How to Pay for Education in Canada: Smart RESP Withdrawal Strategies
- By Tracy Andrade, CFP®, CIM® Wealth Advisor and Certified Financial Planner
- 5 Min Read
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The acceptance letter arrives. Your heart swells with pride. Then reality hits: How do you actually pay for this dream education?
If you’re staring at tuition bills that make your eyes water, you’re not alone. With university costs averaging $20,000-$25,000 annually in Canada, even families who’ve diligently saved in RESPs often find themselves asking: “What’s our next move?”
Here’s the truth most parents discover too late: Having money saved is only half the battle.
How and when you withdraw those funds can maximize your education dollars and minimize your family’s financial stress.
How to Pay for Education in Canada: Smart RESP Withdrawal Strategies
Let’s start with the facts. For the 2024/2025 academic year, you’re looking at:
- University Undergraduate tuition averages $7,360 nationally and rises to $8,514 in Ontario1
- College program tuition ranges from $2,400 to $6,100 annually2
- Apprenticeships: $1,400 (with paid on-the-job training). Over time, tradespeople may invest thousands more in professional tools and equipment.
- Full Trades programs: up to $14,400 (including tools and safety gear) 3
But tuition is just the beginning—when you add residence, meal plans, textbooks, and other fees, the total cost can reach $20,000 to $25,000 per year.
But here’s what keeps me up at night as a Certified Financial Planner: Almost half of college and university students graduate with student debt.
The average student debt at graduation:
- Bachelor’s degree: $30,0004
- College program: $16,0005
- Average repayment time: 9.5 years6 (often longer).
This debt doesn’t just disappear—it follows your child into adulthood, potentially delaying homeownership, family planning, and financial independence. In fact, 66% of students say graduating with debt will make it harder to become financially independent, and 41% intend to live with their parents after post-secondary school for a prolonged period because of student debt.7
Your RESP: The Foundation of Education Funding
If you’ve been contributing to a Registered Education Savings Plan (RESP), congratulations—you’re already ahead of the game.
Your RESP has been working for your family by:
- Growing your contributions through investment returns
- Earning free government money through grants (up to $7,200 per child)
- Providing tax-deferred growth on all investments
- Creating tax advantages when funds are withdrawn for education
Now it’s time to unlock all these benefits strategically.
Understanding Your RESP's Two Types of Money
Your RESP contains two distinct pots of money with different withdrawal rules:
1. Post-Secondary Education (PSE) Withdrawals
These are your original contributions – the money you’ve put in over the years.
- Completely tax-free when withdrawn
- No withdrawal limits
- your child won’t pay any tax on this money.
2. Educational Assistance Payments (EAPs)
This money becomes taxable income to the beneficiary. EAPs include:
- Government grants (Canada Education Savings Grants, Canada Learning Bond etc) – that’s free money from the government
- Investment growth and income – the returns your money has earned over the years
To make an RESP withdrawal, the subscriber must provide proof of enrollment of the beneficiary as either a part- or full-time student, in a qualifying post-secondary educational institution.
The withdrawal rules8:
- First 13 weeks: Up to $8,000 in EAPs ($4,000 for part-time students)
- After 13 weeks: No limit if the student continues to qualify to receive them.
If total EAP withdrawals exceed the annual threshold – $28,881 in 2025 – the student must demonstrate that the funds are needed for eligible expenses. This annual threshold is adjusted by the government each year.
If you plan to withdraw more than the annual threshold, the CRA outlines what qualifies as a reasonable expense. For instance, buying a car may be acceptable if it’s registered in the student’s name and used for commuting to school or school-related activities. Other eligible expenses include items like a laptop, mobile phone, and basic furniture.
Three Strategic Approaches to Maximize Your RESP
The goal isn’t just to minimize taxes—it’s to maximize every dollar you’ve accumulated and ensure your child gets the full benefit of your years of saving.
Strategy #1: Capture All Government Grants
Your RESP may contain up to $7,200 in free government grants per child — don’t leave it on the table.
If there’s any chance your child might not complete their education, prioritize withdrawing EAPs early to secure these grants.
Strategy #2: Take Advantage of Your Child’s Low Tax Rate
Your child’s basic personal exemption for 2025 is $16,129 – meaning they pay zero tax on income below this amount. When you factor in education-related deductions and credits like tuition, education and textbook amounts, moving expenses, and interest on student loans, your child could potentially receive more than $16,129 in EAPs without paying any tax.
While your child is enrolled in a qualifying program, their tuition receipts will qualify for a Tuition tax credit. Once your child has reduced their tax payable to zero, the remaining tuition credit can be transferred to their spouse, parent or grandparent to a maximum of $5,000. Alternatively, a student can carry those credits forward and use them in a future tax year, and must be used in the first year that they have tax to pay. Carried forward credits cannot be transferred to another taxpayer.
The opportunity: Your child is likely in the lowest tax bracket they’ll ever be in. This is the perfect time to withdraw investment growth that could be taxed at higher rates if withdrawn later.
