How to Handle Insufficient or Unused RESP Funds

Registered Education Savings Plans (RESPs) remain one of the most effective ways to save for a child’s post-secondary education in Canada. Contributions are eligible for government grants, investments grow tax-deferred, and withdrawals can help cover costs for trade schools, colleges or universities both in Canada and abroad.

According to Statistics Canada, the national average undergraduate tuition for Canadian students in the 2024/2025 school year was $7,360. Tuition varies widely by program and institution and represents only part of the total cost. Families should also plan for living expenses such as housing or residence fees, groceries, textbooks and supplies, transportation and other day-to-day costs.

What if the RESP falls short of covering education costs?

Estimating how much an RESP will cover can be unpredictable. A child’s choice of program, scholarships, or the RESP’s investment performance can leave an account with more or less than required. Surpluses happen, but shortfalls are more common—and when they occur, families and students must explore other funding options.

Common alternatives include using savings in a tax-free savings account (TFSA), tapping a high-interest savings account, or drawing from a non-registered investment account. Applying for government grants and student loans is another important route many students follow.

Government grants and loans for education in Canada

Not every family can fully fund post-secondary education. Working part-time during high school or university can help students contribute to their costs, and federal or provincial financial aid programs provide vital support for those who qualify.

At the federal level, the Canada Student Grant program helps full-time students in financial need who apply for provincial student aid. Eligibility depends on total family income and household size; for example, the grant cutoff is $114,436 in gross household income for a family of three (this threshold increases with larger families). Detailed income thresholds are available from the program information.

For the 2025/2026 academic year, the maximum Canada Student Grant is $4,200 per year, which breaks down to $525 per month of study.

The Canada Student Loan program provides both full- and part-time students with access to loans that can cover a significant portion of tuition—up to 60% in some cases. Notably, federal student loans have not accrued interest since April 1, 2023.

Students can also look into provincial student loan programs and private borrowing options. For a comprehensive overview of available supports and how to apply, check resources provided by Employment and Social Development Canada.

What to do with unused RESP funds

If a beneficiary does not pursue post-secondary education or the RESP balance exceeds need, there are several options for the subscriber to consider.

Family RESPs can be valuable for households with more than one child, since unused funds may be applied to another beneficiary in the plan—typically a sibling—without immediate tax consequences.

An individual RESP can also be transferred to a sibling’s RESP without triggering tax, but the original contribution history transfers with the funds. That means any government grant limits for the receiving beneficiary still apply, and exceeding annual or lifetime grant limits could require grant repayments.

If the beneficiary is eligible for disability supports, RESP savings can be rolled over to a Registered Disability Savings Plan (RDSP), provided the beneficiary qualifies for the Disability Tax Credit.

As another option, a subscriber can move some RESP growth into their Registered Retirement Savings Plan (RRSP). Original RESP contributions (the principal) can be withdrawn tax-free. Investment income and growth may be transferred to an RRSP on a tax-deferred basis if the subscriber has available RRSP contribution room; transfers are capped at $50,000. Before making such a transfer, be aware that unused government grants must be repaid, the beneficiary must be at least 21 and not enrolled in post-secondary education, and the RESP must be at least 10 years old.

If a transfer to another RESP, an RDSP or an RRSP isn’t possible, the RESP’s investment income and growth would be taxed when withdrawn by the subscriber. In that scenario, the subscriber would also face an additional 20% penalty tax on those earnings—an uncommon but important outcome to avoid where possible.

Post-secondary institutions often publish program-specific cost estimates on their websites. Families who begin planning early and compare expected tuition with living and material expenses are better positioned to combine RESPs, personal savings and financial aid to meet their education goals.

Read more from student finances:

• The best ways to help kids financially
• The top 5 questions about RESPs

• How much does the government contribute to an RESP?
• RESP vs RRSP and TFSA: which is best for education savings?

• Four things to get right when tapping RESP savings