RESP Withdrawal Rules in Canada: Taxes and Grant Repayment

With a new school year approaching and tuition bills coming due, many families are planning withdrawals from their Registered Education Savings Plan (RESP). An RESP remains one of the most effective ways to save for post-secondary education in Canada, but there are important rules to understand to protect government grants, avoid penalties, and manage tax consequences. This guide explains RESP withdrawal rules, timing, allowable uses and options if a beneficiary does not pursue post-secondary studies.

Guide: How to pay for school while keeping some life balance — practical tips for students and parents

The perks of having an RESP

Introduced in 1974, the RESP is a tax-deferred savings account designed to help families save for a child’s post-secondary education. Anyone can open an RESP for a child, and anyone can contribute to it. Key roles to know are the subscriber (often a parent or guardian), the beneficiary (the student), and the provider (the financial institution or professional managing the plan).

An RESP can hold the same kinds of investments as an RRSP—stocks, bonds, mutual funds, GICs and cash. What sets an RESP apart is the government-grant component. The Canada Education Savings Grant (CESG) matches contributions with up to 20% annually, delivering up to $500 per year on a $2,500 contribution and up to $7,200 over a beneficiary’s lifetime. For example, a $1,000 contribution typically generates a $200 CESG “top-up.” While there is no annual contribution limit for an RESP, the lifetime contribution limit per beneficiary is $50,000.

Low-income families may also qualify for additional assistance through the Canada Learning Bond (CLB). The CLB provides an extra payment to eligible children whether or not the family makes personal contributions—eligibility is based on adjusted family income and depends on household size. For specific eligibility thresholds, check official government resources or contact federal support channels.

RESP withdrawal rules

RESP withdrawals are made to the subscriber (the account holder), who can then pass funds to the beneficiary (the student). There are three distinct types of RESP withdrawals, each with different tax and administrative rules:

Post-Secondary Education Payment (PSE): Withdrawals of the original contributions are paid to the subscriber tax-free.
Educational Assistance Payment (EAP): These payments include government grants (CESG), accrued interest and investment growth. EAPs are taxed in the hands of the student when paid out; because students often have low income, they frequently pay little or no tax on these amounts.
Accumulated Income Payment (AIP): If investment growth in the RESP is not used as an EAP (for example, if the beneficiary never enrolls in a qualifying program), the accumulated income can be withdrawn as an AIP. AIPs are taxable to the subscriber and typically face an additional tax (a penalty) unless specific conditions are met.

To minimize taxes and penalties, subscribers are generally advised to have students receive EAPs first while they are enrolled in qualifying post-secondary programs. Any growth not used for EAPs may become AIP and will be taxed at the subscriber’s marginal tax rate plus any applicable additional tax.

For illustration: if parents contributed $2,500 a year for 10 years, they would have put in $25,000. With CESG and investment returns, the account might grow to $40,000. When the child enrolls in post-secondary studies, the parents can withdraw the $25,000 in contributions (PSE) tax-free; the remaining $15,000 paid as EAPs is treated as the student’s income and taxed in their name. Any EAP amounts left unused after studies could convert to AIP and be taxed in the subscriber’s hands.

When should you withdraw from your RESP?

Allow several business days for RESP withdrawals to be processed, and more time if investments need to be sold or converted to cash. Don’t wait until the week before tuition is due. Most institutions require proof of enrollment to release EAPs or other RESP funds; students can often obtain enrollment verification through an online student portal or by visiting the registrar’s office. The RESP provider may also ask for program details before authorizing disbursements.

What are the RESP withdrawal limits?

Subscribers may withdraw their original contributions (PSEs) without limit once the beneficiary is enrolled. EAP withdrawals of investment income, grants and growth are subject to limits early in a study period. For full-time students, EAPs are capped at $8,000 for the first 13 weeks of full-time enrollment; for part-time students, the cap is $4,000 during any 13-week enrollment period. After the initial 13 weeks, full-time students generally have no EAP withdrawal limit for the remainder of their enrolment, while part-time students can withdraw $4,000 in EAPs for each completed 13-week period of study.

What can you spend RESP funds on?

RESP funds are not limited to university tuition. Eligible expenses include tuition at universities, colleges, vocational or trade schools, CEGEPs, religious educational institutions, and qualifying distance-education programs. In addition to tuition, RESP disbursements can cover eligible costs such as required textbooks and supplies, residence fees, transportation (public transit or vehicle expenses related to study), living costs like rent and groceries, and necessary equipment such as a computer.

Examples of eligible institutions (by province and territory)

Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland and Labrador
Northwest Territories
Nova Scotia
Nunavut
Ontario
Prince Edward Island
Quebec
Saskatchewan
Yukon
International institutions that meet Canadian qualification standards

What happens if the beneficiary doesn’t pursue post-secondary education?

If a child decides not to pursue post-secondary studies, subscribers have several options:

Keep the RESP active: The plan can remain open and available for future education; plans can stay active for many years, giving beneficiaries time to reconsider or take gap years.
Close the RESP: Subscribers can withdraw their original contributions tax-free. Any CESG grants must be returned to the government, and investment income would be taxable.
Change the beneficiary: You can transfer the RESP to another eligible beneficiary (for example, a younger sibling), subject to grant and contribution limits.
Transfer funds: Under certain rules, accumulated income may be transferred to other registered plans, such as an RRSP, but this option has specific conditions and limits.