Strategy #3: Time Withdrawals for Maximum Flexibility
Many parents, especially those with multiple children, are overly conservative with RESP withdrawals. It’s understandable — many parents want to make sure there’s enough to go around.
But holding back too much during the school years can lead to a costly surprise later.
If grant money or investment growth remains after your child finishes school (and the RESP has been open 10+ years):
- Your contributions (PSE): Still come out tax-free
- Government grants: Must be returned
- Investment earnings: Taxable to you with a 20% penalty
That said, if the subscriber or their spouse/common-law partner has enough RRSP contribution room, up to $50,000 of the investment growth can be transferred to an RRSP.
Instead, consider withdrawing from the RESP strategically to support your child’s education while they’re enrolled.
Year 1 (Weeks 1-13): Withdraw the maximum $8,000 EAP plus necessary PSE contributions to cover major expenses like tuition and living expenses.
After Week 13: Assess total costs and your child’s income, then maximize EAP withdrawals to cover ongoing expenses.
Subsequent Years: Continue strategic withdrawals, reviewing annually based on your child’s changing financial situation.
Consider withdrawing up to the annual EAP limit. Any additional funds can be contributed to your child’s Tax-Free Savings Account (TFSA) or First Home Savings Account (FHSA), where they can continue to grow tax-free.
By capturing all available government grants, leveraging your child’s low tax bracket, and timing RESP withdrawals strategically, you can stretch your savings further and avoid costly penalties.
Beyond RESPs: Your Complete Funding Strategy
Your RESP is powerful, but it works best as part of a comprehensive funding plan.
Scholarships and Bursaries: Free Money Worth Pursuing
Don’t assume scholarships are only for straight-A students. Many scholarships focus on community involvement, leadership, or specific career paths.
Every scholarship dollar means you can preserve more of your RESP for later years or other children.
Check out Student Awards and Scholarships Canada—you might be surprised what’s available.
Government Student Aid
The Canada Student Financial Assistance program offers grants and loans through one provincial application.
- Loans must be paid back after finishing school
- Grants generally don’t need to be paid back
- Students may choose to only accept grant funding and decline loan funding
Understanding OSAP (Ontario)
Ontario Student Assistance Program (OSAP) assessment considers:
- Family annual income and assets
- Your child’s income and savings
- Family size and number of children in post-secondary simultaneously
- Living arrangements (home vs. away)
- Program costs and duration
Every OSAP loan is actually two separate loans:
- Federal portion: Canada Student Loan (approximately 60% of total)
- Provincial portion: Ontario Student Loan (approximately 40% of total)
Important update: As of April 2023, Canada eliminated interest on the federal portion of student loans, but the provincial portion still accrues interest at prime + 1%.
Student Employment: Building Skills and Reducing Costs
When students contribute financially to their own education through part-time work, it often leads to a stronger sense of ownership and commitment to their studies.
Part-time work during school serves dual purposes:
- Reduces the need for RESP withdrawals or loans
- Provides valuable work experience and networking opportunities
- Helps students develop financial responsibility
Combining RESPs with scholarships, government aid, and part-time work, creates a well-rounded education funding strategy that supports your child’s goals—without compromising your financial future.
Your Personalized Action Plan
Every family’s path to funding education is different—your plan should reflect what matters most to you.
Your optimal strategy depends on:
- Your child’s program length and cost
- Your family’s income and other financial goals
- Whether you have other children who will need education funding
- Your child’s likelihood of completing their program
- Available scholarships and government aid
Key questions to answer:
- How can you maximize government grants while minimizing taxes?
- What’s the optimal mix of RESP withdrawals, scholarships, and student aid?
- How do you preserve family financial flexibility while funding education?
- What’s your backup plan if circumstances change?
By answering a few key questions now, you can build a flexible, future-ready plan that supports your child’s education—and your family’s financial well-being.
Take Action Before Tuition Bills Arrive
Don’t wait until the first tuition payment is due to figure this out. The choices you make now can make a big difference—not just in how much you spend, but in how smoothly your child transitions into post-secondary life.
A little planning today could mean less stress, fewer surprises, and maybe even a future without student debt. Don’t let poor planning undermine years of diligent saving.
Ready to optimize your education funding strategy? Book a complimentary discovery meeting with Tracy Andrade, CFP®, CIM® at marnoa.ca.
Sincerely,
Tracy Andrade, CFP®, CIM®
Wealth Advisor and Financial Planner
(519) 707-0050
tracy@marnoa.ca
marnoa.ca
This guide provides general information and should not replace personalized financial advice. As a specialist in “Sandwich Generation” planning, Tracy Andrade helps families navigate the complex intersection of supporting children’s education while planning for their own financial future.
Keywords: tuition, university, college, RESP withdrawal rules, education funding Canada, paying for school, RESP, CESG grants, post-secondary funding strategy
Canadian and international tuition fees by level of study (current dollars)
Student debt from all sources, by province of study and level of study
Student debt from all sources, by province of study and level of study
1-in-4 Students Have Considered Dropping Out Because of Money – Embark
Registered education savings plan (RESP) Bulletin No.1R3 – Canada.ca