Region, the Canada Revenue Agency and Employment and Social Development Canada (ESDC) jointly administer the RESP program.
“Under the Canada Education Savings Act RESP promoters are responsible for administering RESP plans and they determine the reasonableness of a specific expense for an EAP,” Pronovost wrote in an email. She cited the CRA website’s Frequently Asked Questions section on RESPs, which says “an important factor to consider is whether the expense actually helps the beneficiary to further his or her studies.”
By that measure, tuition and books qualify as “reasonable expenses” and laptops probably pass the reasonableness test. Just to be safe, keep receipts of anything the money is spent on, in case your provider asks for it.