What Happens To An RESP If Your Child Doesn’t Attend College?

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Quick Answer

  • If your child does not attend college and has an RESP, you can transfer the funds to their RDSP, another beneficiary, or your RRSP.
  • You can also keep the RESP open for up to 35 years in case they later pursue post-secondary education.
  • Lastly, you can withdraw your direct RESP contributions tax-free and return the grant money to the government.

What happens to your kid’s Registered Education Savings Plan (RESP) if they decide not to pursue post-secondary education? It’s a good question to ask!

As I have previously discussed, the RESP is a great way to save money for your child’s higher education.

When you consider that the government, through the Canada Education Savings Grant (CESG), also contributes up to a lifetime amount of $7,200 to your RESP, it is a WIN-WIN situation for you and your kid.

Apart from the CESG, families may qualify for additional government grants to enable them to save for their kid’s future education. These include the A-CESG, Canada Learning Bond, and other provincial educational grants.

Funds accumulated in an RESP can be used to pay for post-secondary education undertaken by your child after graduating high school – including apprenticeships and full or part-time programs offered by colleges, universities, trade schools, etc.

What If Your Child Doesn’t Go To College?

So, if your child decides they are not interested in further education, what are your options?

1. Keep the RESP open

There’s no rush! An RESP can stay open for 35 years after the year the account was initially opened. Your child may change their mind between 18 and 35, so you may want to wait and see.

2. Transfer the RESP to another Beneficiary

In a family RESP plan, you can use the funds for another child named under the plan.

If the RESP was set up as an individual plan, you can transfer the plan to another beneficiary as long as they are under 21 years of age and a brother or sister of the original beneficiary.

If both conditions are not met, all or some of the grant money may have to be repaid to the government. Check with your RESP provider for more details.

3. Transfer the funds to your RRSP

You can transfer up to $50,000 from the RESP to your Retirement Plan (RRSP) tax-free if:

  • You have enough RRSP contribution room
  • The RESP account is at least 10 years old
  • The beneficiary is at least 21 years old and not pursuing post-secondary education
  • You are a Canadian resident

4. Close the RESP

You can always withdraw your direct contributions at any time tax-free.

However, all federal and provincial government grants must be returned as they can only be used to pay for post-secondary education.

Taxes and a 20% penalty are due on investment earnings.

5. Transfer the funds to an RDSP

Investment earnings from an RESP can be transferred to a Registered Disability Savings Plan if they share a common beneficiary. In this case, any government grants must be repaid.

Related: How To Invest an RESP Account.

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Enoch Omololu, MSc (Econ)

Enoch Omololu, personal finance expert, author, and founder of Savvy New Canadians, has written about money matters for over 10 years. Enoch has an MSc (Econ) degree in Finance and Investment Management from the University of Aberdeen Business School and has completed the Canadian Securities Course. His expertise has been highlighted in major publications like Forbes, Globe and Mail, Business Insider, CBC News, Toronto Star, Financial Post, CTV News, TD Direct Investing, Canadian Securities Exchange, and many others. Enoch is passionate about helping others win with their finances and recently created a practical investing course for beginners. You can read his full author bio.

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1 thought on “What Happens To An RESP If Your Child Doesn’t Attend College?”

  1. Gravatar for Shauntal

    very helpful post!

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